Document:

Exhibit 10.21

 

AMENDMENT ON THE TERMS AND CONDITIONS

GOVERNING PURCHASES

 

This Agreement made and entered into this day, June 10, 1997, by
and between Prime Electronic & Satellite, Inc. (“PESI”), having
its principal place of business at 7 Industrial 9 Road, Ping-Cheng Industrial
Park, Ping Cheng 324, Tao-Yuan Hsien, Taiwan, R.O.C. Tel: 011-886-3-469-9886,
Fax: 011-886-3-469-9887, and Pro Brand International, Inc. (“PBI”), having
its principal place of business at 1900 West Oak Circle, Marietta, Georgia 60032,
U.S.A.

 

Both parties agree to the following terms and conditions governing the
sales of PESI and the purchase by PBI of products of various models:

 

1.                        Each
product shall carry a warranty for a period of two (2) years from the date
of sale by PBI to its customers.

 

2.                        Each
defective unit shall be returned by PBI to PESI for repair or replacement free
of charge or expenses during the warranty period.  PBI shall ship these defective units to PESI
when it has accumulated one hundred (100) units.  If one percent (1%) or more units fail, PESI
agrees to replace these units free of charge.

 

3.                        One
percent (1%) warranty stock, with a minimum of two hundred (200) units, shall
be maintained on premises at PBI in Marietta, Georgia, or other locations as
may be designated by PBI from time to time. 
This shall be in addition to any units in transit for warranty
replacement purposes.  Three to four
percent (3-4%) of the total number of units shipped to PBI will be added as
warranty stock, with one percent (1%) of each shipment thereafter until a
minimum of two hundred (200) units of warranty stock is reached.  Upon notification by PBI of any depletion of
this warranty stock due to warranty replacement to PBI customers, PESI shall make
up each deficiency of warranty stock following the shipping arrangement
specified in this paragraph.

 

4.                        Should
warranty units not be available via returns and/or warranty stock to allow
immediate exchange for any and all defective units, new units will be provided
by PBI to its customers and PESI shall provide new units to PBI as
compensation.

 

5.                        Should PBI’s
quality control tests identify any one hundred (100) unit lot of products to
have two percent (2%) or greater failure rate, an additional one hundred (100)
unit lot shall be tested.  If the
additional lot tested also has a two percent (2%) or greater failure rate, all
units within that shipment will undergo quality control testing.  PESI will pay the full expenses of testing
related to that shipment which must undergo quality control testing.

 

6.                        Failure
rate based on a particular symptom equal to or in excess of one percent (1%)
per shipment over the two year warranty period shall be deemed an epidemic
failure.  Actions necessary to correct
this epidemic failure shall be at the discretion of PBI.  The first course of action shall be a recall
and replacement of lots affected by the defect at 

 

 

the total expense of PESI, including any additional costs necessary to
rebuild confidence in the PESI product. 
The manner of execution of this and all other actions will be such that
interests of both PESI and PBI will be accommodated as much as possible,
thereby preserving both business relationship between the parties and the
market for their products.

 

7.                        PESI must
notify PBI of anticipated delays in product deliveries at least thirty (30)
days prior to scheduled delivery dates. 
Deliveries delayed over seven (7) days from original or amended
date of delivery due to PESI’s fault are subject to air shipment at PESI’s
expense.

 

8.                        PESI shall
allow PBI to revise the quantity upward or downward on confirmed orders by a
maximum of twenty percent (20%). 
However, a written notification of such revision shall be issued by PBI
to PESI no later than thirty (30) days prior to the scheduled/revised delivery
date.

 

9.                        Any
revision to product specification and/or scheduled delivery date shall require
written notice from PBI to PESI no later than thirty (30) days prior to the
scheduled/revised delivery date.

 

10.                  PBI will have
the exclusive right of sale of PESI products throughout the geographical
territory, including North America, Central and South America.  These exclusivity rights specifically
prohibit PESI or any employee of PESI from selling or attempting to sell any
product to any customer other than PBI, including, but not limited to, OEM
customers, distributors, dealers and individuals, within the geographical
territory mentioned above.  Actions
necessary to correct any such lapse by PESI or its employees shall include, but
not be limited to, PESI’s reimbursement to PBI of the purchase order quantity
at the PBI’s established price for that customer.  If PBI does not have a relationship with that
distributor, dealer or individual, PBI may establish a compensatory price based
upon PBI’s established customer base.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.

 

	
  PRIME ELECTRONICS & SATELLITE  

  	
   

  	
  PRO BRAND INTERNATIONAL, INC.  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Mark Hsu 

  	
   

  	
  By:

  	
  /s/ Cecilia Shou 

  
	
              Chairman

  	
   

  	
              Cecilia
  Shou, President

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  6/16/97

  	
   

  	
  Date:

  	
  6/16/97Exhibit 4.3

 

TERM LOAN AGREEMENT

 

THIS TERM LOAN AGREEMENT is made, entered into and effective as of the 20th
day of February, 2008 (the “Effective Date”) by and between CYANOTECH
CORPORATION, a Nevada corporation, having its principal offices at 73-4460 Queen
Kaahumanu Highway, #102, Kailua-Kona, Hawaii 96740 (the “Borrower”), and BRIDGEVIEW CAPITAL SOLUTIONS, L.L.C., a
Delaware limited liability company, having its principal offices at 5881
Glenridge Drive, NE, Suite 130, ATLANTA,
GEORGIA 30328 (the “Lender”).

 

BACKGROUND

 

A.                                   Borrower has applied to Lender for financing of
the type or types more particularly described hereinbelow.

 

B.                                     Lender is willing to extend financing to Borrower
in accordance with the terms hereof upon the execution of this Agreement by
Borrower, provided that Borrower is in compliance with all of the terms and
provisions of this Agreement and has fulfilled all conditions precedent to
Lender’s obligations herein contained.

 

NOW, THEREFORE, in consideration of the
sum of $100.00 and for other good and valuable consideration, the sufficiency
and receipt of all of which are acknowledged by Borrower, Lender and Borrower
agree as follows:

 

ARTICLE I

 

DEFINITIONS, TERMS
AND REFERENCES

 

1.1.                              Certain
Definitions.  In addition to such
other terms as elsewhere defined herein, as used in this Agreement and in any
exhibits, the following terms shall have the following meanings, unless the
context requires otherwise:

 

“Accounts Receivable Collateral” shall mean all rights of
Borrower and of Nutrex to payment for goods sold or leased, or to be sold or to
be leased, or for services rendered, howsoever evidenced or incurred,
including, without limitation, all accounts, instruments, chattel paper and
general intangibles, all tax refunds and tax refund claims, all returned or
repossessed goods and all books, records, computer tapes, programs, and ledger
books arising therefrom or relating thereto, and as further described in the
Security Instruments, whether now owned or hereafter acquired or arising.

 

“Agreement” shall mean this Term Loan Agreement, as amended or
supplemented from time to time.

 

“Bankruptcy Code” shall mean Title 11 of the United States Code,
as amended from time to time.

 

 

“Borrower” shall mean CYANOTECH CORPORATION, a corporation
organized and existing under the laws of the State of Nevada, and its
respective successors and permitted assigns.

 

“Bureau” shall mean the Bureau of Conveyances of the State of
Hawaii.

 

“Business Day” shall mean a day on which Lender is open for the
conduct of banking business at its office located at 5881 Glenridge Drive, NE, Suite 130, Atlanta, Georgia 30328.

 

“Closing Date” shall mean the date of the execution of this
Agreement and the date on which the Term Loan is made pursuant hereto.

 

“Collateral” shall mean the Accounts Receivable Collateral,
Inventory Collateral, Equipment Collateral, Fixtures Collateral and Property
Collateral, all defined herein, and all collateral described in the Security
Instruments, and in which Lender has, or is to have, a security interest
pursuant hereto, as security for payment of the Term Note.

 

“Collateral Locations” shall mean those locations set forth and
described on Exhibit “B” attached hereto.

 

“Debt Service Coverage” shall mean annual earnings before
interest, taxes, depreciation and amortization divided by all principal and
interest payments owed in one year.

 

“Default Condition” shall mean the occurrence of any event
which, after satisfaction of any requirement for the giving of notice or the
lapse of time, or both, would become an Event of Default.

 

“Equipment Collateral” shall mean all equipment and machinery of
Borrower  and Nutrex (including titled
and untitled motor vehicles), whether now owned or hereafter acquired, together
with all furniture, furnishings, improvements, equipment, tools and personal
property of every kind of Borrower, together with all accessories, parts,
components, attachments, repairs, replacements, modifications, renewals,
additions, improvements, upgrades and accessions of, to or upon such items of
equipment and/or machinery.

 

“Event of Default” shall mean any of the events or conditions
described in Article XIII, provided that any requirement for the giving of
notice or the lapse of time, or both, has been satisfied.

 

“Executive Office” and “Borrower’s Address” shall mean
the offices of Borrower located at 73-4460 Queen Kaahumanu Highway, Suite 102,
Kailua-Kona, Hawaii 96740.

 

“Facility” shall mean all of the real property and improvements
now existing or hereafter constructed, on those tracts of land more
particularly described in Exhibit “A”, upon which Borrower operates the
business and which are used as collateral for this loan wherever such may be
located.

 

2

 

“Financial Statements” shall mean the consolidated audited
balance sheet and statement of change in financial position of Borrower and the
income statements of Borrower prepared by an independent certified public
accountant.

 

“Fiscal Year” shall mean the fiscal year of Borrower which shall
be the twelve (12) month period ending March 31 in each year, or such
other period as Borrower may designate and Lender may approve in writing.  Fiscal quarter shall mean the corresponding
fiscal quarters within such Fiscal Year.

