EXHIBIT 10.14


                                CREDIT AGREEMENT


         THIS is an agreement (the  "Agreement")  made this 27th day of February
1997, by FIRST HAWAIIAN  BANK, a Hawaii  corporation,  as lender,  and CYANOTECH
CORPORATION, a Nevada corporation, as borrower.

         This Agreement  concerns the  establishment of a credit facility in the
amount of ONE MILLION AND NO/000 DOLLARS  ($1,000,000.00)  made available to the
Borrower by the Lender,  pursuant to which the Borrower may obtain Advances from
the Lender, all upon the terms and conditions set forth below.

         In  consideration  of the mutual  covenants  hereinafter set forth, and
intending to be legally bound thereby,  the Borrower and the Lender hereby agree
as follows:

SECTION 1.  Definitions.

         As used in this  Agreement,  each of the following terms shall have the
meaning set forth below with respect thereto:

         "Advance" means a disbursement  of loan proceeds  pursuant to the terms
and conditions set forth in Section 2 of this Agreement.

         "Banking  Day"  means a day on which  First  Hawaiian  Bank is open for
business in the State of Hawaii.

         "Borrower" means Cyanotech Corporation, a Nevada corporation.

         "Borrowing Base" means the aggregate of (i) seventy-five  percent (75%)
of  Eligible  Domestic  Accounts  Receivable  and (ii)  fifty  percent  (50%) of
Eligible Foreign Accounts Receivable.

         "Borrowing Base Certificate" means the certificate in the form attached
hereto as Exhibit "1" and made a part hereof.

         "Capital Lease" means any lease of any property (whether real, personal
or mixed)  which,  in  conformity  with GAAP, is or should be accounted for as a
capital lease on a balance sheet.

         "Closing Date" means the date on which the Lender  determines  that all
of the conditions set forth in Section 4 of this Agreement have been satisfied.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

         "Commitment"  means the  Lender's  agreement  to make  Advances of loan
proceeds to the Borrower,  pursuant to, but subject to the terms and  conditions
of, this Agreement and, where the context so requires,  the aggregate  principal
amount of all Advances disbursed or to 

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be disbursed, thereunder.  The amount of the  Commitment shall  be the lesser of
(i) ONE MILLION AND NO/000  DOLLARS ($1,000,000.00) and (ii) the Borrowing Base.
         
         "Compliance  Certificate"  means the  certificate  in the form attached
hereto as Exhibit "2" and made a part hereof.

         "Current Liabilities" means the principal amount of all loans and short
term notes  payable  within one year,  "funded  debt" (i.e.,  current  principal
amounts of  long-term  debt and Capital  Leases  which are to be paid within one
year),  trade  accounts  payable,  accrued  expenses,  cash  dividends  payable,
unearned revenues, income taxes payable and such other items of indebtedness and
other  obligations of the Borrower in accordance with GAAP, would be included as
current liabilities on the balance sheet as of the date to which liabilities are
to be determined.

         "Eligible   Domestic   Accounts   Receivable"  means  receivables  from
customers located within the United States of America which are less than ninety
(90) days from invoice date; provided, however, in determining Eligible Domestic
Accounts Receivable (i) receivables from governmental  entities and Subsidiaries
of Borrower, and intracompany accounts,  shall not be included; (ii) receivables
from customers to whom Borrower is indebted,  including any accounts  payable to
such customers,  shall only be included to the extent of the excess,  if any, of
such accounts  receivable  over such  indebtedness;  (iii) if over fifty percent
(50%) of the value of all  receivables  from any  customer are older than ninety
(90) days from their respective invoice dates, no receivables from such customer
shall be included;  and (iv) the portion of each account receivable in excess of
twenty-five  percent (25%) of the total of Eligible Domestic Accounts Receivable
plus Eligible  Foreign  Accounts  Receivable (as  determined  following any such
exclusions) shall not be included.

         "Eligible Foreign Accounts Receivable" means receivables from customers
located  outside of the United  States of America  for which  credit  support is
provided by Export  Letters of Credit which have been provided to the Lender for
negotiation.

         "ERISA" means the Employees  Retirement Income Security Act of 1974, as
amended from time to time.

         "Event of Default" means any of the events described in Section 7.1 of
this Agreement.

         "Expenses" means the fees, costs and expenses  described in Section 6.7
of this Agreement.

         "Export Letter of Credit" means a documentary letter of credit,  issued
by  a  bank   preapproved  in  writing  by  Lender,   which  bank  has  accepted
documentation for payment.

         "Financing   Statement"  means  the  UCC-1  Financing  Statement  dated
concurrently with the Security  Agreement,  executed by the Borrower in favor of
the  Lender,  perfecting  a first  security  interest  in and to the  collateral
described in the Security Agreement.


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<PAGE>
         "GAAP" means generally accepted accounting principles.

         "Lender" means First Hawaiian Bank, a Hawaii corporation.

         "Loan Documents" means all of the documents and instruments executed by
or for the benefit of the Borrower in connection with the Commitment, including,
without  limitation,  this Agreement,  the Note, the Security  Agreement and the
Financing Statement.

         "Loan Fee" means an amount equal to TWO THOUSAND  FIVE HUNDRED  DOLLARS
($2,500.00),  one-half of which was payable by the Borrower upon the  acceptance
of the Lender's offer of the Commitment, the receipt of which is acknowledged by
the Lender,  and  one-half of which is payable by the  Borrower on or before the
Closing Date.

         "Maturity  Date" means (a) January 31, 1998 or (b) the date,  following
the occurrence of an Event of Default, on which the Lender notifies the Borrower
that the entire Principal  Balance,  together with all accrued interest thereon,
and all fees, charges,  expenses and other sums payable under this Agreement and
the other Loan Documents, shall become due and payable.

         "Net Available Collected Balances" means balances in demand deposit and
maximizer  accounts  with  and  analyzed  by the  Lender,  after  deducting  (a)
provisional  credits for items in the process of collection;  (b) reserves;  (c)
the collected balance necessary to support account activity charges; and (d) the
collected  balance  necessary  to  support  earnings  paid  to the  Borrower  as
interest.

         "Net Income" means the net income of the Borrower (i.e., gross revenues
received by the Borrower,  less operating expenses,  taxes,  insurance and other
proper  expenses in accordance with GAAP. Net Income shall not include (i) gains
resulting  from the sale or other  disposition  of assets which do not relate to
the  activities of the Borrower in the ordinary  course of business,  (ii) gains
arising from changes in  accounting  principles  or practices  and,  (iii) gains
arising from the write-up of assets.

         "Note"  means the  promissory  note  dated the date of this  Agreement,
executed  by the  Borrower  in favor of the Lender,  evidencing  the  Borrower's
agreement to repay the  Principal  Balance  hereunder,  together  with  interest
thereon, as provided therein.

         "Person"  means  an  individual,  a  partnership,  a joint  venture,  a
corporation,  a trust, an unincorporated  association,  and or government or any
department or agency thereof.

         "Plan"  means at any time an  employee  pension  benefit  plan which is
covered by Title IV of ERISA or subject to the minimum  funding  standards under
Section  412 of the  Code,  and  is  maintained  by the  Borrower  for  its  own
employees.

         "Principal  Balance" means the aggregate outstanding  principal balance
of all Advances.


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<PAGE>
         "Quarter" means any one of the following  three-calendar-month  periods
in any  calendar  year:  January 1 to and  including  March  31;  April 1 to and
including  June 30; July 1 to and  including  September 30; and October 1 to and
including December 31. 
         "Quick Assets" means cash and cash equivalents,  marketable  securities
and accounts  receivable (less doubtful  accounts) in accordance with GAAP as of
the date to which Quick Assets are to be determined.

