EXHIBIT 10.7
SECURITY AGREEMENT
BY AND AMONG
OCEAN BIO-CHEM, INC.,
STAR-BRITE
DISTRIBUTING, INC.,
STAR BRITE AUTOMOTIVE, INC.,
STAR BRITE DISTRIBUTING (CANADA), INC.
AND KINPACK INC.
AND
REGIONS BANK
DATED AS OF JULY 1, 2002
THIS INSTRUMENT PREPARED BY
JOHN F. ANDREWS
CAPELL & HOWARD, P.C.
P. O. BOX 2069
MONTGOMERY, AL 36102-2069
(334) 241-8000
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of July 1, 2002, is entered into
by
and among OCEAN BIO-CHEM, INC. ("Ocean"),
STAR-BRITE DISTRIBUTING, INC.
("Distributing"), STAR BRITE AUTOMOTIVE,
INC. ("Automotive") and STAR BRITE
DISTRIBUTING (CANADA), INC. ("Canada"),
corporations organized and existing
under the laws of the State of Florida,
KINPAK INC., ("KINPAK") a corporation
organized and existing under the laws of
the State of Alabama and REGIONS BANK,
an Alabama banking corporation (the
"Bank"). Ocean, Distributing, Automotive,
Canada and KINPAK are herein sometimes
referred to as the "Borrowers."
R E C I T A L S:
The Borrowers have requested that the Bank provide to the Borrowers
the
following credit facilities (the "Credit
Facilities"): (i) a direct-pay
irrevocable letter of credit (the
"Substitute Letter") securing the payment of
$4,000,000 Industrial Refunding Revenue
Bonds (KINPAK INC. Project) Series 1997
currently outstanding in the principal
amount of $3,280,000 (the "1997 Bonds")
issued by The Industrial Development Board
of the City of Montgomery (the
"Board"), (ii) a direct-pay irrevocable
letter of credit (the "Letter of
Credit") securing the payment of $3,500,000
Industrial Development Revenue Bonds
(KINPAK INC. Project) Series 2002 (the
"2002 Bonds") to be issued by the Board,
and (iii) a revolving working capital line
of credit (the "Revolving Line of
Credit") in the maximum amount outstanding
at any time of $5,000,000.
The 1997 Bonds were issued pursuant to a Trust Indenture dated as
of
December 1, 1996, as amended and
supplemented by First Supplemental Trust
Indenture dated as of March 1, 1997
(collectively, the "1997 Indenture") between
the Board and Regions Bank as Trustee (in
such capacity the "1997 Trustee"). The
proceeds of the 1997 Bonds were used to
refund certain prior revenue bonds of
the Board, the proceeds of which were used
to renovate and improve a
manufacturing facility located in
Montgomery, Alabama (the "Existing Facility")
and currently leased by the Board to KINPAK
pursuant to Restated Lease Agreement
dated as of December 1, 1996, as amended
and supplemented by First Supplemental
Lease Agreement dated as of March 1, 1997
(collectively the "1997 Lease"). The
Borrowers have requested that the Bank
issue the Substitute Letter in
substitution for the existing letter of
credit heretofore issued by First Union
National Bank of Florida securing the 1997
Bonds.
The 2002 Bonds will be issued pursuant to a Trust Indenture dated
as of
July 1, 2002 (the "2002 Indenture") between
the Board and Regions Bank, as
Trustee (acting in such capacity, the "2002
Trustee"). The Board will use the
proceeds of the 2002 Bonds to finance (i)
the construction of an approximately
70,000 square foot addition to the Existing
Facility and the acquisition of
certain machinery and equipment for use
therein (collectively the "2002
Improvements") and (ii) the payment of a
portion of the expenses of issuing the
2002 Bonds. KINPAK and the Board will enter
into a Second Supplemental Lease
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Agreement dated as of July 1, 2002 pursuant
to which KINPAK will lease the 2002
Improvements from the Board and KINPAK will
agree to pay additional rent to the
Board sufficient to pay the debt service on
the 2002 Bonds. The Existing
Facility as improved by the 2002
Improvements is herein referred to as the
"Project." Regions Bank when acting in the
capacity as both the 1997 Trustee and
2002 Trustee is herein referred to as the
"Trustee."