 

“Fixtures Collateral” shall mean all buildings, structures and
improvements of every nature whatsoever now or hereafter situated on the Land
as described in Exhibit “A” (as such term is hereinafter defined), and all
fixtures, machinery, building materials, appliances, and equipment of Borrower
of every nature now or hereafter located on or upon, or intended to be used in
connection with, the Land as described in Exhibit “A” or the improvements
thereon, including, but not by way of limitation, those for the purposes of
operating the Facility; supplying or distributing heating, cooling,
electricity, gas, water, air and light; and all related machinery and
equipment; all plumbing; and all like personal property and fixtures of every
kind and character now or at any time hereafter located in or upon the Land as
described in Exhibit “A” or the improvements thereon, or which may now or
hereafter be used or obtained in connection therewith, including all
extensions, additions, improvements, betterments, after-acquired property,
renewals, replacements and substitutions, or proceeds from a permitted sale or
any of the foregoing, and all the right, title and interest of Borrower in any
such fixtures, machinery, equipment, appliances and personal property subject
to or covered by any prior security agreement, conditional sales contract,
chattel mortgage or similar lien or claim, together with the benefit of any
deposits or payments now or hereafter made by Borrower or on behalf of
Borrower, or any improvements thereon or any part thereof or are now or
hereafter acquired by Borrower; and all equipment and fixtures constituting
proceeds acquired with cash proceeds of any of the property described herein,
and all other interest of every kind and character in all of the real,
personal, and mixed properties described herein that Borrower may now own or at
any time hereafter acquire, all of which are hereby declared and shall be
deemed to be fixtures and accessions to the Land as described in Exhibit “A”,
as between the parties hereto and all persons claiming by, through or under
them, as further described in the Security Instruments.

 

“Funding” shall mean the act of Lender disbursing money to
Borrower or for the benefit of Borrower under and pursuant to the terms of this
Agreement and the Term Note.

 

“GAAP” means, as in effect from time to time, generally accepted
accounting principles consistently applied.

 

“Guaranty Fee” shall mean a fee in the amount of $17,254.40
payable to the RD prior to the issuance of the RD Guarantee.

 

“Guaranty
Renewal Fee” shall mean the fee as described in Section 2.5 herein.

 

“Indebtedness”
means any (i) obligations for borrowed money, (ii) obligations
whether or not assumed, secured by Liens or payable out of the proceeds or
production from property now or hereafter owned or acquired, and (iii) the
amount of any other obligation (including obligations under financing leases)
which would be shown as a liability on a balance sheet prepared in accordance
with GAAP.

 

3

 

“Inventory Collateral” shall mean all inventory of Borrower and
Nutrex, whether now owned or hereafter acquired, located in the Facility, on
the Land, or wherever located, including, without limitation, all goods of
Borrower held for sale or lease or furnished or to be furnished under contracts
of service, all goods held for display or demonstration, goods on lease or
consignment, returned and repossessed goods, all raw materials,
work-in-progress, finished goods and supplies used or consumed in Borrower’s
business, together with all returns, repossessions, substitutions,
replacements, parts, additions, accessions and all documents, documents of
title, dock warrants, dock receipts, warehouse receipts, bills of lading or
orders, for the delivery of all, or any portion, of the foregoing, and as
further described in the Security Instruments

 

“Land” shall mean all those certain tracts, pieces and parcels
of land described on Exhibit “A” attached hereto.

 

“Lender” shall mean BRIDGEVIEW
CAPITAL SOLUTIONS, L.L.C. having its principal office located at 5881
Glenridge Drive, NE, Suite 130, Atlanta, Georgia 30328, and its successors
and assigns.

 

“Lender Commitment Fee” shall mean the amount equal to one and a
half percent (1.50%) of the amount of the Loan: 
$16,176.00.

 

“Lessor”
shall mean the State of Hawaii, through its Board of Land and Natural
Resources, under the Master Lease.

 

“Lessor’s
Consent to Mortgage” means that certain Consent to the Mortgage of Sublease
K-4, acceptable in form and content to Lender, and executed by Lessor.

 

“Lessor’s
Estoppel Certificate” means that certain Lessor’s Estoppel Certificate,
acceptable in form and content to Lender, and executed by Lessor.

 

“Lessor’s
Subordination Agreement” means that certain Subordination Agreement,
acceptable in form and content to Lender, and executed by Lessor, Borrower and
Lender.

 

“Liabilities” shall have the meaning given in accordance with
GAAP consistently applied.

 

“Lien” shall mean any voluntary or involuntary mortgage,
security deed, deed of trust, lien, pledge, assignment, security interest,
title retention agreement, financing lease, levy, execution, encumbrance of any
kind, including those contemplated by or permitted in this Agreement and the
other Loan Documents.

 

“Loan Documents” shall mean, collectively, this Agreement, the
Term Note, any financing statements, deeds to secure debt, or mortgages
covering portions of the Collateral, security agreement, guaranty agreement,
and any and all other documents, instruments, certificates and agreements
executed and/or delivered by Borrower in connection herewith, or any one, more,
or all of the foregoing, as the context shall require.

 

4

 

“Loan Obligations” shall mean all advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from Borrower
to Lender as it relates to this Term Loan of any kind or nature, present or
future, whether or not evidenced by any note or term note or other instrument,
whether arising under this Agreement or under any of the other Loan Documents,
and whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, now
existing or hereafter arising and however acquired.  The term includes, without limitation, all
interest, charges, expenses, fees, attorneys fees and all other sums chargeable
to Borrower under this Agreement or any of the other Loan Documents.

 

“Master Lease” shall mean that certain unrecorded General
Lease No. S-4717 effective as of November 1, 1978, and executed on March 9,
1984, a short form of which, dated April 21, 2000, was recorded in the
Bureau as Document No. 2000-056137.

 

“Mortgage” shall mean that certain Real Property Mortgage;
Security Agreement; Assignment of Rents; and Financing Statement of even date
herewith from Borrower in favor of or for the benefit of Lender.

 

“Nutrex” shall mean Nutrex Hawaii, Inc., a Hawaii
corporation, formerly known as Nutrex, Inc., which is a wholly-owned
subsidiary of Borrower.

 

“Permitted Encumbrances” shall mean those security interests,
liens and encumbrances, if any, set forth and described on Exhibit “C”
attached hereto, pertaining to the type of Collateral involved, as shown
thereon.

 

“Person” means any person, firm, corporation, partnership, trust
or other entity.

 

“Property” shall mean the real estate located in Kailua-Kona, Hawaii,
more particularly described in Exhibit “A” attached hereto.

 

“Property Collateral” shall mean the Land and all of the
interest of Borrower in all easements, rights-of-way, licenses, operating
agreements, strips and gores of land, vaults, streets, ways, alleys, passages,
sewer rights, waters, water courses, water rights and powers, submerged lands,
oil and gas and other minerals, flowers, shrubs, fresh inventory crops, trees,
timber and other emblements now or hereafter located on the Land or under or
above the same or any part or parcel thereof, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditament and appurtenances,
reversion and reversions, remainder and remainders, whatsoever, in any way
belonging, relating or appertaining to the Land or any part thereof, or that
hereafter shall in any way belong, relate or be appurtenant thereto, whether
now owned or hereafter acquired by Borrower, and as further described in the
Security Instruments.

 

“RD” shall mean the Rural Development, an agency of the United
States Department of Agriculture, and any successor department, agency or
instrumentality authorized to administer the Business and Industrial Guaranteed
Loan Program.

 

5

 

“RD Guarantee” shall mean the Loan Note Guarantee backed by the
full faith and credit of the United States provided by RD of a specified
percentage of the outstanding amount of the Term Loan pursuant to the RD
Guaranty Commitment.

 

“RD Guaranty Commitment” shall mean that certain Conditional
Commitment for Guarantee issued by the RD on February 12, 2008, being
known as Case No. 61-005-911206026, a copy of which is attached hereto as Exhibit “D”.

 

“Security Agreement” means, singularly and collectively, those
certain Security Agreements of even date herewith, acceptable in form and
content to Lender, executed by Borrower or Nutrex and Lender, as applicable.

 

“Security Instruments” shall include, but not be limited to, the
following security documents executed by Borrower to Lender, each being dated
of even date herewith, as security for the Term Loan: the Mortgage; Uniform
Commercial Code Financing Statements; Security Agreement executed by Borrower;
and the Security Agreement executed by Nutrex.

 

“Soft Costs” shall mean all costs, expenses and fees incurred by
Lender and Borrower in preparing and documenting this Agreement and all
documents and instruments related thereto, together with the Loan Origination
Fee, the Guaranty Fee and all other loan related fees and costs, including but
not limited to filing and recording fees, costs of appraisals, EPA
environmental surveys, title and lien reports and searches, environmental
studies or reports, insurance and attorneys fees.

 

“Sublease” shall mean that certain Sublease K-4 dated December 29,
1995, as amended by Supplemental Agreement No. 1 to Amend Sublease K-4,
dated November 21, 1996, a short form of which, dated April 21, 2000,
was recorded in the Bureau as Document No. 2000-056138.

 

“Sublessor” shall mean the Natural Energy Laboratory of Hawaii
Authority, State of Hawaii, the lessee under the Master Lease and the sublessor
under the Sublease.

 

“Sublessor’s Consent, Estoppel Certificate and Subordination
Agreement” shall mean that certain Sublessor’s Consent to Mortgage of
Sublease K-4; Estoppel Certificate and Subordination Agreement, acceptable in
form and content to Lender, and executed by Sublessor and Borrower.

 

“Term Loan” shall mean the ONE
MILLION SEVENTY EIGHT THOUSAND FOUR HUNDRED DOLLARS AND NO/100 DOLLARS ($1,078,400.00) term loan made by Lender to
Borrower which is evidenced by the Term Note described immediately hereafter
and as pursuant to this Agreement.

 

“Term Note” shall mean that certain term note of Borrower in
favor of Lender dated of even date herewith, as amended or supplemented from
time to time, in the principal amount of $1,078,400.00,
together with any renewals or extensions thereof, in whole or in part.  The Term Note shall be substantially in the
form of Exhibit “E” attached hereto. 
A repayment schedule as to the Term Note is attached hereto as Exhibit “F”.