         "Quick Ratio" means Quick Assets divided by Current Liabilities.

         "Subsidiary"  means (a) any  corporation  of which the  Borrower,  or a
subsidiary of the Borrower,  owns or controls,  directly or  indirectly,  51% or
more of the outstanding capital stock, or (b) any partnership or other entity in
which the Borrower,  or a subsidiary  of the Borrower,  holds 51% or more of the
equity  interest,  and of which the  Borrower,  or a subsidiary of the Borrower,
controls the management or policies.

         "Tangible  Net  Worth"  means the  excess of Total  Assets  over  Total
Liabilities, as determined in accordance with GAAP.

         "Total Assets" means all items of property owned by the Borrower and it
Subsidiaries  which, in accordance  with GAAP,  would be included as an asset on
the  balance  sheet  as of the  date  to  which  assets  are  to be  determined,
excluding,  however,  (a) all assets  which would be  classified  as  intangible
assets under GAAP, such as, goodwill  (whether  representing  the excess of cost
over book value of assets  acquired or otherwise),  patents,  trademarks,  trade
names,  copyrights,   franchises,  and  deferred  charges  (including,   without
limitation,  organization  costs,  and  research  and  development  costs),  (b)
treasury stock and minority  interests in  Subsidiaries,  (c) cash set apart and
held in a  sinking  or other  analogous  fund  established  for the  purpose  of
redemption or other  retirement of capital stock,  (d) to the extent not already
deducted from total assets, reserves for depreciation,  depletion,  obsolescence
or  amortization  of  properties  and all other  reserves or  appropriations  of
retained  earnings  which,  in accordance  with GAAP,  should be  established in
connection with the business  conducted by the Borrower,  and (e) any evaluation
or other write-up in book value of assets subsequent to December 31, 1995.

         "Total  Liabilities"  means  the  principal  amount  of  all  items  of
indebtedness and other  obligations of the Borrower and its Subsidiaries  which,
in accordance  with GAAP,  would be included as a liability on the balance sheet
as of the date to which  liabilities  are to be determined,  including,  without
limitation,  (i)  indebtedness  for borrowed money or for the deferred  purchase
price of property or  services,  (ii)  obligations  as lessee under leases which
shall  have been or should be, in  accordance  with  GAAP,  recorded  as Capital
Leases,  (iii)  reserves  for loan  losses,  (iv)  obligations  under  direct or
indirect  guarantees,  and obligations  (contingent or otherwise) to purchase or
otherwise  acquire,  or otherwise  assure a creditor against loss in respect of,
indebtedness  or  obligations  of  others,  and (v)  obligations  in  respect of
unfunded  vested  benefits in excess of $100,000.00  in the aggregate  under all
Plans covered by Title IV of ERISA.


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<PAGE>
SECTION 2.  The Commitment.

         2.1  Amount.  The Lender  agrees,  subject to the terms and  conditions
contained in this  Agreement,  to make Advances to the Borrower in the aggregate
amount which shall not exceed,  at any one time,  the amount of the  Commitment.
Within the limits of the  Commitment,  and  subject to the terms and  conditions
contained herein, the Borrower may borrow, repay and reborrow.

         2.2  Advances.   Applications  for  each  desired  Advance  under  this
Agreement  shall  be made by the  Borrower  in  accordance  with the  terms  and
provisions of the Note and shall be accompanied by a Borrowing Base Certificate.
No  Advance  shall  cause the  Principal  Balance  to exceed  the  amount of the
Commitment.  The Borrower  shall use the proceeds of the Advances for Borrower's
working capital purposes,  and for such other purposes as the Lender may approve
in writing.

         2.3  Interest.  Interest on  the  Principal  Balance  shall  accrue  as
provided in the Note.

         2.4  Payments.  The  Borrower  shall pay to the Lender  interest on the
Principal  Balance  as  provided  in the  Note.  The  Borrower  shall  repay the
Principal  Balance,  all  accrued  but unpaid  interest  thereon,  and all fees,
charges and other sums payable  under the Loan  Documents,  to the Lender on the
Maturity Date. The Borrower may prepay principal on the terms and conditions set
forth in the Note.

         2.5  Security  Agreement.  In order to provide further assurance to the
Lender  of the due and  punctual  payment  of the  Note and the  observance  and
performance by the Borrower of all of its obligations  under the Loan Documents,
the Borrower  shall, on or before the Closing Date,  deliver to the Lender,  the
Security  Agreement,  duly  executed  by the  Borrower,  in form  and  substance
satisfactory to the Lender.

         2.6  Closing.  Closing  of  the  Commitment  shall  be  subject  to the
satisfaction  of all of the conditions  precedent set forth in Section 4 of this
Agreement, and shall occur no later than March 14, 1997.

SECTION 3.  Representations and Warranties by the Borrower.

         The Borrower represents and warrants to the Lender that:

         3.1  Organization, Standing and Authority of Borrower.  The Borrower is
a Nevada corporation  duly  registered,  validly  existing  and in good standing
under the laws of the State of Nevada, is  authorized  to do business  and is in
good standing in the State of Hawaii and has all requisite  power and  authority
to carry on the business  and  to own the  property  that it now carries on  and
owns.  Each Subsidiary is duly registered, validly existing and in good standing
under the laws of the jurisdiction where it was formed,  and each Subsidiary has
all  requisite  power  and  authority  to  carry on the business  and to own the
property  that  it now  carries  on and owns.  The  Borrower  has all  requisite
power and authority to execute and deliver the Loan Documents and to observe and
perform all of the provisions and conditions 

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<PAGE>
thereof.  The  execution  and  delivery of the Loan  Documents  have  been  duly
authorized by the Board of Directors of the Borrower and, to the extent required
by law,  by the stockholders of the Borrower,  and no other corporate  action of
the  Borrower is  requisite to the execution and delivery of the Loan Documents.

         3.2  Tax  Returns  and  Payments.  All  tax  returns and reports of the
Borrower  required  by law to be filed  have been  duly  filed,  and all  taxes,
assessments,  contributions,  fees and other  governmental  charges  (other than
those  presently  payable  without penalty or interest and those which have been
disclosed to the Lender but which are currently  being  contested in good faith)
upon the Borrower or upon the  properties  or assets or income of the  Borrower,
which are due and payable, have been paid.

         3.3  Litigation. There is, to the knowledge of the Borrower, no action,
suit,  proceeding  or  investigation  pending  at law or in equity or before any
federal,  state,  territorial,   municipal  or  other  governmental  department,
commission,  board,  bureau,  agency or instrumentality or threatened against or
affecting the Borrower,  which might materially  adversely affect the Borrower's
ability to perform its obligations under the Loan Documents.

         3.4  Compliance with Other Instruments,  None Burdensome.  The Borrower
is  not  in  violation  of  or  in default with respect to any term or provision
of its Articles of Incorporation or Bylaws or any mortgage, indenture, contract,
agreement  or instrument applicable  to it or by which it may be bound;  and the
execution, delivery, performance of and compliance with each and all of the Loan
Documents  will not  result  in any such  violation  or be in  conflict  with or
constitute a default  under any such term or provision or result in the creation
of any  mortgage,  lien or  charge  on any of the  properties  or  assets of the
Borrower not  contemplated by this Agreement;  and there is no term or provision
of the Articles of  Incorporation  or Bylaws,  of the Borrower or any  mortgage,
indenture,  contract,  agreement or instrument  applicable to the Borrower or by
which it may be bound,  which may adversely  affect the business or prospects or
condition  (financial  or other) of the Borrower or of any of its  properties or
assets.  Without  limiting  the  foregoing,  the  Borrower is not a party to, or
otherwise  subject to, any  agreement  which  limits the amount of, or otherwise
imposes  restrictions  on, the incurring of  indebtedness by the Borrower of the
type contemplated by this Agreement.

