Mortgage, Assignment of Lease

BY AND AMONG


THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF MONTGOMERY


AND


KINPAK INC.,


IN FAVOR OF


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


STATE OF ALABAMA )
: MONTGOMERY COUNTY )


MORTGAGE, ASSIGNMENT OF LEASES
AND SECURITY AGREEMENT


THIS MORTGAGE, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT dated as of July 1, 2002, is entered into by KINPAK INC., an Alabama corporation (herein called "KINPAK") and THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY, an Alabama public corporation (herein called the "Board" and together with KINPAK, the "Mortgagors"), for the benefit of REGIONS BANK, an Alabama banking corporation with a principal place of business in Montgomery, Alabama (herein called the "Bank");


R E C I T A L S


The Mortgagors have requested that the Bank provide to KINPAK and the following affiliated parties: Ocean Bio-Chem, Inc., Star-Brite Distributing, Inc., Star Brite Automotive, Inc. and Star Brite Distributing (Canada), Inc. (collectively with KINPAK, 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 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") issued by the Board concurrently herewith, 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") 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.


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The 2002 Bonds are being 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 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, 2002 by and among the Borrowers and the Bank (the "Credit Agreement").


As security for the Borrowers' obligations under the Credit Agreement with respect to the Substitute Letter, the Letter of Credit and the Revolving Line of Credit the Board and KINPAK are executing this Mortgage, Assignment of Leases and Security Agreement (this "Mortgage") in favor of the Bank.


NOW, THEREFORE, for value received and in consideration of the foregoing recitals and to induce the Bank to enter into the Credit Agreement and to issue the Substitute Letter , the Letter of Credit and make available the Revolving Line of Credit, and to secure the prompt payment of all amounts due by the Borrowers under the Credit Agreement, the Credit Facilities and the documents and instruments securing the same, including, without limitation, this Mortgage, and also to secure the full and complete performance of each and every obligation, covenant, duty and agreement of the Mortgagors contained in this Mortgage, the Mortgagors agree as follows:


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ARTICLE I


DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION


SECTION 1.1 DEFINITIONS. For all purposes of this Mortgage, except as otherwise expressly provided or unless the context otherwise requires:


(a) The terms defined in this Article have the meanings assigned to them in this Article. Singular terms shall include the plural as well as the singular and vice versa.


(b) All references in this instrument to designated "articles," "sections" and other subdivisions are to the designated articles, sections and subdivisions of this instrument as originally executed.


(c) The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Mortgage as a whole and not to any particular article, section or other subdivision.


(d) The term "person" shall include any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization and any government or any agency or political subdivision thereof.


(e) Capitalized term not otherwise defined herein shall have the meanings assigned in the Credit Agreement.


"ADDITIONAL PROJECT EQUIPMENT" means all items of furniture, furnishings, fixtures, machinery, equipment or other personal property at any time installed in or about the Project owned by the Borrowers, or any thereof, the costs of which are not paid by the Board from the proceeds of the Bonds, or are not otherwise Project Equipment.


"BANK" means Regions Bank, an Alabama banking corporation with a principal place of business in Montgomery, Alabama, and its successors and assigns.


"BOARD" means The Industrial Development Board of the City of Montgomery, a public corporation organized under the laws of the State of Alabama, and its successors and assigns.


"BONDS" means the 1997 Bonds and the 2002 Bonds.


"COLLATERAL" means all property and rights mortgaged, assigned, pledged or otherwise subject to the lien of this Mortgage.


"CONDEMNATION AWARDS" has the meaning stated in the third Granting Clause of Article II.


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"CREDIT AGREEMENT" means that certain Credit Agreement dated as of July 1, 2002, between the Borrowers and the Bank, including any amendments or supplements to such instrument entered into pursuant to the applicable provisions thereof.


"CREDIT FACILITIES" means, collectively, the Substitute Letter , the Letter of Credit and the Revolving Line of Credit.


"EQUIPMENT" means the Project Equipment and the Additional Project Equipment.


"EVENT OF DEFAULT" has the meanings stated in Section 7.1 hereof. An Event of Default shall "exist" if an Event of Default shall have occurred and be continuing.


"EXISTING FACILITY" means the manufacturing facilities (land, buildings, other improvements, equipment, machinery, personal property and fixtures) owned by the Board and leased to KINPAK and located on the real property described in Exhibit A.


"FINANCING DOCUMENTS" shall mean this Mortgage, the Indentures, the Lease Agreement, the Credit Agreement, the Security Agreement and the Revolving Line of Credit Note.


"INDENTURES" shall mean, collectively, the 1997 Indenture and the 2002 Indenture.


"KINPAK" means KINPAK INC., an Alabama corporation, and its successors and assigns.


"LEASE AGREEMENT" shall mean the Restated Lease Agreement dated as of December 1, 1996, as amended and supplemented by First Supplemental Lease Agreement dated as of March 1, 1997, and by Second Supplemental Lease Agreement dated as of July 1, 2002, between KINPAK and the Board relating to the Project, including any amendments or supplements to such instrument from time to time entered into pursuant to the application provisions thereof.