 

6

 

“UCC” shall
mean the Hawaii Uniform Commercial Code, Hawaii Revised Statutes, Chapter 490,
as in effect on the date hereof, and as hereinafter amended.

 

1.2.                              Use
of Defined Terms.  All terms defined
in this Agreement and the exhibits shall have the same defined meanings when
used in any other Loan Document, unless the context shall require otherwise.

 

1.3.                              Accounting
Terms.  All accounting terms not
specifically defined herein shall have the meanings generally attributed to
such terms under GAAP consistently applied.

 

1.4.                              UCC Terms.  The terms “accounts”,
“instruments”, “general intangibles” and “equipment”, as and when used in the
Loan Documents, shall have the same meanings given such terms under the UCC.

 

1.5.                              Terminology.  All personal pronouns used in
this Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the
plural shall include the singular. 
Titles of articles and sections in this Agreement are for convenience
only, and neither limit nor amplify the provisions of this Agreement, and all
references in this Agreement to articles, sections, subsections, paragraphs,
clauses, subclauses or exhibits shall refer to the corresponding article,
section, subsection, paragraph, clause, subclause of, or exhibit attached to,
this Agreement, unless specific reference is made to the articles, sections or
other subdivisions divisions of, or exhibit to, another document or instrument.

 

1.6.                              Exhibits.  All exhibits attached
hereto are by reference made a part hereof.

 

ARTICLE II

 

THE TERM LOAN

 

2.1.                              The
Term Loan.  Borrower has agreed to
borrow from Lender, and Lender has agreed to make the Term Loan to Borrower,
subject to Borrower’s compliance with and observance of the terms, conditions,
covenants and provisions of this Agreement, the Term Note, and the other Loan
Documents, and Borrower has made the covenants, representations, and warranties
herein and therein as a material inducement to Lender to make the Term Loan.

 

2.2.                              Term
and Interest Rate.  The Term Loan
shall be evidenced by the Term Note.  The
Term Note shall be fully amortized over a seven (7) year term.  The rate of interest as set forth in the Term
Note cannot be changed more often than quarterly, and must rise and fall with
the selected prime rate, all as more particularly set forth in Exhibit “E”.  Lender shall make an adjustment of payment
installments only by the amount of rise or fall resulting from the interest
rate change.  The interest rate of the
Term Loan evidenced by the Term Note will be the Prime Rate plus one percent
(1.00%)  per annum, adjustable quarterly on January 1,
April 1, July 1, and October 1 each year, for the term of the
Term Loan.  The Prime Rate will be the
New York Prime Rate, as quoted in the Wall Street Journal.  Interest shall be calculated on the basis of
360 days per year for the actual number of days elapsed.  Interest for the month of the Closing Date
shall be prepaid and collected on the Closing Date.

 

7

 

2.3.                              Security for the Term Loan.  The Term
Loan will be secured by the Security Instruments.

 

2.4.                              Repayment of Loan.  Each
payment of the Loan Obligations shall be paid directly to Lender in lawful
money of the United States of America at Lender’s main office located at 5881
Glenridge Drive, NE, Suite 130, Atlanta, Georgia 30328, or such other
place as Lender shall designate in writing to Borrower.  Each such payment shall be paid in
immediately available funds by 2:00 p.m., Atlanta, Georgia time, on the
date such payment is due, except if such date is not a Business Day such
payment shall then be due on the first Business Day after such date, but
interest shall continue to accrue until the date payment is received.  Any payment received after 2:00 p.m.,
Atlanta, Georgia time, shall be deemed to have been received on the immediately
following Business Day for all purposes, including, without limitation, the
accrual of interest on principal. 
Borrower, at the request of Lender, shall allow Lender to automatically debit
a designated account of Borrower for the purpose of making monthly loan
payments.

 

2.5.                              Guaranty
Renewal Fee.  In addition to each
monthly payment, Borrower shall pay contemporaneously therewith a continuing
guaranty fee (the “Guaranty Renewal Fee”) equal to one-twelfth of the
outstanding principal balance of the Term Loan as of each calendar year end
multiplied by one-quarter of one percent (0.25%), multiplied by the percent of
the guarantee.  Borrower shall pay the
Guaranty Renewal Fee for the period from the Closing Date to December 31,
2008 in a lump sum on or prior to the Closing Date, as set forth in Section 4.8
below, and shall commence its monthly payments of the Guaranty Renewal Fee with
the first monthly payment due for the calendar year 2009.

 

ARTICLE III

 

CONDITIONS PRECEDENT TO CLOSING

 

Unless waived in writing by Lender, the conditions set forth in
Sections 3.1 through 3.23 shall constitute express conditions precedent to any
obligation of Lender hereunder.

 

3.1.                              Compliance.  Borrower shall have performed
and complied with all terms and conditions required by this Agreement to be
performed or complied with by it prior to or as of the Closing Date.

 

3.2.                              Certificate of Good Standing.  Lender
shall have received certificates of good standing with respect to Borrower and
Nutrex from the Secretary of State of the state of their respective
incorporations within thirty (30) days of the date hereof.

 

3.3.                              Articles of Incorporation/By-Laws.  Lender
shall have received copies of the articles of incorporation and by-laws of
Borrower and Nutrex as in effect on the date hereof, certified as to truth and
accuracy by the corporate secretary of Borrower and Nutrex, respectively.

 

3.4.                              Sublessor’s Consent, Estoppel Certificate and
Subordination Agreement.  Borrower shall have obtained and delivered to
Lender the duly executed Sublessor’s Consent, Estoppel Certificate and
Subordination Agreement to Lender to be recorded in the Bureau on the Closing
Date.

 

8

 

3.5.                              Financial Statements.  Lender
shall have received Borrower’s most recent financial statements dated no more
than ninety (90) days prior to the Closing Date in such form and substance as
required by Lender.

 

3.6.                              Title
Insurance; Financing Statement Search; Lien Search; Court Report.  Lender shall have received a commitment from
a title insurance company approved by Lender and authorized to do business in
the State of Hawaii to issue a title
insurance policy with respect to the Property Collateral, and the total amount
shall be the amount of $1,078,400, with no exceptions other than Lender’s first
mortgage and financing statements and those other exceptions approved by
Lender.  Such title insurance commitment
shall recite that Lender shall have a second priority lien on the Property
Collateral. Lender shall also have received such Financing Statement searches,
Lien searches, and Court Reports from such a title insurance company in form
and content acceptable to Lender.

 

3.7.                              Board Resolutions and Incumbency Certificate.  Lender
shall have received certificates from the President or Secretary (or Assistant
Secretary) of Borrower and of Nutrex certifying to Lender that appropriate
consents and resolutions have been entered into by their respective Boards of
Directors incident hereto and that the officers of the corporations whose
signatures appear herein below, on the other Loan Documents, and on any and all
other documents, instruments and agreements executed in connection herewith,
and the officers executing the same, are duly authorized by Borrower or Nutrex,
as the case may be, and by the Boards of Directors of such corporations to
execute and deliver this Agreement, the other Loan Documents and such other
documents, instruments and agreements, and to bind such corporations
accordingly thereby, all in form and substance acceptable to Lender.

 

3.8.                              Insurance Certificate.  Lender
shall have received a certificate in respect of all insurance required
hereunder, in form and substance acceptable to Lender.  Borrower shall provide Lender with evidence
of adequate property, casualty and liability insurance on the business.

 

3.9.                              Site Visit.  Lender shall have undertaken a
site visit, the results of which must be satisfactory to Lender in its sole
discretion.

 

3.10.                        Loan Documents and RD Guaranty Commitment.  Lender
shall have received all the other Loan Documents and the RD Guaranty Commitment
duly executed in form and substance acceptable to Lender, its counsel and the
RD.

 

3.11.                        Opinion of Counsel.  Lender shall have received an opinion of
counsel satisfactory to it from independent legal counsel to Borrower in
substantially the form of Exhibit “G” attached hereto.

 

3.12.                        Operation and Management of the Facility.  The
Facility shall be operated and managed by Borrower.  The operation and management of the Facility
shall not be transferred to any other party; the transfer of such
responsibility in violation of the foregoing in this sentence shall constitute
an Event of Default, the same as if such event had been described and contained
in Article XIII of this Agreement.

 

9

 

3.13.                        Licenses and Permits.  Borrower shall have received and shall
provide evidence of same to Lender that Borrower has obtained all licenses,
permits, certificates and other governmental permission to own and operate the
Facility.

 

3.14.                        Appraisals.  Lender shall have received appraisals by an
appraiser(s) approved by Lender for the Facility and Collateral or
portions thereof as requested by Lender in an amount acceptable to Lender.

 

3.15.                        Receipt of Evidence of Tax Payments.  Lender shall have received a
certificate from Borrower, in form and substance acceptable to Lender, that
Borrower and Nutrex have paid all federal, state and local income taxes, that
all amounts required to be withheld from employees’ wage payments have been
withheld and have been paid to the proper governmental agency, and that no
judgment or tax lien is in existence with respect to Borrower or Nutrex.

 

3.16.                        Guaranty Renewal Fee.  Lender shall have received the Guaranty
Renewal Fee due for the period from the Closing Date to December 31, 2008,
which amount is equal to $1,973.87.

 

3.17.                        Loan
Commitment Fee.  Lender shall have
received the Loan Commitment Fee (one-half ($8,088.00) of which was due at the
signing of the commitment letter for the Term Loan and the balance ($8,088.00)
of which is due prior to or on the Closing Date).

 

3.18.                        Sublessor’s
Consent, Estoppel Certificate and Subordination Agreement.  Borrower shall have obtained the Sublessor’s
Consent, Estoppel Certificate and Subordination Agreement for recordation in
the Bureau on the Closing Date.