         3.5  Compliance  with  Law.  The   consummation  of  the   transactions
contemplated  by the Loan Documents will not conflict with or result in a breach
of any law, statute, ordinance, regulation, order, writ, injunction, judgment of
any court or governmental instrumentality, domestic or foreign.

         3.6  Governmental Authorization.  No consent, approval or authorization
of, or registration, declaration or filing with, any governmental or public body
or authority in connection  with the valid execution and delivery of each of the
Loan  Documents is required or, if required,  such consent,  approval,  order or
authorization shall have been obtained prior to the Closing Date.

         3.7  Financial  Statements.   All   financial   statements   heretofore
delivered to the Lender by the  Borrower are true and correct  in all  respects,
have been prepared in 

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<PAGE>
accordance with GAAP,  consistently applied,  and fairly represent the financial
condition  of  the  Borrower as of the dates thereof;  and no material,  adverse
changes have occurred in the financial  condition  reflected  therein  since the
dates thereof.

         3.8  Brokers,  Finders and Agents.  The  Borrower  has not  employed or
engaged any broker,  finder or agent who may claim a commission  or fee or other
compensation  with respect to the  Commitment.  The Borrower will  indemnify and
hold the Lender  harmless from any and all claims of brokers or other claims for
commissions or fees in connection  with the Commitment and will further hold the
Lender harmless and indemnify the Lender against all losses,  damages, costs and
charges (including attorneys' fees) which the Lender may sustain because of such
claims or in consequence of defending against such claims.

         3.9  Compliance with Funding Standards.  The Borrower has fulfilled its
obligations  under  the  minimum  funding  standards  of ERISA and the Code with
respect to each Plan and is in  compliance  in all  material  respects  with the
currently applicable  provisions of ERISA and the Code, and has not incurred any
liability to the Pension Benefit  Guaranty  Corporation or a Plan under Title IV
of ERISA. 

         3.10 Character of Representations and Warranties. None of the financial
statements  or any  certificate  or  statement  furnished to the Lender by or on
behalf  of the  Borrower  in  connection  with the  Commitment,  and none of the
representations and warranties in this Agreement,  contains any untrue statement
of a material fact or omits to state a material fact  necessary in order to make
the statements contained therein or herein not misleading. To the best knowledge
of the Borrower,  there is no fact which materially  adversely affects or in the
future (so far as the Borrower can now foresee) may materially  adversely affect
the ability of the Borrower to observe or perform its obligations under the Loan
Documents  which has not been set forth herein or in a certificate or opinion of
counsel or other  written  statement  furnished to the Lender by or on behalf of
the Borrower.

SECTION 4.  Conditions of the Lender's Obligation.

         The Lender's obligation to make Advances  hereunder,  is subject to the
fulfillment, to its reasonable satisfaction, of the following conditions:

         4.1 Representations and Warranties True at Closing. The representations
and warranties contained in Section 3 of this Agreement and otherwise made by or
on behalf of the Borrower in connection  with the  Commitment  shall be true and
correct as of the time of each request by the Borrower for an Advance hereunder,
with the same effect as if made at such time.

         4.2  Execution  of Loan Documents. The Borrower shall have executed and
delivered  to the  Lender and the Lender  shall have  approved,  all of the Loan
Documents.

         4.3  Expenses; Loan Fee.  The Borrower shall have paid to the Lender on
the  Closing  Date the Loan  Fee and all of the  fees and  expenses  (including,
without limitation, fees and disbursements and expenses of legal counsel for the
Lender)  provided for in Section 6.7 which the Lender shall  determine to be due
and payable as of the Closing Date.


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         4.4  No Event of Default.  There  shall exist  at the time each Advance
is  made  no  condition  or event which would  constitute an Event of Default or
which,  after  notice or  lapse of time,  or both,  would constitute an Event of
Default.

         4.5  Opinion of  Counsel.  The  Borrower  shall have  delivered  to the
Lender, and the Lender shall have approved,  an opinion of legal counsel for the
Borrower in substantially  the form set forth in Exhibit "3" attached hereto and
made a part hereof.

         4.6  Corporate Proceedings  and  Documents.  All corporate  proceedings
taken by the Borrower in connection with the Commitment shall be satisfactory in
form and  substance  to the Lender and its  counsel,  and the Lender  shall have
received;  (i) properly  certified  resolutions of the Board of Directors of the
Borrower duly  authorizing  the execution and delivery of the Loan Documents and
the consummation of the transactions contemplated hereby, (ii) a certificates of
good  standing of the Borrower  issued by the Secretary of State of the State of
Nevada and by Director of the Department of Commerce and Consumer Affairs of the
State of Hawaii,  (iii) a copy of the Articles of Incorporation of the Borrower,
certified as true and exact by said  Director,  (iv) a copy of the Bylaws of the
Borrower  certified  as true,  correct  and  complete  by the  secretary  of the
Borrower, and (v) such authenticated copies of such other corporate documents as
the Lender may reasonably request.

         4.7  Evidence of Tax Payments;  Tax Clearance Certificate.   The Lender
shall have  received a Tax  Clearance  Certificate  issued by the  Department of
Taxation  of the State of Hawaii  certifying  that all taxes due to the State of
Hawaii by the Borrower up to and including a date within thirty (30) days of the
Closing Date have been paid.

         4.8  Financing  Statement  and Personal  Property  Lien  Report;  Court
Report.  The Borrower shall have  delivered to the Lender a financing  statement
and  personal  property  lien  report and court  report,  in form and  substance
satisfactory to the Lender, issued by a recognized corporate searcher of titles,
advising  the Lender that a search of the public  records  discloses,  as of the
Closing Date, no judgments,  pending actions in state or federal court, security
agreements, chattel mortgages, financing statements, title retention agreements,
notices or certificates of tax liens or other  instruments or documents filed or
recorded  against the Borrower  except those which may be approved by the Lender
in writing.

         4.9  Insurance.  Borrower  shall have delivered to the Lender  evidence
that the requirements of Section 6.5 have been satisfied.

SECTION 5.  Making of Advances.

         Each Advance shall be made upon and subject to the following  terms and
conditions:

         5.1  Application for Advances.  Applications for Advances shall be made
as  provided  in the Note.  Each  application  for an Advance  shall be deemed a
certification  by the Borrower  that,  as of the date of such  application,  all
representations and warranties  contained in Section 3 are true and correct, and
the Borrower is in compliance  with all of the provisions of Sections 4 and 5 of
this Agreement. All statements contained in any such 


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<PAGE>
application shall be deemed a representation and warranty  made by the  Borrower
in connection with the Commitment.

         5.2  Conditions Precedent to Each Advance.  The Lender's  obligation to
make each Advance hereunder shall be subject to the fulfillment, to the Lender's
satisfaction,  as of the time of application  and as of the time of the Advance,
of all of the conditions precedent set forth in this Section 5.2:

                  (a)  Representations  and Warranties.  The representations and
warranties  contained in any application for an Advance, or in Section 3 of this
Agreement,  or otherwise made by or on behalf of the Borrower in connection with
the Commitment, shall be true and correct as of the time of each Advance made by
the Lender under this Agreement, with the same effect as if made at such time.

                  (b)  No  Event  of  Default.  There shall exist at the time of
each  Advance  no condition which would constitute an Event of Default or which,
after notice or lapse of time, or both, would constitute an Event of Default.