As security for the payment of the 2002 Bonds, the Borrower will
cause
the Bank to issue the Letter of Credit in
favor of the 2002 Trustee in the
amount of (i) the aggregate principal
amount of the 2002 Bonds, to enable the
2002 Trustee to pay the principal amount of
the 2002 Bonds when due and to pay
the principal portion of the purchase price
of 2002 Bonds tendered (or deemed
tendered) for purchase, plus (ii) interest
on the 2002 Bonds for a period of 120
days at the rate of 12% per annum, to
enable the 2002 Trustee to pay interest on
the 2002 Bonds when due and to pay the
interest portion of the purchase price of
2002 Bonds tendered (or deemed tendered)
for purchase.
The Revolving Line of Credit will be made available by the Bank to
the
Borrowers pursuant to the terms hereof and
the Borrowers will use the moneys
drawn under the Revolving Line of Credit to
provide working capital for the
Borrowers' business operations. The
obligations of the Borrowers under the
Revolving Line of Credit will be evidenced
by a promissory note of the Borrowers
in favor of the Bank dated as of July 1,
2002.
The Substitute Letter, the Letter of Credit and the Revolving Line
of
Credit are being issued pursuant to a
Credit Agreement dated as of July 1, 2003
by and among the Borrowers and the Bank
(the "Credit Agreement").
As security for the Borrowers' obligations under this Agreement
with
respect to the Revolving Line of Credit the
Borrowers are executing this
Security Agreement (this "Security
Agreement") in favor of the Bank, whereby the
Bank is being granted a security interest
in all receivables and inventory of
the Borrowers.
NOW, THEREFORE, in consideration of the foregoing, and other good
and
valuable consideration, the nature and
adequacy of which Borrowers and the Bank
acknowledge as sufficient and proper to
make this Agreement binding, the parties
hereto, intending to be legally bound, do
state and agree as follows:
1. Meaning of terms used herein:
(a) "Account Debtor" means a person or entity who is obligated
on
a Receivable.
(b) "Borrowers" means the Borrowers jointly and each of the
Borrowers severally.
(c) "Chattel Paper" means a writing or writings which evidence
both a debt and a security interest in or lease of goods.
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(d) "Contract Rights" means any rights under contracts not yet
earned by performance and not yet evidenced by an Instrument or
Chattel
Paper.
(e) "Credit Agreement" shall have the meaning set forth in the
Recitals hereto.
(f) "Credit Facilities" means collectively, the Substitute
Letter, the Letter of Credit, and the Revolving Line of Credit
.
(g) "Document" means a bill of lading, dock warrant, dock
receipt, warehouse receipt or order for the delivery of goods, and
also
any other document which in the regular course of business or
financing
is treated as
adequately evidencing that the person in possession of it
is entitled to receive, hold and dispose of the Document and the
goods
it covers, whether negotiable or non-negotiable.
(h) "Instrument" includes all negotiable instruments,
documentary
drafts, Chattel Paper and other writings which evidence a right
to
payment of money for goods and inventory sold or leased or for
services
rendered.
(i) "Inventory" means all inventory of every nature and
description belonging to the Borrowers wherever located and whether
now
owned or in existence or hereafter acquired, held for sale or lease
or
to be furnished under contracts of service, and all work in
progress,
finished goods, parts, materials and supplies of every nature
and
description produced, used or consumed in the Borrowers'
business.
(j) "Letter of Credit" shall have the meaning set forth in the
Recitals hereto.
(k) "Letters of Credit" means the Letter of Credit and the
Substitute Letter collectively.
(l) "Line of Credit Obligations" means all indebtedness or
obligations of the Borrowers to the Bank under or related to
the
Revolving Line of Credit.
(m) "Receivables" means and includes any and all rights of the
Borrowers to the payment of money or other forms of consideration
of
any kind (whether classified un