 

3.19.                        Zoning, Building, Subdivision Codes and OSHA
Requirements.  Lender shall have received evidence as
requested by Lender with respect to the Facility that the same is not in
violation of any zoning, building, subdivision, sanitary or Occupational Safety
and Health Administration rules, requirements or laws.

 

3.20.                        ADA Compliance.  Lender shall have received evidence
satisfactory to Lender that the Property is in compliance with the Americans
with Disabilities Act of 1990.

 

3.21.                        Environmental Matters.  With respect to the Property Collateral,
Lender shall have received from Borrower, the form FmHA 1940-20 Request for
Environmental Information as executed by Borrower on January 17, 2008.

 

Borrower covenants and agrees that all Property Collateral or interests
in real property pledged as collateral security for the Term Loan are free of
any substantial amounts of waste or debris, and are free from any material
amounts of contamination, including:

 

10

 

(a)                                  (1)  “Any Hazardous Waste,” as defined by
the Resource Conservation and Recovery Act of 1976 or any “Hazardous Substance”
as defined in Hawaii law, both as amended from time to time, and regulations
promulgated thereunder;

 

(2)  “Any Hazardous Substance” as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1989, as amended from
time to time, and regulations promulgated thereunder;

 

(3)  Any substance, the presence of which on the real property is
prohibited by any law similar to those set forth in this section; and

 

(4)  Any material which, under federal, state or local law,
statute, ordinance or regulation, or court administrative order or decree, or
private agreement, requires special handling in collection, storage, treatment
or disposal.

 

(b)                                 Borrower has not filed any notice under any
federal or state law indicating past or present treatment, storage or disposal
of a hazardous waste, substance or constituent, or other substance into the
environment.  None of the operations of
Borrower is the subject of federal or state litigation or proceedings, or of
any investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to any improper treatment, storage, recycling,
disposal or release into the environmental of any hazardous or toxic substance,
waste or constituent.  None of the
operations of Borrower is subject to any judicial or administrative proceeding
alleging the violation of any federal, state or local environmental, health or
safety statute, or regulation.  Borrower
does not transport any hazardous wastes, substances or constituents.

 

(c)                                  All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection with the
operation or use of any and all Property Collateral pledged as collateral
security for the Term Loan, including, without limitation, past or present
treatment, storage, disposal or release of a hazardous substance or solid waste
into the environment, have been, to the knowledge of Borrower, duly obtained or
filed.

 

(d)                                 Borrower will take and continue to take prompt
action to remedy all environmental pollution and contamination, hazardous waste
disposal and other environmental clean-up problems, if any, whether or not such
clean-up problems have resulted from the order or request of a municipal,
state, federal, administrative or judicial authority, or otherwise. Borrower
will not violate any applicable municipal ordinance, state or federal statute,
administrative rule or regulation, or order or judgment of any court with
respect to environmental pollution or contamination, hazardous waste disposal
or any other environmental matter.

 

(e)                                  Borrower will indemnify and hold Lender, its
officers, directors, employees, representatives, agents and affiliates harmless
against, and promptly pay on demand or reimburse each of them with respect to,
any and all claims, demands, causes of action, loss, damage, liabilities, costs
and expenses of any and every kind or nature whatsoever asserted against or
incurred by any of them by reason of or arising out of or in any way related to
(i) 

 

11

 

the breach of any representation or warranty as set forth regarding
Hazardous Materials Laws (as defined in paragraph (a) on page 8 of
the Mortgage), or (ii) the failure of Borrower to perform any obligation
herein required to be performed pursuant to Hazardous Materials Laws.  The provisions of this section shall survive
the final payment of the Term Loan and the termination of this Agreement, and
shall continue thereafter in full force and effect.

 

(f)                                    Notwithstanding anything contained in this
paragraph to the contrary, any covenants of Borrower concerning any
environmental matter addressed herein shall not be applicable to any condition
which is first created or introduced after a foreclosure, conveyance or other
transfer of title of the Property Collateral pledged as collateral security for
the Term Loan.

 

3.22.                        Continuing Compliance.  At the time of the Term Loan, there shall not
exist any event, condition or act that constitutes an Event of Default
hereunder or any condition, event or act which with notice, lapse of time or
both would constitute such Event of Default. 
There would not exist any such event, condition, or act immediately
after the disbursement, were it to be made.

 

3.23.                        Miscellaneous.  Lender shall have received such
other documents, certificates, instruments and agreements as shall be required
hereunder or provided for herein or as Lender or Lender’s counsel may
reasonably require in connection herewith.

 

ARTICLE
IV

 

CONDITIONS SUBSEQUENT TO CLOSING

 

Unless waived in writing by Lender, the conditions set forth in
Sections 4.1 through 4.3 shall constitute express post-closing conditions to
any obligation of Lender hereunder which must be satisfied by Borrower no later
than 4:30 p.m. (Hawaii Standard Time) on May 31, 2008.

 

4.1.                              Receipt of Evidence of Tax Payments.  Lender
shall have received evidence, such as a tax clearance certificate, in form and
substance acceptable to Lender, that Borrower and Nutrex have paid all federal,
state and local income taxes and have filed all federal, state and local tax
returns and reports, that all amounts required to be withheld from employees’
wage payments have been withheld and have been paid to the proper governmental
agency, and that no judgment or tax lien is in existence with respect to
Borrower or Nutrex.

 

4.2.                              Lessor’s
Consent, Estoppel Certificate and Subordination Agreement.  Borrower shall have obtained and delivered to
Lender and recorded the duly executed Lessor’s Consent to Mortgage, the
Lessor’s Estoppel Certificate and the Lessor’s Subordination Agreement.

 

4.3.                              Miscellaneous.  Lender shall have received
such other documents, certificates, instruments and agreements as shall be
required hereunder or provided for herein or as Lender or Lender’s counsel may
reasonably require in connection herewith.

 

 Notwithstanding anything to the contrary
contained herein or in any Loan Documents, failure of Borrower to satisfy all
post-closing conditions herein by 4:30 p.m. (Hawaii Standard Time) on May 31,
2008 shall constitute an Event of Default, as provided in Article XIII
below.

 

12

 

ARTICLE V

 

FINANCING

 

5.1.                              Term Loan.  Lender agrees to make a term
loan to Borrower in the principal amount of ONE
MILLION SEVEN SEVENTY EIGHT THOUSAND FOUR HUNDRED DOLLARS AND NO/100 DOLLARS
($1,078,400.00), which shall be repayable
with interest in accordance with the terms of the Term Note.

 

5.2.                              Use of Proceeds.  Borrower agrees that the
proceeds of the Term Loan shall be used as follows:

 

(a)                                  $1,000,000.00 shall be used for working capital
purposes.

 

(b)                                 $78,400.00 shall be used to pay for Soft Costs.

 

ARTICLE VI

 

SECURITY INTEREST – COLLATERAL

 

6.1.                              Collateral.  To secure the prompt payment
and performance to Lender of the Loan Obligations, Borrower hereby grants to
Lender a continuing security interest in and lien upon all of the following
property and interests in property of Borrower, whether now owned or existing
or hereafter created, acquired or arising and wheresoever located, namely the:

 

(a)                                  Property Collateral;

 

(b)                                 Equipment Collateral;

 

(c)                                  Fixtures Collateral;

 

(d)                                 Inventory Collateral;

 

(e)                                  Accounts Receivable Collateral; and

 

(f)                                    All products and/or proceeds of any and all of
the foregoing, including, without limitation, insurance proceeds.

 

Lender
shall record UCC-1 financing statements covering such Collateral in the
applicable recording offices executed by Borrower as requested by Lender.

 

6.2.                              Security Instruments.  With
respect to the Property Collateral and Fixtures Collateral located within the
State of Hawaii:

 

13

 

6.2.1                        Pre-Closing.  Borrower shall deliver to Lender on or before
the Closing Date, the duly executed Sublessor’s Consent, Estoppel Certificate
and Subordination Agreement to be recorded in the Bureau.

 

6.2.2                        Post-Closing.  Borrower shall deliver to Lender subsequent
to closing, the Lessor’s Consent to Mortgage, the Lessor’s Estoppel Certificate
and the Lessor’s Subordination Agreement to be recorded in the Bureau in
accordance with Section 4.2 above.  With respect to the Accounts Receivable
Collateral, Inventory Collateral and Equipment Collateral, Borrower and Nutrex
shall each deliver to Lender at or prior to the Closing Date, Security
Agreements duly executed by Borrower and Nutrex respectively.  Lender shall record UCC-1 financing
statements covering such Collateral in the applicable recording offices.

 

ARTICLE VII

 

REPRESENTATIONS, WARRANTIES, AND
COVENANTS

 

APPLICABLE TO PROPERTY
COLLATERAL

 

With respect to the Property Collateral, Borrower hereby represents,
warrants and covenants to Lender as set forth in Sections 7.1 through 7.4,
inclusive.

 

7.1.                              Sale of Property Collateral.  Borrower
will not sell, lease, exchange, or otherwise dispose of any of the Property
Collateral without the prior written consent of Lender.

 

7.2.                              Insurance.  Borrower agrees that it will
obtain and maintain insurance on the Property Collateral with such company and
in such amounts and against such risks as Lender may reasonably request (except
that business interruption insurance will be limited to ninety (90) days),
including, but not limited to, fire, hazard and general liability coverage,
with loss payable to Lender as its interests may appear.  Such insurance shall not be canceled by
Borrower, unless with the prior written consent of Lender.  Such insurance policy or policies shall
contain the “New York Standard Mortgagee Clause”, stating in effect, that the
interest of Lender shall not be invalidated by (i) any act or neglect of
Borrower (including arson or a related act); (ii) by foreclosure or other
proceedings relating to the Property Collateral; (iii) by any change in
the title or ownership of the property; or (iv) the occupation of the
premises for purposes more hazardous than permitted by the policy.  In addition, if the Property Collateral is
located within a special flood hazard area, Borrower will obtain and maintain
federal flood insurance (including mud slide and soil erosion protection) if
eligible, in amounts of coverage equal to the lesser of (i) the
outstanding balance of the Term Loan; (ii) the insurable value of the
property; or (iii) the maximum limit of coverage available.  A surveyor’s affidavit evidencing an
examination of an official flood map must be delivered to Lender on or prior to
the Closing Date, if required by Lender.