                  (c)  Payment of Expenses.  The Borrower shall have paid to the
Lender all expenses provided for in Section 6.7 which the Lender shall determine
to be due.

                  (d)  Insolvency, Bankruptcy, etc.  The Borrower shall not have
become insolvent;  or made an assignment for the benefit of creditors; or failed
generally to pay its debts as they become due; or become the subject of an order
for relief in an involuntary  case under the bankruptcy laws as now or hereafter
constituted,  and such order shall remain in effect and unstayed for a period of
sixty (60) consecutive  days; or commenced a voluntary case under the bankruptcy
laws as now or hereafter  constituted;  or filed any petition or answer  seeking
for itself any arrangement, composition, adjustment, liquidation, dissolution or
similar relief to which it may be entitled under any present or future  statute,
law or regulation; or filed any answer admitting the material allegations of any
petition filed against it in any such proceedings;  or sought or consented to or
acquiesced  in the  appointment  of, or taking  possession  by,  any  custodian,
trustee,  receiver or liquidator  of it or of all or a  substantial  part of its
properties  or  assets;  or taken  any  action  looking  to its  dissolution  or
liquidation;  or within sixty (60) days after  commencement  of any  proceedings
against  it  seeking  any  arrangement,  composition,  adjustment,  liquidation,
dissolution  or similar  relief to which it may be entitled under any present or
future  statute,  law  or  regulation,  such  proceeding  shall  not  have  been
dismissed;  or within  sixty  (60)  days  after  the  appointment  of, or taking
possession by, any custodian,  trustee,  receiver or liquidator of any or of all
or a  substantial  part of its  properties  or assets,  without  its  consent or
acquiescence,  any such appointment or possession shall not have been vacated or
terminated.

         5.3  Conditions are Solely for Benefit of the Lender. All conditions of
the obligations of the Lender to make Advances hereunder, are imposed solely and
exclusively for the benefit of the Lender,  and its successors and assigns,  and
no other person shall have standing to require  satisfaction  of such conditions
in  accordance  with  their  terms,  and  no  other  person  shall,   under  any
circumstances, be deemed to be the beneficiary of such 


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<PAGE>
conditions,  any or all of which may be freely  waived,  in whole or in part, by
the Lender at any time if,  in its sole judgment,  the Lender deems it advisable
to do so.

SECTION 6.  Other Covenants of the Borrower.

         The Borrower covenants and agrees with the Lender as follows:

         6.1  Information. The Borrower shall (a) furnish directly to the Lender
with reasonable  promptness such data and  information,  financial or otherwise,
(including  such  financial  information  as may  be  required  in any  separate
agreement  between the Borrower and the Lender)  concerning the Borrower as from
time to time may  reasonably  be  requested  by the Lender,  including,  but not
limited to, an annual audit of  Borrower's  accounts  receivable  prepared by an
auditor  selected by the Lender which may be requested at the sole discretion of
the  Lender;  (b)  promptly  notify the Lender of any  condition  or event which
constitutes a breach or event of default of any covenant,  condition,  warranty,
representation or provision of any of the Loan Documents,  and of any materially
adverse  change in the financial  condition or  operations of the Borrower;  (c)
furnish directly to the Lender,  promptly upon  transmission  thereof such other
information as the Borrower provides to its other lenders;  (d) furnish directly
to the Lender  not more than  thirty  (30) days  after the end of each  calendar
month,  a  Compliance  Certificate  of  the  Borrower  signed  by an  authorized
executive  officer  of the  Borrower  together  with  the  financial  statements
required to be provided  pursuant to Section 6.9(A) of this  Agreement;  and (e)
furnish  directly to the Lender not more than fifteen (15) days after the end of
each  calendar  month,  a Borrowing  Base  Certificate,  including  an  accounts
receivable  aging  report,  signed by an  authorized  executive  officer  of the
Borrower.

         6.2  Preservation  of  Juristic  Existence. The Borrower shall maintain
its juristic  existence in good  standing  under the laws of the State of Nevada
and any other jurisdiction in which it conducts business, and shall not, without
the prior  written  consent  of  the  Lender,  amend,  modify,  or terminate its
constituent documents,  true and correct copies of which the Borrower represents
have been provided to the Lender.

         6.3  Payment of Taxes.  The  Borrower shall pay or cause to be paid all
taxes,  assessments,  or  other  governmental  charges  levied  upon  any of its
properties  or  assets,  or in respect  of its  income  before  the same  become
delinquent,  except that the Borrower will have the right to contest assessments
and other charges in the manner provided in Section 7.2.

         6.4  Maintenance  and  Performance of Contracts.  The Borrower shall at
all times maintain and perform all material contracts,  licenses,  permits,  and
other  agreements  applicable to its business and  operations and provide timely
notice to the Lender of any  default by the  Borrower  or any third  party under
any of such contracts, licenses, permits or agreements.

         6.5  Insurance.  The  Borrower  shall  maintain at all times during the
term  of the Commitment such business  insurance  and casualty  insurance on all
assets of the Borrower as is normally carried by prudent entities engaged in the
same or similar businesses and all such policies shall include a "Lender's  Loss
Payable Clause" naming the Lender as beneficiary.

                                       10

<PAGE>
         6.6  Indemnification  of the Lender.  The Borrower shall  indemnify and
hold the Lender harmless from any and all claims asserted  against the Lender by
any person,  entity or  governmental  authority  arising out of or in connection
with  the  Commitment  except  for  claims  arising  out of the  Lender's  gross
negligence or wilful  misconduct.  The Lender shall be entitled to appear in any
action or proceeding to defend itself  against such claims,  and all  reasonable
costs  incurred  by the Lender in  connection  therewith,  including  reasonable
attorneys'  fees,  shall be  reimbursed by the Borrower to the Lender within ten
(10) days after  presentment,  as  provided  in Section  6.7.  Any failure to so
reimburse the Lender within the specified time period shall  constitute an Event
of Default under this Agreement,  and the unreimbursed amount shall thereupon be
added to the  Principal  Balance,  and shall bear  interest at the default  rate
specified in the Note.

         The  Lender  shall,  at its sole  option,  be  entitled  to  settle  or
compromise any asserted claim against it, and such  settlement  shall be binding
upon the Borrower for purposes of this  indemnification.  Payment thereof by the
Lender or the  payment  by the  Lender  of any  judgment  or claim  successfully
perfected against the Lender shall constitute an additional  Advance  hereunder,
shall bear  interest at the default rate  specified in the Note until paid,  and
shall be payable  upon demand of the Lender.  The  agreements  contained in this
section shall survive  termination  of the  Commitment and any other portions of
this Agreement.

         6.7  Expenses. Whether  or  not  the  transactions  hereby contemplated
shall  be  consummated,  the Borrower shall  assume  and pay  upon demand of the
Lender:

                  (a)  All  reasonable out-of-pocket  expenses  incurred  by the
Lender in connection with the making and continued administration of any portion
of the  Commitment,  including,  but not  limited  to, the  reasonable  fees and
disbursements and expenses of legal counsel for the Lender;

                  (b)  Any and  all  advances  or  payments  made by the  Lender
pursuant to this  Agreement or any other Loan  Documents,  and other  similar or
dissimilar expenses and charges in connection with the administration, servicing
or collection of any portion of the Commitment,  including  restructuring of the
Commitment,  all of which shall constitute an additional  liability owing by the
Borrower to the Lender; and

                  (c)  All costs and  expenses,  including, but not  limited to,
reasonable  attorneys'  fees,  incurred by the Lender as a result of an Event of
Default or for the purpose of  negotiating a resolution of any default  (whether
by means of refinancing  or otherwise and whether or not  successful) or for the
purpose of effecting collection of the amounts outstanding under the Commitment,
principal,  interest, fees and charges, or any other sums required to be paid by
the Borrower  pursuant to any of the Loan Documents,  when the same shall become
due and payable (whether at the stated maturity thereof or upon any acceleration
of the maturity thereof).