"LETTER OF CREDIT" means the letter of credit with respect to the 2002 Bonds to be issued by the Bank in favor of the Trustee, as more fully described in the Credit Agreement.


"LETTERS OF CREDIT" shall mean, collectively, the Letter of Credit and the Substitute Letter.


"MORTGAGE" means this instrument as originally executed or as it may from time to time be supplemented, modified or amended by one or more instruments entered into pursuant to the applicable provisions hereof.


"MORTGAGED SITE" has the meaning stated in the first Granting Clause of Article II.


"MORTGAGORS" means KINPAK and the Board.


"OBLIGATIONS" shall mean all indebtedness or obligations of the Borrowers to the Bank under the Credit Agreement or secured by this Mortgage or


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the Security Agreement, including without limitation (i) the Borrowers' obligation to reimburse the Bank for draws made under the Letters of Credit, (ii) the Borrowers' obligation to pay fees and charges to the Bank for the issuance and continuation of the Letters of Credit and (iii) the Borrowers' obligations under the Revolving Line of Credit Note and all renewals and extensions of any or all of the obligations of the Borrowers described herein (including, without limitation, comparable obligations assumed or undertaken with respect to any renewal or extension of, or any substitute for, the Letters of Credit, whether or not any renewal or extension agreement is executed in connection therewith).


"PERMITTED ENCUMBRANCES" means those restrictions, exceptions, reservations, conditions, limitations, interests and other matters that are identified in Exhibit B to this Mortgage.


"PERSONAL PROPERTY AND FIXTURES" has the meaning set forth in the second Granting Clause of Article II.


"PROJECT" means collectively, the Existing Facility, the 2002 Improvements, the Project Equipment and the Additional Project Equipment.


"PROJECT EQUIPMENT" means (i) all items (whether or not fixtures) of furniture, furnishings, fixtures, machinery, equipment or other personal property the costs of which, in whole or in part, are paid by the Board out of the proceeds of the Bonds and (ii) all items (whether or not fixtures) of furniture, fixtures, machinery, equipment or other personal property at any time installed in or about the Project that are acquired by the Board or the Borrowers in substitution for or replacement of property theretofore constituting part of the Project Equipment and that, under the provisions of the Lease Agreement and the Indentures, are to constitute part of the Project Equipment.


"REAL PROPERTY" means the real property, described on Exhibit A.


"RENTS" has the meaning stated in the fifth Granting Clause of Article II.


"REVOLVING LINE OF CREDIT" has the meaning set forth in the Recitals hereto.


"REVOLVING LINE OF CREDIT NOTE" means the Revolving Line of Credit Note of even date herewith of the Borrowers in favor of the Bank evidencing the Revolving Line of Credit.


"SECURITY AGREEMENT" means the Security Agreement of even date herewith between the Borrowers and the Bank.


"SPECIAL FUNDS" means all funds and accounts established pursuant to the Indentures.


"SUBLEASES" has the meaning stated in the fifth Granting Clause of Article II.


"SUBSTITUTE LETTER" shall mean the letter of credit with respect to the 1997 Bonds issued by the Bank in favor of the Trustee.


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"TRUSTEE" shall mean Regions Bank, an Alabama banking corporation with a principal place of business in Montgomery, Alabama, in its capacity as trustee under the Indentures, and its successors and assigns.


"1997 BONDS" shall mean the $4,000,000 aggregate principal amount of Industrial Refunding Revenue Bonds (KINPAK INC. Project) Series 1997 issued by the Board pursuant to the 1997 Indenture.


"2002 BONDS" shall mean the $3,500,000 aggregate principal amount of Industrial Development Revenue Bonds (KINPAK INC. Project) Series 2002 issued by the Board pursuant to the 2002 Indenture.


"2002 IMPROVEMENTS" shall mean the approximately 70,000 square foot addition to the Existing Facility and the additional machinery and equipment for use therein to be purchased by the Board and financed by the proceeds of the 2002 Bonds.


"1997 INDENTURE" shall mean that certain Trust Indenture dated as of December 1, 1996, as amended and supplemented by First Supplemental Trust Indenture dated as of March 1, 1997, between the Board and the Trustee relating to the 1997 Bonds, including any amendments or supplements to such instrument from time to time entered into pursuant to the applicable provisions thereof.


"2002 INDENTURE" shall mean that certain Trust Indenture dated as of July 1, 2002, between the Board and the Trustee relating to the 2002 Bonds, including any amendments or supplements to such instrument from time to time entered into pursuant to the applicable provisions thereof.


"1997 TRUSTEE" shall mean Regions Bank as trustee under the 1997 Indenture.


"2002 TRUSTEE" shall mean Regions Bank as trustee under the 2002 Indenture.


SECTION 1.2 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The article and section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.