 

In addition, and as referenced in Section 4.12, Lender shall
receive a title insurance policy on the Property Collateral naming Lender as
insured as soon as the same shall issue after recordation of all Security
Instruments related to the transactions contemplated herein in form and
substance satisfactory to Lender. 
Borrower shall pay all premiums and fees related to such title
insurance.

 

14

 

7.3.                              Good Title; No Existing Encumbrances.  Borrower
owns the Property Collateral free and clear of any and all prior security
interests, liens or encumbrances thereon other than any Permitted Encumbrances,
and no financing statements or other evidence of the grant of a security
interest respecting the Property Collateral exist on the public records as of
the date hereof other than any evidencing the Permitted Encumbrances.

 

7.4.                              Right to Grant Security Interest; No Further
Encumbrances.  Borrower has the right to grant a security
interest in the Property Collateral to Lender. 
Borrower will pay all taxes and other charges against the Property
Collateral.  Borrower will not use the
Property Collateral illegally or allow the Property Collateral to be encumbered,
except for the security interest in favor of Lender granted herein and except
for any Permitted Encumbrances.

 

ARTICLE VIII

 

REPRESENTATIONS, WARRANTIES, AND
COVENANTS

 

APPLICABLE TO EQUIPMENT
COLLATERAL AND FIXTURES COLLATERAL

 

With respect to the Equipment Collateral and Fixtures Collateral,
Borrower hereby represents, warrants and covenants to Lender as set forth in
Sections 8.1 through 8.5, inclusive.

 

8.1.                              Sale of Equipment Collateral and Fixtures
Collateral.  Except as permitted herein and elsewhere in
this Agreement, Borrower will not sell, lease, exchange, or otherwise dispose
of any of the Equipment Collateral and Fixtures Collateral without the prior
written consent of Lender; provided, however, that with notice to but without
the necessity of consent of Lender, from time to time hereafter, in the
ordinary course of business, Borrower may sell, exchange or otherwise dispose
of portions of its Equipment Collateral and Fixtures Collateral which are
obsolete, worn out or unsuitable for continued use, if the Equipment Collateral
and Fixtures Collateral is replaced promptly with equipment constituting
Equipment Collateral and Fixtures Collateral having a market value equal to or
greater than the Equipment Collateral and Fixtures Collateral so disposed of
and in which Lender shall obtain and have a first priority security interest
pursuant hereto.

 

8.2.                              Insurance.  Borrower agrees that it will
obtain and maintain insurance on the Equipment Collateral and Fixtures
Collateral with such companies and in such amounts and against such risks as
Lender may reasonably request, with loss payable to Lender as its interests may
appear.  Such insurance shall not be
canceled by Borrower, unless with the prior written consent of Lender.

 

8.3.                              Good Title; No Existing Encumbrances.  Borrower
owns the Equipment Collateral and Fixtures Collateral free and clear of any
prior security interest, lien or encumbrance, and no financing statements or
other evidences of the grant of a security interest respecting the Equipment Collateral
and Fixtures Collateral exist on the public records as of the date hereof other
than any evidencing the Permitted Encumbrances, and other than financing
statements that will be paid off and canceled of record, with proceeds of this
Term Loan.

 

15

 

8.4.                              Right to Grant Security Interest; No Further
Encumbrances.  Borrower has the right to grant a security
interest in the Equipment Collateral and Fixtures Collateral to Lender.  Borrower will pay all taxes and other charges
against the Equipment Collateral and Fixtures Collateral, and will not use the
Equipment Collateral and Fixtures Collateral illegally or allow the same to be
encumbered, except for the security interest in favor of Lender granted herein
and except for any Permitted Encumbrances. 
Nothing herein, however, shall prevent Borrower from leasing any
Equipment required in the operation of the Facilities.

 

8.5.                              Location.  As of the date hereof, the
Equipment Collateral and Fixtures Collateral are located only at the Collateral
Locations, and Borrower hereby covenants with Lender not to move any portion of
the Equipment Collateral and Fixtures Collateral without at least thirty (30)
days prior written notice to Lender; provided, however, that nothing contained
herein shall be deemed to prohibit Borrower, without notice to or the consent
of Lender, from transferring temporarily (for periods not to exceed thirty (30)
days in any event) any Equipment Collateral and Fixtures Collateral from a Collateral
Location to another location at any time or from time to time hereafter for the
limited repairing, refurbishing or overhauling such equipment in the ordinary
course of business.

 

ARTICLE IX

 

REPRESENTATIONS, WARRANTIES, AND COVENANTS

 

APPLICABLE TO

 

ACCOUNTS RECEIVABLE COLLATERAL AND INVENTORY
COLLATERAL

 

With respect to the Accounts Receivable Collateral and Inventory
Collateral, Borrower hereby represents, warrants and covenants to Lender as set
forth in Section 9.1 through 9.4, inclusive.

 

9.1.                              Sale of Accounts Receivable Collateral and
Inventory Collateral.  Except as permitted elsewhere in this
Agreement, Borrower will not sell, lease, exchange, or otherwise dispose of any
of the Accounts Receivable Collateral and Inventory Collateral without the prior
written consent of Lender, provided, however, that Inventory Collateral may be
sold in the ordinary course of Borrower’s business.

 

9.2.                              Good Title; No Existing Encumbrances.  Borrower
owns the Accounts Receivable Collateral and Inventory Collateral free and clear
of any prior security interest, lien or encumbrance, and no financing
statements or other evidence of the grant of a security interest respecting the
Accounts Receivable Collateral and Inventory Collateral exist on the public
records as of the date hereof other than any evidencing the Permitted
Encumbrances.

 

16

 

9.3.                              Right to Grant Security Interest; No Further
Encumbrances.  Borrower has the right to grant a security
interest in the Accounts Receivable Collateral and Inventory Collateral to
Lender.  Borrower will pay all taxes and
other charges against the Accounts Receivable Collateral and Inventory
Collateral, and will not use the Accounts Receivable Collateral and Inventory
Collateral illegally or allow the same to be encumbered, except for the
security interest in favor of Lender granted herein and except for any
Permitted Encumbrances.

 

9.4.                              Location.  As of the date hereof, the
Accounts Receivable Collateral and Inventory Collateral are located only at the
Collateral Locations, or within the boundaries of Kailua-Kona, Hawaii, and Borrower hereby covenants with
Lender, except for in the ordinary course of business, not to move any portion
of the Accounts Receivable Collateral and Inventory Collateral without at least
thirty (30) days prior written notice to Lender.  Borrower will execute and cause any other
parties to execute any and all security agreements, financing statements, or
other agreements requested by Lender related to any such Collateral and
Collateral Locations as reasonably requested by Lender.

 

ARTICLE X

 

GENERAL REPRESENTATIONS AND
WARRANTIES

 

In order to induce Lender to enter into this Agreement, Borrower hereby
represents and warrants to Lender as set forth in Sections 10.1 through 10.18,
inclusive.

 

10.1.                        Principal Business Activity.  Borrower is engaged in the business of owning
and operating a microalgae growing and processing facility.

 

10.2.                        Corporate Existence and Qualification.  Borrower is organized, validly
existing and in good standing under the laws of the State of Nevada and authorized to transact business in Hawaii. 
Borrower’s principal place of business, chief executive office and
office where it keeps principally all of its books and records are located at
the Executive Office.

 

10.3.                        Corporate Power and Authority; Validity and Binding Effect.  Borrower
has the power to make, deliver and perform under the Loan Documents, and
Borrower has the right to borrow hereunder, and all of the foregoing parties
have taken all necessary and appropriate corporate action to authorize the
execution, delivery and performance of the Loan Documents.  This Agreement constitutes, and the remainder
of Loan Documents, when executed and delivered for value received, will
constitute, the valid obligations of Borrower, legally binding upon them and
enforceable against Borrower in accordance with their respective terms.  The undersigned officers of Borrower are duly
authorized and empowered to execute, attest and deliver this Agreement and the
remainder of the Loan Documents for and on behalf of Borrower and to bind
Borrower accordingly thereby.

 

10.4.                        Financial Statements.  The balance sheets and income statements of
Borrower were submitted to Lender in connection herewith, copies of which are
attached hereto as Exhibit “H”, are true and complete and accurately and
fairly represent the financial condition of Borrower, the results of operations
and the transactions in the equity accounts as of the date and for the periods
referred to therein, and have been prepared in accordance with GAAP applied on
a consistent basis throughout the period involved.  There are no material Liabilities, direct or
indirect, fixed or 

 

17

 

contingent,
as of the date of such Financial Statements that are not reflected therein or
in the note thereto.  There has been no
material adverse change in the financial condition, operations, or prospects of
Borrower since the date of the latest balance sheet contained in such Financial
Statements.  If, by the time of the
Closing Date, Borrower’s Financial Statements are more than ninety (90) days
old, Lender may require current Financial Statements which shall be submitted
to the RD.

 

10.5.                        Pending Matters.  No action, suit, investigation or proceeding
is pending or threatened against Borrower at law or in equity (whether or not
reportedly on behalf of Borrower) before or by any court or federal, state or
municipal or other governmental department, commission, board, bureau, agency
or instrumentality which may result in any adverse change in business,
operations, properties or assets or in the conditions, finances or otherwise in
Borrower, nor is Borrower in violation of any agreement, the violation of which
might reasonably be expected to have a materially adverse effect on its
business or assets, nor is Borrower in violation of any order, judgment, or
decree of any court, or any statute or governmental regulation to which such
Borrower is subject.