         6.8  Banking Relationships.  The  Borrower  shall  maintain its primary
depository  relationship with the Lender. Borrower shall have opened one or more
investment  accounts  (including  time deposit  accounts)  with the Lender which
shall  have   initial   balances   of  not  less  than  four   million   dollars
($4,000,000.00)  and the  balances  of which  may be  reduced  to the

                                       11
<PAGE>
extent of  capital  expenditures  by  Borrower.   Borrower  shall  maintain  Net
Available  Collected  Balances  with  the  Lender  of  not less than one hundred
thousand dollars ($100,000.00).

         6.9  Financial  Statements.  The Borrower  shall  furnish to the Lender
the following:

                  (a)  as soon as available, but not later than thirty (30) days
after the end of each calendar  month,  comparative  company-prepared  financial
statements  of the Borrower for such month,  prepared in  accordance  with GAAP,
containing, among other matters,  consolidated statements of income and retained
earnings, setting forth in each case comparative figures for the same quarter of
the previous fiscal year, and a balance sheet reflecting the financial condition
of the Borrower as of the end of such month.

                  (b)  as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Borrower, comparative audited financial
statements  of the Borrower for such fiscal year,  prepared in  accordance  with
GAAP, containing, among other matters, consolidated and consolidating statements
of income and retained earnings,  and consolidated and consolidating  statements
of cash flow,  setting forth in each case  comparative  figures for the previous
fiscal year,  and a balance  sheet  reflecting  the  financial  condition of the
Borrower as of the end of such fiscal year,  and  accompanied  by the opinion of
independent  certified public accountants of recognized standing,  containing no
qualifications,  or only such qualification as are reasonably  acceptable to the
Lender.

         6.10  Litigation. The Borrower will give the Lender prompt notice of:

                  (a)  Any litigation  or claims of any kind which might subject
the  Borrower  to any  liability  in  excess  of one  hundred  thousand  dollars
($100,000.00), whether covered by insurance or not; and

                  (b)  All complaints  and  charges  filed  by any  governmental
agency or any other party affecting or exercising  supervision or control of the
Borrower or its businesses or assets which may impair the security of the Lender
or adversely affect any of its rights under the Loan Documents.

         6.11  Inspection of Properties  and  Records.  The Borrower will permit
the officers, employees, attorneys, and authorized agents of the Lender to visit
and  inspect any  of  the  properties  of  the Borrower to examine the books and
records of the Borrower and to make copies thereof or extracts  therefrom and to
discuss  the  affairs,  finances and accounts of the Borrower with the principal
officers of the Borrower and its  accountants,  all at such reasonable times and
as often as the Lender shall deem necessary.

         6.12  Maintenance  of  Properties;  Compliance with Laws.  The Borrower
will maintain all of its properties and assets in good repair, working order and
condition and will make or cause to be made all  appropriate  repairs,  renewals
and  replacements  thereof;  and will comply with all  applicable  laws,  rules,
regulations and orders relating thereto.

                                       12

<PAGE>
         6.13 Financial Covenants.

                  (a)  The Borrower  shall at all times  maintain a Tangible Net
Worth  of not  less  than  seventeen  million  three  hundred  thousand  dollars
($17,300,000.00);

                  (b)  The Borrower shall at all times maintain a Quick Ratio of
at least 2.50 to 1.00; and

                  (c)  The  Borrower  shall  for each Quarter have Net Income of
not less than one hundred thousand dollars ($100,000).

         6.14 Negative Covenants.  As  long  as any portion of the  indebtedness
hereunder  remains  unpaid,  the Borrower  shall not,  without the prior written
consent of the Lender:

                  (a)  create,  incur,  assume,  or  suffer  to exist  any lien,
encumbrance, mortgage, security interest, pledge, or charge of any kind upon any
of its  property  or assets of any  character,  whether  now owned or  hereafter
acquired,  or  transfer  any of such  property  or  assets  for the  purpose  of
subjecting  the same to the payment of any  indebtedness  or  performance of any
other obligation, or acquire or have an option to acquire any property or assets
upon conditional sale or other title retention agreement, device or arrangement;
provided, however, that the Borrower may create or incur or suffer to be created
or incurred or to exist:

                         (i)  liens for  taxes  or  assessments for governmental
charges or levies if payment  thereof  shall not at the time be  required  to be
made or which the Borrower is then contesting in good faith and which are not in
excess of five hundred thousand dollars ($500,000.00) or for which reserves have
been established by Borrower;
                         
                         (ii) liens in  respect  of  pledges  and deposits under
workers' compensation laws or similar legislation,  and in respect of pledges or
deposits in connection with appeal or similar bonds incidental to the conduct of
litigation,  and liens incidental to the conduct of its business not incurred in
connection  with the  borrowing of money or the  obtaining of advances or credit
and  which do not in the  aggregate  materially  detract  from the  value of its
assets or property; or

                         (iii) any  other  liens with the prior written approval
of the Lender;

                  (b)  create,  assume  or  become  or  remain  liable  for,  or
committed to incur directly or indirectly,  any indebtedness except indebtedness
in respect of the Loan  Documents  or  indebtedness  (including  any  additional
advances under the loan agreements  identified in Subsections  6.14(b)(iii)  and
(iv) of this Agreement)  which by its terms is expressly made subordinate to the
Principal  Balance,  all  accrued  but unpaid  interest  thereon,  and all fees,
charges and other sums payable under the Loan Documents and which is:

                                       13
<PAGE>
                         (i)  indebtedness for taxes, assessments,  governmental
charges or levies to the extent that  payment  thereof  shall not at the time be
required to be made or which the Borrower is then  contesting  in good faith and
which are not in excess of five hundred  thousand  dollars  ($500,000.00) or for
which reserves have been established by Borrower;

                         (ii) indebtedness incurred  in  the ordinary  course of
business which will not materially impair the ability of the  Borrower  to repay
the  amounts due hereunder;

                        (iii) indebtedness outstanding as of the date hereof  to
Spirulina International B.V.  pursuant to a term loan agreement,  dated April 1,
1995, in the amount of $162,500.00;

                         (iv) indebtedness outstanding  as of the date hereof to
Satochi Sakurada pursuant to a term loan agreement,  dated July 11, 1995, in the
amount of $350,000.00; and

                         (vi) indebtedness approved by the Lender in writing;

                  (c)  directly  or  indirectly  purchase or acquire any stocks,
bonds,  notes,  debentures  or other  securities  of or acquire by  purchase  or
otherwise  all or  substantially  all of  the  business  or  assets,  or  stock,
partnership  interests or other evidence of ownership  (beneficial or otherwise)
or make any other  investment  in, any  corporation,  association,  partnership,
organization  or  individual  except  such as may be  approved in writing by the
Lender;

                  (d)  directly or  indirectly  make or commit to make any loan,
advance,  guaranty  or  extension  of  credit to any  corporation,  association,
partnership,  organization  or  individual  except  such as may be  approved  in
writing by the Lender;

                  (e)  assume,  endorse,  be or become  liable for, or guarantee
directly or indirectly any debt or obligation of any  corporation,  association,
partnership,  organization  or  individual  except  such as may be  approved  in
writing by the Lender;

                  (f) merge with or into or  consolidate  with any other Person;
or sell,  lease,  transfer or otherwise  dispose of assets  comprising more than
five percent (5%) of the Total Assets of the  Borrower,  on a cumulative  basis,
from the Closing Date;  provided,  however,  that any  Subsidiary may merge with
another  Subsidiary,  or with the Borrower (if the Borrower is the continuing or
surviving entity);

                  (g)  terminate  any  Plan  so as to  result  in  any  unfunded
liability  of the Borrower in excess of  $500,000.00  under Title IV of ERISA or
permit to exist any occurrence of any  reportable  event (as defined in Title IV
of ERISA); or

                  (h) make any  significant  change in  accounting  treatment or
reporting practices, except as required by GAAP.