SECTION 1.3 DATE OF MORTGAGE. The date of this Mortgage is intended as and for a date for the convenient identification of this Mortgage and is not intended to indicate that this Mortgage was executed and delivered on said date.


SECTION 1.4 SEPARABILITY CLAUSE. If any provision in this Mortgage shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.


SECTION 1.5 GOVERNING LAW. This Mortgage shall be construed in accordance with and governed by the laws of the State of Alabama.


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SECTION 1.6 COUNTERPARTS. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument.


ARTICLE II


GRANTING CLAUSES


The Mortgagors have bargained and sold and do hereby grant, bargain, sell and convey to the Bank, its successors and assigns, the property and interests in property, present and future, described in the following Granting Clauses, and have granted and do hereby grant to the Bank a security interest in said property and interests in property:


I


(MORTGAGED SITE AND BUILDINGS)


All right, title and interest, present and future in the real property and interests therein described in Exhibit A attached hereto, together with all easements, permits, licenses, rights-of-way, contracts, leases, tenements, hereditaments, appurtenances, rights, privileges, options and immunities pertaining or applicable to said real property and interests therein, together with all buildings, structures and improvements now or hereafter located on such real property (herein referred to as the "Mortgaged Site").


II


(PERSONAL PROPERTY AND FIXTURES)


The Personal Property and Fixtures and all other personal property and fixtures (i) acquired or to be acquired by the Mortgagors with proceeds of the Bonds or (ii) located on, in or about the Project in which the Board or KINPAK have any interest, including all substitutions and replacements for such personal property and fixtures and the proceeds thereof. As of the date hereof the Personal Property and Fixtures includes, without limitation, the personal property described on Exhibit C attached hereto.


III


(CONDEMNATION AWARDS AND INSURANCE PROCEEDS)


All awards or payments, including all interest thereon, together with the right to receive the same, that may be made to the Mortgagors with respect to the Collateral as a result of the exercise of the right of eminent domain, any damage to or destruction of the Collateral or any part thereof, or any other injury to or decrease in the value of the Collateral (herein referred to as "Condemnation Awards"), and all right, title and interest of the Mortgagors in


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and to any policies of insurance (and the proceeds thereof) with respect to any damage to or destruction of the Collateral.


IV


(SPECIAL FUNDS)


KINPAK's right, title and interest in and to money and investments from time to time on deposit in, or forming a part of, the funds and accounts established under the Indentures (herein referred to as the "Special Funds"), subject to the prior lien of the Indentures with respect to the Special Funds and the provisions of the Indentures permitting the application thereof for the purposes and on the terms and conditions set forth therein.


V


(LEASES AND RENTS)


(a) All written or oral leases or other agreements for the use or occupancy of all or any portion of the Collateral with respect to which KINPAK is the lessor and any and all extensions and renewals thereof, now or hereafter existing, (collectively referred to as the "Subleases");


(b) Any and all guaranties of performance by lessees under the Subleases;


(c) The immediate and continuing right to collect and receive all the rents, income, receipts, revenues, issues and profits now due or that may hereafter become due or to which KINPAK may now be or may hereafter (including during the period of redemption, if any) become entitled to demand or claim, arising or issuing from or out of the Subleases or from or out of the minimum rents, additional rents, percentage rents, common area maintenance charges, parking charges, tax and insurance premium contributions, liquidated damages upon default, the premium payable by any lessee upon the exercise of any cancellation privilege provided for in any of the Subleases, and all proceeds payable under any policy of insurance covering loss of rents resulting from untentability caused by destruction or damage to the Collateral, together with any and all rights and claims of any kind that KINPAK may have against any such lessee under the Subleases or against any sublessees or occupants of the Collateral [all such moneys, rights and claims described in this subparagraph (c) being hereinafter referred to as the "Rents"]; provided, however, that so long as no Event of Default has occurred under this Mortgage, KINPAK shall have the right under a license granted hereby (but limited as provided in Section 8.7 below) to collect, receive and retain the Rents (but not prior to accrual thereof); and


(d) Any award, dividend or other payment made hereafter to KINPAK in any court procedure involving any of the lessees under the Subleases in any bankruptcy, insolvency or reorganization proceeding in any state or federal court and any and all payments made by lessees in lieu of rent, KINPAK hereby appointing the Bank as its irrevocable attorney-in-fact to appear in any action and collect any such award, dividend or other payment.


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VI


(OTHER PROPERTY)


Any and all other real or personal property of every kind and nature from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred to the Bank as and for additional security hereunder by KINPAK or the Board, or by anyone in the behalf of, or with the written consent of, KINPAK or the Board.


VII


(REVENUES)


All revenues and receipts derived by the Board from the leasing or sale of the Mortgaged Site or the Equipment, including, without limitation, all right, title and interest of the Board in and to the Lease Agreement (not including, however, the Board's rights to indemnification and reimbursement of expenses); provided, however, that nothing contained in this clause shall impair, diminish or otherwise affect the Board's obligations under the Lease Agreement or impose any such obligations upon the Bank.


VIII


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