 

10.6.                        Disclosure.  All information furnished or to be furnished
by Borrower to Lender in connection with the Term Loan or any of the Loan
Documents, is, or will be at the time the same is furnished, accurate and
correct in all material respects and complete insofar as completeness may be
necessary to provide Lender a true and accurate knowledge of the subject
matter.  Borrower has no knowledge of any
liability of any nature, whether accrued, absolute, contingent or otherwise,
which singularly or in the aggregate could have a materially adverse effect
upon the economic condition of Borrower or the Facility.

 

10.7.                        ERISA.  Borrower is in compliance with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”).

 

10.8.                        Proceedings Pending.  There are no proceedings pending or, to the
best of Borrower’s knowledge, threatened, to acquire any part of the Property
Collateral by any power of condemnation or eminent domain, or to enjoin or
similarly prevent or restrict the use of the Property or the operation of the
Facility in any manner.

 

10.9.                        Compliance with Applicable Laws.  The Facility and the property
on which it is situated comply with all applicable laws, ordinances, rules and
regulations, including, without limitation, the Americans with Disabilities Act
and regulations thereunder, and all laws, ordinances, rules and
regulations relating to zoning, building codes, setback requirements and
environmental matters.

 

10.10.                  No
Material Litigation.  Except as set forth on Exhibit “I”  attached hereto, there are no proceedings
pending or, so far as Borrower knows, threatened, before any court or
administrative agency that might materially or adversely affect the financial
condition or operations of Borrower.

 

10.11.                  No
Default.  Except as set forth in Exhibit “J”
attached hereto, Borrower is not in default in the payment of any of its
material obligations, and there exists no event, condition or act which
constitutes an Event of Default as defined herein, and no condition, event, or
act which with notice or lapse of time would constitute such event of default.

 

18

 

10.12.                  Taxes.  Borrower
has filed or caused to be filed all tax returns required to be filed by it and
has paid all taxes shown to be due and payable on said returns or on any
assessments made and shall furnish Lender with copies of its annual tax returns
within ten (10) days after they have been filed.

 

10.13.                  Adverse Contracts.  Except
as set forth on Exhibit “K” attached hereto, Borrower is not a party to
any contract or agreement, or subject to any charge, corporate restriction,
judgment, decree or order which materially and adversely affects its business,
property, assets, operations or condition, financial or otherwise.

 

10.14.                  Insolvency.  After
giving effect to the execution and delivery of the Loan Documents and the
making of any disbursements under the Term Note, Borrower will not be
“Insolvent” within the meaning of such term as defined in Section 101(26)
of the Bankruptcy Code, or be unable to pay its debts generally as such debts
become due.

 

10.15.                  Title.  Borrower
has good and marketable title to all the Collateral, subject to no material
lien of any kind except as otherwise disclosed in writing to Lender, and except
for the Permitted Encumbrances.

 

10.16.                  No
Violations.  The execution, delivery and performance by
Borrower of this Agreement and the other Loan Documents has been duly
authorized by all necessary corporate actions, if necessary, and does not and
will not require any additional consent or approval of the shareholders and
directors of Borrower and will not violate any provision of any law, rule,
regulation (including, without limitation, if applicable, Regulation X of the
Board of Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to Borrower or the charter or by-laws of Borrower, or result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower is a
party or by which it or its properties may be bound or affected; and Borrower
is not  in default under any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
or any such indenture, agreement, lease or instrument, except as may be
disclosed in Exhibit “L”.

 

10.17.                  RD
Guaranty Commitment Representations.  Without limiting any of the representations,
warranties, or certifications otherwise made by Borrower herein, Borrower
hereby makes the warranties, representations, and certifications required of
Borrower under the RD Guaranty Commitment attached hereto as Exhibit “D”,
which is incorporated herein by reference in its entirety.

 

10.18.                  Continuing
Representations.  These representations shall be considered to
have been made again at and as of the date of each advance made under the Term
Note and shall be true and correct as of that date.

 

19

 

10.19.                  Trade
Names.  Borrower has not changed its name or been
known by any other name within the last five (5) years.

 

ARTICLE XI

 

GENERAL AFFIRMATIVE COVENANTS

 

Borrower covenants and agrees with Lender that from and after the date
hereof, and so long as the Term Loan remains outstanding, that it will comply
with the covenants set forth in Sections 11.1 through 11.36, inclusive.

 

11.1.                        Payment of Loan/Performance of Loan Obligations.  Duly and
punctually pay or cause to be paid the principal and interest of the Term Note
in accordance with its terms and duly and punctually pay and perform or cause
to be paid or performed all Loan Obligations hereunder and under the other Loan
Documents.

 

11.2.                        Maintenance of Existence.  Borrower shall maintain in the state of its
incorporation, and, in each jurisdiction in which the character of the property
owned by them or in which the transaction of their business makes qualification
necessary, good standing.

 

11.3.                        Use of Proceeds.  Borrower will use the net proceeds of the
Term Loan only for the purposes set forth in Section 5.2 in the conduct of
the business in which it is presently engaged, or in which it presently
proposes to engage.

 

11.4.                        Accrual and Payment of Taxes.  Borrower, during each Fiscal
Year, shall accrue all current tax liabilities of all kinds, all required
withholding of income taxes of employees, all required old age and unemployment
contributions, and all required payments to employee benefit plans, and pay the
same when they become due.

 

11.5.                        Payment of Taxes and Obligations.  Borrower will pay and
discharge promptly all taxes, assessments and other governmental charges and
claims levied or imposed upon it or its property, or any part thereof,
provided, however, that it shall have the right in good faith to contest any
such taxes, assessments, charges or claims, and, pending the outcome of such
contest, to delay or refuse payment thereof provided that adequate funded
reserves are established by it to pay and discharge any such taxes,
assessments, charges and claims.  Borrower
shall, on an annual basis not later than sixty (60) days after the end of each
tax year, provide reasonable evidence to Lender that all income and withholding
taxes have been paid.

 

11.6.                        Records Respecting Collateral.  Adequate records of Borrower
with respect to the Collateral will be kept at the Executive Office (subject to
being changed pursuant to Section 11.10) and will not be removed from such
address without the prior written consent of Lender.

 

11.7.                        Right to Inspect.  Lender (or any person or persons designated
by it) shall, in its sole discretion, have the right to call at any place of
business of Borrower at any reasonable time, and, without hindrance or delay,
inspect, audit, appraise, check and make extracts from any books, records,
journals, orders, receipts and any correspondence and other data relating to
the Collateral and to Borrower’s business or to any other transactions between
the parties hereto.

 

20

 

11.8.                        Financial and Other Information.  Borrower shall provide or
cause to be provided to Lender, the following Financial Statements and
information on a continuing basis and as Lender may require from time to time:

 

(a)                                  Quarterly Financial Statements of Borrower.  Within
forty-five (45) days after the end of each calendar quarter Borrower will
provide Lender with an internally prepared compilation report which, as a
minimum, includes a consolidated balance sheet and profit and loss statement of
the business of Borrower together with a statement providing an aging of
accounts receivable and accounts payable, showing the status at the end of the
quarter, and signed by an appropriate officer of Borrower.  The officer will comment relative to the
required loan covenants being met and/or not met and any corrective action
necessary or planned.  Borrower shall
provide to Lender the aforementioned quarterly reports for a minimum period of
thirty-six (36) months after the Closing Date and during the remaining life of
the Loan with the only exception being that Borrower has been current with the
guaranteed loan payments for twenty-four (24) consecutive months, is
maintaining a greater than 1.25 to 1.0 Debt Service Coverage, and is in
compliance with all other applicable RD regulations.  Borrower shall promptly from time to time as
required by Lender, submit such other information concerning the business,
conditions and affairs of Borrower, as Lender may reasonably request.  Lender will provide Borrower’s quarterly financial
statements to RD; however, no formal analysis or report will be prepared by
Lender and provided to RD unless deemed necessary by Lender due to adverse
change in Borrower’s financial condition.

 

(b)                                 Annual Financial Statements. 
Commencing at the end of the first full Fiscal Year after the date
hereof, Borrower shall furnish Lender, within ninety (90) days of the end of
Borrower’s Fiscal Year, annual audited Financial Statements of Borrower’s
affairs prepared by an independent certified public accountant satisfactory to
Lender and certified in a manner satisfactory to Lender as accurately
reflecting the condition and affairs of the business of Borrower, which report
shall contain among other matters, a balance sheet as of the end of Borrower’s
Fiscal Year, a profit and loss statement showing the result of operations of
Borrower for the Fiscal Year, a reconciliation of surplus, and any applicable
accountant’s notes, all as prepared in accordance with GAAP and applied on a
basis consistently maintained throughout the period involved.  Furthermore, the independent certified public
accountant will notify Lender if Borrower is not in compliance with any
financial covenant contained in this Agreement, and the RD Guaranty
Commitment.  Borrower shall also submit
to Lender such other information concerning the conditions and affairs of the
business as Lender may reasonably request.

 

11.9.                        Maintenance of Insurance.  In addition to and cumulative with any other
requirements herein imposed on Borrower with respect to insurance, Borrower
shall maintain insurance with responsible insurance companies on such of its
properties and employees, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the same vicinity,
but in any event to include loss, damage, flood, windstorm, fire, theft,
extended 

 

21

 

coverage,
crop insurance, workers compensation and products liability and business
interruption insurance (not to exceed ninety 90 days) in amounts satisfactory
to Lender, which such insurance shall not be canceled by Borrower unless with
the prior written consent of Lender. 
Borrower shall file with Lender, upon its request, a detailed list of
such insurance then in effect stating the names of the insurance companies, the
amounts and rates of insurance, the date of expiration thereof, the properties
and risks covered thereby and the insured with respect thereto, and, within
thirty (30) days after notice in writing from Lender, obtain such additional
insurance as Lender may reasonably request.