                                       14
<PAGE>
SECTION 7.  Default; Remedies on Default.

          7.1  Events  of  Default.  If and for so long as any of the  following
events (herein called "Events of Default") shall occur:

                  (a)  The Borrower  shall  default in the payment of  principal
or interest under the Note when the same becomes due; or

                  (b)  The  Borrower  shall  default  in the  performance  of or
compliance with any term,  covenant,  condition or provision contained in any of
the Loan Documents,  and such default,  if capable of being remedied,  shall not
have been remedied  within twenty (20) days after the Lender or any other person
notifies the Borrower in writing of such default; or

                  (c)  The Borrower  shall  become  insolvent,  or shall make an
assignment for the benefit of creditors or shall fail generally to pay its debts
as they  become due; or the  Borrower  shall  become the subject of an order for
relief in an  involuntary  case under the  bankruptcy  laws as now or  hereafter
constituted,  and such order shall remain in effect and unstayed for a period of
sixty  (60)  consecutive  days,  or shall  commence a  voluntary  case under the
bankruptcy laws as now or hereafter  constituted,  or shall file any petition or
answer seeking for itself any arrangement, composition, adjustment, liquidation,
dissolution  or similar  relief to which it may be entitled under any present or
future  statute,  law or  regulation,  or shall  file any answer  admitting  the
material  allegations of any petition filed against it in any such  proceedings;
or the Borrower  shall seek or consent to or acquiesce in the  appointment of or
taking possession by, any custodian, trustee, receiver or liquidator of it or of
all or a substantial  part of its  properties or assets;  or the Borrower  shall
take action looking to its dissolution or liquidation; or within sixty (60) days
after  commencement  of  any  proceedings   against  the  Borrower  seeking  any
arrangement, composition, adjustment, liquidation, dissolution or similar relief
to  which it may be  entitled  under  any  present  or  future  statute,  law or
regulation, such proceedings shall not have been dismissed; or within sixty (60)
days after the appointment of, or taking possession by, any custodian,  trustee,
receiver or liquidator of any or of all or a substantial  part of its properties
or  assets,  without  the  consent or  acquiescence  of the  Borrower,  any such
appointment or possession shall not have been vacated or terminated; or 
                  
                  (d)  Any representation  made by or on behalf of the  Borrower
herein or otherwise in writing in connection with the Commitment  shall prove to
have been false or  incorrect  in any  material  respect on the date as of which
such representation was made; or

                  (e)  A  final  judgment  which  alone  exceeds  $100,000.00 in
amount shall be rendered against the Borrower,  and shall  not  be discharged or
have execution thereof stayed pending appeal within thirty (30) days after entry
of such judgment or shall not be discharged  within  thirty  (30) days after the
expiration of any such stay; or

                  (f)  The Borrower shall  default under any Capital  Lease,  or
under  any  agreement  respecting  deferred  payment  for  goods,  or under  any
agreement involving the extension of credit to which the Borrower is a party (if
such default  gives the holder of the  obligation  the right to  accelerate  the
indebtedness)  and such default shall not be waived or 

                                       15

<PAGE>
remedied  within the time  permitted for the remedying of such default under the
applicable document; or

                  (g)  The Borrower  shall  fail to  comply  with any  financial
covenant  contained in any Capital Lease, or any agreement  respecting  deferred
payment for goods,  or any agreement  involving the extension of credit to which
the Borrower is a party (whether or not such  agreement is hereafter  amended or
terminated)  and such  failure  shall not be waived or remedied  within the time
permitted for the remedying of such failure under the applicable document; or

                  (h)  There  occurs any adverse change in the business,  assets
or general financial condition of the Borrower  which has or, in the  reasonable
opinion of the Lender, could have, a material adverse effect upon the ability of
the Borrower to observe and perform its obligations under the Loan Documents,

         THEN, AND IN ANY SUCH EVENT,  in addition to all remedies  conferred by
law,  the Lender shall have no further  obligation  to make  Advances  under the
Commitment,  and the Lender  shall have the option to declare the Note to be due
and payable,  whereupon the entire aggregate unpaid Principal  Balance under the
Note, all accrued but unpaid interest thereon,  and all fees,  charges and other
sums payable under the Loan Documents shall forthwith  mature and become due and
payable,  without  presentment,  demand,  protest or notice of any kind,  all of
which are hereby  expressly  waived,  and upon such maturity by  acceleration or
otherwise, all such principal,  interest, amounts, fees, charges and other sums,
shall bear  interest at the rate  provided in the Note to be paid  following  an
Event of Default.

         7.2  Right of Contest.  The Borrower shall have the right to contest in
good faith any claim,  demand, levy or assessment by a third party the assertion
of which would constitute an Event of Default hereunder;  provided, however, any
such contest shall be prosecuted  diligently and in a manner not  prejudicial to
the Lender  hereunder;  and, upon demand by the Lender,  the Borrower shall make
suitable  provision  by  payment to the  Lender or by bond  satisfactory  to the
Lender for the possibility that the contest will be unsuccessful. Such provision
shall be made within ten (10) days after demand therefor and, if made by payment
of funds to the Lender, the amount so deposited shall be disbursed in accordance
with the  resolution  of the  contest  either  to the  Borrower  or the  adverse
claimant.

         7.3  Marshalling.  The  Borrower  hereby  waives  any and all rights to
require  any  security   given   hereunder  to  be  marshalled  and  agrees  and
acknowledges that after the occurrence of any Event of Default,  the Lender may,
in its sole and  absolute  discretion,  proceed to enforce its rights  under the
Loan Documents and to realize on any or all of the security for the repayment of
the amounts outstanding under the Commitment or any portion or portions thereof,
irrespective  of the  differing  nature of such  security and whether or not the
same constitutes real or personal property.


SECTION 8.  Miscellaneous Provisions.

         8.1  Authority  to File  Notices.  The Borrower  irrevocably  appoints,
constitutes  and designates the Lender its  attorney-in-fact  to file for record
any notice that the Lender

                                       16

<PAGE>
reasonably  deems  necessary or desirable to protect  its interest  hereunder or
under any of the Loan Documents.  Such  power  shall  be  deemed coupled with an
interest and shall be irrevocable  while any sum remains due and owing under any
of the Loan  Documents  or  any  obligation of the Borrower  thereunder  remains
unperformed.

         8.2  Actions. The Lender shall have the right to commence, appear in or
defend any action or  proceeding  purporting  to affect  the  rights,  duties or
liabilities of the parties  hereunder,  or the amounts  outstanding or available
under the Commitment, whether or not an Event of Default has occurred hereunder.
In  connection  therewith,  the  Lender may incur and pay  reasonable  costs and
expenses,  including,  but not  limited  to,  reasonable  attorneys'  fees.  The
Borrower shall pay to the Lender within ten (10) days after demand therefor, all
such  expenses,  and the  Lender  is  authorized  to  disburse  funds  from  the
Commitment for such purposes.

         8.3  Timeliness;  Term of Agreement;  Survival of  Representations  and
Warranties.  Time is of the  essence of this  Agreement.  This  Agreement  shall
continue in full force and effect until all  indebtedness of the Borrower to the
Lender under the Loan Documents shall have been paid in full, all obligations of
the Borrower  under this Agreement and the Loan Documents have been observed and
performed,  and all obligations of the Lender under this Agreement and the other
Loan  Documents  have  been  terminated.   All  representations  and  warranties
contained  herein  or  made  in  writing  by or on  behalf  of the  Borrower  in
connection  with the Commitment  shall survive the execution and delivery of the
Loan Documents and any  investigation  at any time made by, through or on behalf
of the Lender.  All statements  contained in any certificate or other instrument
delivered to the Lender on behalf of the Borrower  pursuant to this Agreement or
otherwise in connection with the Commitment shall constitute representations and
warranties hereunder.

         8.4  Amendments  and Waivers.  Neither this Agreement nor any provision
hereof may be amended,  waived,  discharged or terminated orally, but only by an
instrument  in writing,  signed by the party  against  whom  enforcement  of the
amendment, waiver, discharge or termination is sought.

         8.5  Remedies Are Cumulative.  All rights,  powers and remedies  herein
given to the Lender are cumulative and not  alternative,  are in addition to all
rights,  powers and  remedies  afforded  by  statutes or rules of law and may be
exercised concurrently,  independently, or successively in any order whatsoever.
Without limiting the generality of the foregoing, the Lender may enforce any one
or more of the Loan Documents  without  enforcing all of them concurrently or in
any particular order.

         8.6  No  Waiver.  No failure,  forbearance  or delay on the part of the
Lender in exercising  any power or right under any of the Loan  Documents  shall
operate  as a waiver of the same or any other  power or right,  and no single or
partial  exercise of any such power or right shall preclude any other or further
exercise  thereof or the  exercise of any other such power or right.  No Advance
made by the Lender  hereunder shall constitute a waiver of any of the conditions
precedent to the Lender's obligation to make further Advances, nor, in the event
the Borrower is unable to satisfy any such condition, shall any such waiver have
the

                                       17
<PAGE>
effect of precluding the Lender from thereafter  declaring  such inability to be
an Event of Default as provided in Section 7.1 of this Agreement.

         8.7  No Joint Venture.  The execution of this Agreement,  the making of
the  Commitment,  the  making of any  Advance,  and the  exercise  of any rights
hereunder, are not intended, and shall not be construed, to create a partnership
or joint venture between the Lender and the Borrower.

         8.8  Notices.  All notices,  requests,  demands or documents  which are
required or  permitted to be given or served  hereunder  shall be in writing and
personally  delivered,  or sent by  registered  or certified  mail  addressed as
follows:

              TO BORROWER at:      Hawaiian Ocean Science and Technology Park
                                   73-4460 Queen Kaahumanu  Hwy., #102
                                   Kailua-Kona, Hawaii  96740
                                   Attention: Executive Vice President,
                                                  Finance & Administration

              TO LENDER at:        999 Bishop Street
                                   Honolulu, Hawaii 96813
                                   Attention: Corporate Banking Division

The  addresses  may be  changed  from time to time by the  addressee  by serving
notice as heretofore provided.  Service of such notice or demand shall be deemed
complete on the date of actual delivery as shown by the addressee's  registry or
certification  receipt or at the  expiration of the second day after the date of
mailing, whichever is earlier in time.

         The  Borrower  hereby  irrevocably  authorizes  the  Lender  to  accept
facsimile  ("FAX")  transmissions  of  such  notices,   requests,   demands  and
documents,  provided such  transmission  is signed by an officer of the Borrower
authorized  to do so in a  corporate  resolution.  The  Borrower  shall and does
hereby hold the Lender  harmless  from,  and indemnify the Lender  against,  any
loss,  cost,  expense,  claim or demand  which may be  incurred  by or  asserted
against  the  Lender by  virtue  of the  Lender  acting  upon any such  notices,
requests,  demands  or  documents  transmitted  in  accordance  with  the  above
provisions.  The Borrower shall confirm any such FAX transmission  separately by
telephone  conference  between the Lender and the  individuals  signing such FAX
transmission, and shall thereafter transmit to the Lender the actual "hard copy"
of the notice, request, demand or document in question.

         8.9 Waiver of Jury Trial.  The Borrower hereby  knowingly,  voluntarily
and  intentionally  waives  any  right it may have to a jury  trial in any legal
proceeding which may be hereinafter  instituted by the Lender or the Borrower to
assert any of their  respective  claims arising out of or relating to any of the
Loan  Documents  or any other  agreement,  instrument  or document  contemplated
thereby. In such event, the Borrower,  at the request of the Lender, shall cause
its attorney of record to effectuate  such waiver in compliance  with the Hawaii
Rules of Civil Procedure, as the same may be amended from time to time.

                                       18
<PAGE>
         8.10  Entire  Agreement.  The  Loan  Documents  constitute  all  of the
agreements  between the parties  relating to the  Commitment  and  supersede all
other prior or concurrent oral or written letters, agreements or understandings.

         8.11  Assignment; Parties  in  Interest.  The Borrower shall not assign
its interest in this Agreement without the prior written  consent of the Lender,
which consent may be withheld by the Lender in its sole and absolute discretion.
All of the terms and  provisions  of this  Agreement  shall be binding  upon and
inure to the  benefit  of and be  enforceable  by the  parties  hereto and their
respective successors and assigns,  whether or not hereinabove so expressed and,
in particular, shall inure to the benefit of and be enforceable by the holder or
holders from time to time of the Note or any part thereof or interest therein.

         8.12  Headings  of   Paragraphs.   The  headings  of   paragraphs   and
sub-paragraphs  herein are inserted only for convenience and reference and shall
in no way define, limit or describe the scope or intent of any provision of this
Agreement.

         8.13  Applicable Law.   This  Agreement is  executed  and  delivered in
and shall be  construed and enforced in accordance with the laws of the State of
Hawaii.

         8.14  Counterparts.  This  Agreement  may be  executed  in two or  more
counterparts,  each of which shall be deemed to be an original, but all of which
shall  constitute  one and the  same  instrument,  and in  making  proof of this
Agreement,  it shall not be  necessary  to produce or account  for more than one
such counterpart.

         8.15  Severability.  If  any  provision  of this Agreement or the other
Loan  Documents  is  held  to  be  invalid  or  unenforceable,  the validity and
enforceability  of the other  provisions  of this  Agreement  and the other Loan
Documents will remain unaffected.

         8.16  Terms and  Conditions  of this  Agreement  Supplement  Other Loan
Documents.  The  terms  and  conditions  of this  Agreement  and the  covenants,
representations and warranties of the Borrower under this Agreement shall not be
deemed to supersede,  amend or modify the obligations and duties of the Borrower
under the other Loan  Documents.  The terms and conditions of this Agreement and
the covenants,  representations  and warranties of the Borrower hereunder merely
supplement,  and do not supplant or supersede,  provisions of similar  effect or
subject matter in the other Loan Documents.  The Loan Documents shall,  however,
constitute  and be  deemed  amendments  to any  inconsistent  provisions  of any
commitment  letter issued by the Lender to the Borrower in  connection  with the
Commitment,  and,  upon the  execution of this  Agreement,  any such  commitment
letter shall be deemed superseded by the Loan Documents and canceled.

         8.17  Agents.  In  exercising  any  rights  under this Agreement or the
other  Loan Documents,  the  Lender  may  act  through its employees,  agents or
independent contractors;  provided that the Lender shall remain  responsible for
the actions of its employees and agents.