 

11.10.                  Change
of Principal Place of Business.  Borrower hereby understands and agrees that
if, at any time hereafter, Borrower elects to move its principal place of
business, or if Borrower elects to change its respective name, identity or
structure, Borrower will obtain Lender’s approval in writing at least thirty
(30) days prior thereto.

 

11.11.                  Waivers.  With
respect to the Collateral Location, Borrower will obtain such waivers of lien,
estoppel certificates or subordination agreements as Lender may reasonably
require to insure the priority of its security interest in that portion of the
Collateral situated at such locations.

 

11.12.                  Compliance
with Laws.  Borrower shall comply with the requirements
of all applicable laws, rules, regulations and orders of any governmental
authority, including, without limitation, all applicable environmental laws and
Hazardous Materials Laws and shall pay all taxes, assessments, charges, claims
for labor, supplies, rent and other obligations which, if unpaid, might give
rise to a Lien against the Collateral, except Liens to the extent permitted in Section 12.1  of this Agreement. 
Borrower certifies that the Facility, if applicable, is accessible to
the public in compliance with the Americans with Disabilities Act.  The noncompliance with the aforesaid shall be
construed to constitute a material adverse effect upon the business or credit
of Borrower.

 

11.13.                  Junior
Financing.  Borrower shall not without the prior written
consent of Lender incur any additional indebtedness relating to the Facility,
if applicable, or create or permit to be created or to remain, any mortgage,
pledge, lien, lease, encumbrance or charge on, or conditional sale or other
title retention agreement whether prior to or subordinate to the liens of the
Mortgage and Security Agreements, with respect to the Facility, or any part
thereof, or income therefrom other than the Mortgage and Security Agreements
provided for herein.

 

11.14.                  Books
and Records.  Borrower shall permit, and cause to permit,
persons designated by Lender to inspect any and all of the properties and books
and records of Borrower and those books and records of Borrower pertaining to
the Facility, and to permit Lender to make copies of and to discuss the affairs
of Borrower and the Facility with officers of such parties as designated by
Lender, all at such times as Lender shall request.

 

11.15.                  Payment
of Indebtedness.  Borrower shall duly and punctually pay or
cause to be paid all Indebtedness now owing or hereafter incurred by Borrower
in accordance with the terms of such Indebtedness, except such Indebtedness
owing to those other than Lender which is being contested in good faith and
with respect to which any execution against collateral of Borrower have been
effectively stayed and for which reserves adequate for payment have been
established.

 

22

 

11.16.                  Records
of Accounts.  Borrower shall maintain all records,
including records pertaining to accounts receivable of Borrower at the chief
executive offices of Borrower as set forth in this Agreement.

 

11.17.                  Notice
of Loss.  Borrower shall immediately notify Lender of
any event causing a loss or depreciation in value of Borrower’s assets in
excess of $50,000.00 and the amount of such loss or depreciation, except
Borrower shall not be required to notify Lender of depreciation in building and
equipment resulting from ordinary use thereof.

 

11.18.                  Conduct
of Business.  Borrower shall cause the operation of the
Facility to be conducted at all times in a prudent manner in compliance with
applicable laws and regulations relating thereto and cause all licenses,
permits, certificates, and any other agreements necessary for the use and
operation of the Facility to remain in effect.

 

11.19.                  Condition
of Properties.  Borrower shall keep all buildings,
improvements, machinery and equipment located on or used or useful in
connection with the respective Facility in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needed and proper repairs, renewals, replacements, additions and improvements
thereto to keep the same in good operating condition.

 

11.20.                  Inventory,
Fixtures and Equipment.  Borrower shall maintain, or cause to be
maintained, sufficient inventory, fixtures and equipment of types and
quantities at the Facility necessary to enable Borrower adequately to perform
operations at such Facility.

 

11.21.                  Certificate.  Upon
Lender’s written request, furnish Lender with a certificate stating that
Borrower has complied with and is in compliance with all terms, covenants and
conditions of the Loan Documents and there exists no Default or Event of
Default or, if such is not the case, that one or more specified events have
occurred, and that the representations and warranties contained herein are true
with the same effect as though made on the date of such certificate.

 

11.22.                  Litigation;
Default Conditions and Events of Default.  Upon its receipt of notice or
knowledge thereof, Borrower will report to Lender: (i) any lawsuit or
administrative proceeding in which Borrower is a defendant wherein the amount
of damages claimed exceeds $50,000.00; or (ii) the existence and nature of
any Default Condition or Event of Default hereunder.

 

11.23.                  Costs.  Borrower
shall pay or reimburse Lender for all costs and fees incurred by Lender in
preparing and documenting this Agreement and the Term Loan, and all amendments
and modifications thereof.

 

11.24.                  Execution
of Other Documents.  Borrower will, upon demand by Lender,
promptly execute all such additional agreements, contracts, indentures,
documents and instruments in connection with this Agreement as Lender, in its
sole discretion, may reasonably consider necessary.

 

23

 

11.25.                  Litigation
and Attorneys Fees.  Borrower will pay promptly to Lender without
demand, reasonable attorneys fees and all costs and other expenses paid or
incurred by Lender in collecting or compromising the Term Loan or in enforcing
or exercising its rights or remedies created by, connected with or provided in
this Agreement or any other agreement or instrument required by Lender in
connection with the Term Loan, whether or not suit is filed.

 

11.26.                  Further
Assurances.  Borrower shall duly execute and/or deliver
(or cause to be duly executed and/or delivered) to Lender any instrument,
invoice, document, document of title, warehouse receipt, bill of lading, order,
financial statement, assignment, waiver, consent or other writing which may be
reasonably necessary to Lender to carry out the terms of this Agreement and any
of the other Loan Documents and to perfect its security interest in and
facilitate the collection of the Collateral, the proceeds thereof, and any
other property at any time constituting security to Lender.  Borrower shall perform or cause to be
performed such acts as Lender may request to establish and maintain for Lender
a valid and perfected security interest in and security title to the
Collateral, free and clear of any liens, encumbrances or security interests
other than in favor of Lender.

 

11.27.                  Debt
to be Borrower’s Debt.  All debt to be repaid from loan proceeds is
debt of Borrower and not debt of any other entity.

 

11.28.                  Current
Ratio.  Commencing with the Closing Date and for each
and every fiscal year-end thereafter, Borrower shall maintain a current ratio
(current assets divided by current liabilities) of not less than 1.3 to 1.0.

 

11.29.                  Minimum
Tangible Balance Sheet Equity.  Borrower shall maintain a tangible balance
sheet equity of at least ten percent (10%) at the time of execution of this
Agreement, and all the times during the term of the Term Loan.

 

11.31.                  Minimum
Debt-to-Tangible Net Worth Ratio.  Borrower shall maximum debt-to-tangible net
worth ratio of no more than 1.3 to 1.0 for each fiscal year-end.

 

11.32.                  RD
Guaranty Commitment.  Borrower agrees that it shall comply with
each and every provision of that certain RD Guaranty Commitment as issued by
the RD, and Borrower agrees to provide all information and certifications and
any other matters to Lender that Lender deems necessary for issuance of
Lender’s certifications required in the RD Guaranty Commitment, attached hereto
as Exhibit “D”.

 

11.33.                  Employee
Reports.  Borrower shall submit a report annually to
Lender and RD as of December 31, indicating the total number permanent,
part-time and seasonal employees.

 

11.34.                  Repayment
Schedule.  A schedule detailing payment and amortization
of the loan is attached as Exhibit “F”.

 

11.35.                  Arms
Length Transactions.  All of Borrower’s transactions will be at
arms length and competitive with any of the officers, employees, directors, or
their spouses and family members that may buy, sell, or trade to it. The same
will apply to any entity that they may be a stockholder, director, or own any
interest in, as well as a spouse or family member.

 

24

 

11.36.                  Stockholder
Debt.  Any and all debts to stockholders, officers
or affiliates  now or hereafter made will
be subordinated to the Term Loan or converted to stock.

 

ARTICLE XII

 

NEGATIVE COVENANTS

 

Borrower covenants and agrees with Lender that from and after the date
hereof and so long as any amount remains unpaid on the Term Loan, it will not,
without the prior written consent of Lender, do any of the things or acts set
forth in Sections 12.1 through 12.16, inclusive.

 

12.1.                        No Encumbrances.  Borrower will not create, incur, assume, or
suffer to exist any deed to secure debt, mortgage, deed of trust, pledge,
assignment, lien, charge, encumbrance on, or security interest or security
title of any kind on the Land and/or Collateral described in Section 6.1
of this Agreement or on any of their personal property except for:  (i)  liens for taxes not yet due or
being contested as permitted by this Agreement; (ii)  liens at any time
existing in favor of Lender; (iii)  any Permitted Encumbrances; (iv) inchoate
Liens arising by operation of law for the purchase of labor, services,
materials, equipment or supplies, provided payment shall not be delinquent and,
if such Lien is a lien upon the Collateral, which Lien is fully subordinate to
the applicable Deed, Mortgage and/or Security Agreement covering such
Collateral, is disclosed to Lender and is being contested by Borrower in good faith
and Borrower is diligently pursuing such contest to completion, and adequate
reserves, as determined by Lender, are being maintained therefore; and (v) liens
incurred in the ordinary course of business in connection with workmen’s
compensation, unemployment insurance or other forms of governmental insurance
or benefits, or to secure performance of tenders, statutory obligations, leases
and contracts (other than for money borrowed or for credit received in respect
of property acquired) entered into the ordinary course of business as presently
conducted or to secure obligations for surety or appeal bonds.