         8.18  Consent  by the  Lender.  Whenever  the  consent of the Lender is
required by the terms of this Agreement, then, except where the granting of such
consent is reserved to the 

                                       19

<PAGE>
Lender in its sole  judgment,  option or  discretion,  such consent shall not be
unreasonably or arbitrarily withheld.

         8.19  Lender's  Right of Setoff.  Upon the  occurrence  of any Event of
Default, or if the Lender shall be served with garnishee process, whether or not
the  Borrower  shall be in default  hereunder  at the time,  the Lender may, but
shall not be required  to, set off any  indebtedness  owing by the Lender to the
Borrower against any indebtedness under the Loan Documents, without prejudice to
any other rights or remedies of the Lender thereunder.

         IN WITNESS  WHEREOF,  the  Borrower and the Lender have  executed  this
Agreement on the day and year first above stated.

                                       FIRST HAWAIIAN BANK
                                       By /s/Kathryn Anderson
                                          -------------------
                                          Its Vice President
                                                        Lender



                                       CYANOTECH CORPORATION
                                       By /s/ Ronald P. Scott
                                          -------------------
                                          Its Exec. V.P./CFO
                                                      Borrower










                                       20
<PAGE>
STATE OF HAWAII                       )
                                      ) SS.
COUNTY OF HAWAII                      )


     On this 27th day of February, 1997, personally appeared Ronald P. Scott, to
me personally  known,  who, being by me duly sworn or affirmed did say that such
person(s)  executed the  foregoing  instrument  as the free act and deed of such
person(s), and if applicable, in the capacity shown, having been duly authorized
to execute such instrument in such capacity.

                                                  /s/ Lei T. Cablin
                                                  ------------------------------
                                                  Notary Public, State of Hawaii

                                                  My commission Expires: 7/03/99

<PAGE>
STATE OF HAWAII                       )
                                      ) SS.
COUNTY OF HAWAII                      )


     On this 27th day of February,  1997 , personally  appeared Ronald P. Scott,
to me  personally  known,  who,  being by me duly sworn or affirmed did say that
such  person(s)  executed the  foregoing  instrument as the free act and deed of
such  person(s),  and if  applicable,  in the capacity  shown,  having been duly
authorized to execute such instrument in such capacity.

                                                  /s/ Lei T. Cablin
                                                  ------------------------------
                                                  Notary Public, State of Hawaii

                                                  My commission Expires: 7/03/99
<PAGE>
                                   EXHIBIT "1"



                           BORROWING BASE CERTIFICATE


         CYANOTECH CORPORATION, a Nevada corporation (the "Borrower"), certifies
to FIRST HAWAIIAN BANK (the  "Lender"),  in connection  with that certain Credit
Agreement dated February , 1997 (the "Loan  Agreement")  executed by and between
the Borrower and the Lender, as follows:

         1. The  undersigned  is  authorized  by the  Borrower  to  submit  this
Compliance  Certificate to the Lender [for the month of , ] [in connection  with
the application for an Advance dated , ].

         2. The  undersigned  has  reviewed  the  relevant  terms  of this  Loan
Agreement,  and the other  Loan  Documents,  and has made,  or caused to be made
under  his  supervision,  a review  of the  transactions  and  condition  of the
Borrower  during such month  sufficient to provide the  information set forth in
Schedule 1 attached hereto.

         3. The  information  contained  in  Schedule  1 [, and set forth in the
accounts  receivable aging report attached  thereto,  was true and correct as of
the last day of such month] [is true and correct as of the date hereof].

         Capitalized  terms used herein have the  meanings  given to them in the
Loan Agreement unless otherwise herein defined.

                                               DATED:                 ,        .


                                               CYANOTECH CORPORATION


                                               By
                                                   Its


                               Exhibit "1", Page 1
<PAGE>

                                  Schedule 1 to
                           Borrowing Base Certificate


Total Eligible Domestic Accounts Receivable:      $
                                    times 75%                    $

Total Foreign Accounts Receivable:                $
                                    times 50%                    $
                                    Total:  Borrowing Base       $


     [The following  information is required in connection with a request for an
Advance]

Outstanding Principal Balance:                    $

Amount of Advance Requested:                      $

                                    Total:        $

     [The following information is required for the monthly certification]

     An  accounts  receivable  aging  report for the month of , 199 is  attached
hereto.

ACCOUNTS RECEIVABLE:

  Current           Over 30 Days      Over 60 Days     Over 90 Days

$                 $                 $                $
 ---------          ------------      ------------     ------------


ACCOUNTS PAYABLE:

  Current           Over 30 Days      Over 60 Days     Over 90 Days

$                 $                 $                $
  ---------         ------------      ------------     ------------


                               Exhibit "1", Page 2

<PAGE>



                                   EXHIBIT "2"


                             COMPLIANCE CERTIFICATE


         CYANOTECH CORPORATION, a Nevada corporation (the "Borrower"), certifies
to FIRST HAWAIIAN BANK (the  "Lender"),  in connection  with that certain Credit
Agreement dated February , 1997 (the "Loan  Agreement")  executed by and between
the Borrower and the Lender, as follows:

         1. The undersigned  is  authorized  by  the  Borrower  to  submit  this
Compliance Certificate to the Lender for the month of , .

         2. The  undersigned  has  reviewed  the  relevant  terms  of this  Loan
Agreement,  and the other  Loan  Documents,  and has made,  or caused to be made
under  his  supervision,  a review  of the  transactions  and  condition  of the
Borrower  during  such  month  and  such  review  has  not  disclosed,  and  the
undersigned  does not have knowledge of the existence,  of any Event of Default,
or, if any Event of Default  has  occurred  or exists,  the nature and period of
existence  thereof  and what  action  the  Borrower  has  taken or is  taking or
proposes  to take with  respect  thereto  is  described  in  Schedule 1 attached
hereto.

         3.  The information  contained  in  the  financial statements  attached
hereto was true and correct as of the last day of such month.

         Capitalized  terms used herein have the  meanings  given to them in the
Loan Agreement unless otherwise herein defined.

                                                DATED:                ,        .


                                                CYANOTECH CORPORATION


                                                By
                                                       Its

                                  Exhibit "2"

<PAGE>


                                   EXHIBIT "3"



                               Opinion of Counsel

                             [Counsel's Letterhead]


                                 February , 1997


First Hawaiian Bank
999 Bishop Street, 11th Floor
Honolulu, Hawaii  96813
Attention:  Corporate Banking Division

         Re:      Cyanotech Corporation

Gentlemen/Ladies:

         We are counsel for Cyanotech  Corporation,  a Nevada  corporation  (the
"Borrower"),  in connection with its request for a loan from First Hawaiian Bank
(the "Lender"). Pursuant to Section 4.5 of the Credit Agreement dated February ,
1997  executed by and between the Borrower  and the Lender,  we provide you with
our opinion as follows:

         1.  The  Borrower  is a Nevada  corporation  duly  registered,  validly
existing  and in good  standing  under  the  laws of the  State  of  Nevada,  is
authorized to do business and is in good standing in the State of Hawaii and has
all  requisite  power  and  authority  to carry on the  business  and to own the
property that it now carries on and owns.  The Borrower has all requisite  power
and  authority  to execute  and deliver  the Loan  Documents  and to observe and
perform all of the provisions and conditions thereof. The execution and delivery
of the Loan Documents has been duly authorized by all requisite corporate action
on the part of the Borrower.

         2.  The Loan Documents when executed and delivered by the Borrower will
be  enforceable  in  accordance  with their terms against the Borrower and shall
constitute the valid and legally binding obligations of the Borrower.


                                        Sincerely,





                                   Exhibit "3"