 

12.2.                        Dividends/Bonuses.  Borrower will not, without Lender’s prior
written consent, make any bonuses to any officers of Borrower or declare or pay
any dividends on its own common stock, or authorize or make any other
distribution with respect to any of its stock now or hereafter
outstanding.  Notwithstanding the
foregoing, Borrower shall be permitted to pay dividends or bonuses provided
that Borrower has been current on the Term Loan for twelve (12) consecutive
months, an after-tax profit was made in the preceding Fiscal Year, all of
Borrower’s debts are paid to a current status, the business of Borrower is
maintaining a greater than 1.25 to 1.0 cash flow to Debt Service Coverage,
Borrower is still in compliance with all other loan conditions and regulations
of the RD, and prior written consent of Lender is obtained.  After Lender has determined that all of the
above parameters have been met and a deduction has been made for any accounts
payable, such cash dividends or bonuses to officers of Borrower, will not
exceed fifty percent (50%) of net earnings of Borrower.

 

25

 

12.3.                        Merger, Sale, Assignments, Etc.  Borrower will not liquidate or
dissolve or otherwise terminate its legal status or enter into any
consolidation, merger, partnership, reorganization or other combination, or
convey, or sell, assign, lease or otherwise dispose of all or the greater part
of its assets or businesses (now owned or hereafter acquired) (whether in one
transaction or in a series of transactions), or permit Borrower to sell,
assign, lease or otherwise dispose of, all or the greater part of the assets or
business of another, or made any substantial change in the basic type of
business conducted by it as of the date hereof, without the prior written
consent of Lender, which may be granted or refused by Lender in Lender’s sole
discretion.

 

12.4.                        Disposition of Assets.  Borrower will not sell, lease, transfer or
otherwise dispose of Collateral, unless any such disposition shall be in the
ordinary course of business for a full and fair consideration, which in no
event shall include a transfer for full or partial satisfaction of a preexisting
debt.

 

12.5.                        Change in Business.  Borrower will not make any material change in
the nature of its business as it is being conducted as of the date hereof,
without the prior consent of Lender, which will not be unreasonably withheld.

 

12.6.                        Changes in Accounting.  Borrower will not change its methods of
accounting, unless such change is permitted by GAAP, and provided such change
does not have the effect of curing or preventing what would otherwise be an
Event of Default or default had such change not taken place.

 

12.7.                        ERISA Funding and Termination.  Borrower will not permit (a) the
funding requirements of ERISA with respect to any employee plan to be less than
the minimum required by ERISA at any time, or (b) any employee plan to be
subject to involuntary termination proceedings at any time.

 

12.8.                        Transactions with Affiliates.  Borrower will not enter into
any transaction with any Person affiliated with such Borrower other than in the
ordinary course of its business and on fair and reasonable terms no less
favorable to such Borrower than those they would obtain in a comparable
arms-length transaction with a Person not an affiliate.

 

12.9.                        Change of Use.  Borrower will not alter or change the use of
the Facility or enter into any lease or management agreement for the Facility
other than the leases and management agreements in place as of the date of this
Agreement, unless Borrower first notifies Lender and provides Lender a copy of
the proposed lease or management agreement, obtains Lender’s written consent
and obtains and provides Lender with a subordination agreement in form
satisfactory to Lender from such lessee or manager subordinating to all rights
of Lender.

 

12.10.                  Place
of Business.  Borrower will not change its chief executive
offices or open any new place of business without first giving Lender at least
thirty (30) days prior written notice thereof and promptly providing Lender
such information as Lender may request in connection therewith.

 

12.11.                  No
Advances.  Borrower shall not, during the life of the
Term Loan, make any advances or loans to any officer, owner, stockholder,
director and/or affiliate of Borrower, during this Term Loan, without Lender’s
prior written consent.

 

26

 

12.12.                  No
Increase in Borrower’s Compensation.  Borrower will not increase the salaries and
compensations of officers and owners of Borrower unless Borrower has been
current with the Term Loan payments for twelve (12) consecutive months, an
after-tax profit was made in the preceding Fiscal Year, all of Borrower’s debts
are paid to a current status, the business is maintaining a minimum 1.25 to 1.0
cash flow to Debt Service Coverage after the Closing Date, and Borrower is in
compliance with all loan conditions.

 

12.13.                  No
Sale or Disposition of Business Collateral.  Borrower will not sell or
otherwise dispose of collateral described in Section 6.1 of this
Agreement, other than as permitted herein and by RD regulations.

 

12.14.                  Change
of Ownership.  Borrower will not materially change the
ownership of Borrower such that the change would result in a change of control
of Borrower, without obtaining Lender and RD’s consent and without complying
with all applicable RD regulations.

 

12.15.                  Purchase
of Capital Improvements.  Borrower shall not expend in excess of
$500,000.00 for capital improvements during any Fiscal Year, without the prior
written consent of Lender.  This
prohibition does not apply upon Borrower purchasing machinery and equipment
being replaced due to depreciation or obsolescence.

 

12.16.                  Liabilities
of Third Parties.  Borrower will refrain from assuming any
liabilities or obligations of any third parties, including but not limited to,
the officers or directors of Borrower. 
Borrower will refrain from co-signing or endorsing liabilities or
obligations or indebtedness of other persons or entities during the life of
this Term Loan.  Also, its principals
will refrain from co-signing or endorsing any liability or obligation which will
substantially weaken their financial condition. 
In addition, Borrower will not obligate itself without approval of
Lender for liabilities of other persons or entities in excess of $100,000.00
outside of the normal course of business.

 

ARTICLE XIII

 

EVENTS
OF DEFAULT

 

The occurrence of any events or conditions described in Sections 13.1
through 13.9 shall constitute an Event of Default hereunder, provided that the
requirements for the giving of notice and the lapse of time provided for in Section 13.10
have been satisfied.

 

13.1.                        Term Note.  Borrower shall fail to make any payments of
principal of or interest on the Term Note when due and not cure same within ten
(10) days of the occurrence of the default.

 

13.2.                        Misrepresentations.  Any certificate, statement, representation,
warranty or audit heretofore or hereafter furnished by or on behalf of
Borrower, pursuant to or in connection with this Agreement or otherwise
(including, without limitation, representations and warranties contained herein
or in any Loan Documents) or as an inducement to Lender to extend any credit to
or to enter into this or any other agreement with Borrower, in connection with
this Term Loan, proves to have been false in any material respect at the time
when the facts therein set forth were stated or certified, 

 

27

 

or
proves to have omitted any substantial contingent or unliquidated liability or
claim against Borrower, or on the date of execution of this Agreement there
shall have been any material adverse change in any of the facts previously
disclosed by any such certificate, statement, representation, warranty or
audit, which change shall not have been disclosed to Lender in writing at or
prior to the time of such execution.

 

13.3.                        Covenants.  Borrower shall fail to perform, keep or
observe any other term, provision, condition, covenant, undertaking, warranty
or representation contained in this Agreement or in the other Loan Documents,
which is required to be performed, kept or observed and such failure is not
cured to Lender’s satisfaction within thirty (30) days after Lender gives
Borrower written notice identifying such failure; or any Event of Default as
defined in any other Loan Document occurs.

 

13.4.                        Other Debts.  Borrower shall default on any other
agreement, document or instrument to which Borrower is a party, which default
shall cause a material adverse effect on the businesses of Borrower, the value
of the Collateral, or Lender’s interest therein.  Nutrex or any other wholly owned subsidiary
of Borrower shall default in any agreement, document, instrument, loan, or
obligation owed to Borrower.

 

13.5.                        Voluntary Bankruptcy.  Borrower shall file a voluntary petition in
bankruptcy or a voluntary petition or answer seeking liquidation,
reorganization, arrangement, re-adjustment of its debts, or for any other
relief under the Bankruptcy Code, or under any other act or law pertaining to
insolvency or debtor relief, whether state, Federal, or foreign, now or
hereafter existing; Borrower shall enter into any agreement indicating its
consent to, approval of, or acquiescence in, any such petition or proceeding;
Borrower shall apply for or permit the appointment by consent or acquiescence
of a receiver, custodian or trustee of Borrower for all or a substantial part
of its property; Borrower shall make an assignment for the benefit of
creditors; or Borrower shall be unable or shall fail to pay its debts generally
as such debts become due, or Borrower shall admit, in writing, its inability or
failure to pay debts generally as such debts become due.

 

13.6.                        Involuntary Bankruptcy.  There shall have been filed against Borrower
an involuntary petition in bankruptcy or seeking liquidation, reorganization,
arrangement, readjustment of debts or any other relief under the Bankruptcy
Code, or under any other act or law pertaining to insolvency or debtor relief,
whether State, Federal or foreign, now or hereafter existing, and such petition
is not dismissed within sixty (60) days after the entry of filing thereof;
Borrower shall suffer or permit the involuntary appointment of a receiver,
custodian or trustee of Borrower for all or a substantial part of its property
and such appointment is not dismissed within sixty (60) days after such
appointment was first made; or Borrower shall suffer or permit the issuance of
a warrant of attachment, execution or similar process against all or any
substantial part of the property of Borrower and the same is not dismissed
within sixty (60) days of the application thereof.

 

13.7.                        RD Guarantee.  The RD Guarantee shall be voided, repudiated,
or breached.

 

13.8.                        Post-Closing Conditions.  Borrower fails to satisfy the post-closing
conditions by 4:30 p.m. (Hawaii Standard Time) on May 31, 2008 in
accordance with Article IV above.

 

28

 

13.9.                        Cross Default.  An event of default shall occur under
any agreement evidencing or securing indebtedness owed by Borrower in favor of
Lender, including but not limited to that certain term loan in the original
principal amount of $3,500,000.00 (the “$3,500,000.00 Loan”) made by Lender in
favor of Borrower pursuant to that certain Term Loan Agreement dated April 21,
2000.  Any
Event of Default under this Agreement shall also constitute an Event of Default
under the terms and conditions of the $3,500,000.00 Loan.

 

13.10.                  Right
of Cure.  Any provision of this Agreement to the
contrary notwithstanding, Lender shall not exercise any of its remedies for any
Event of Default hereunder (including, without limitation, the right to
acceleration of the balance of the indebtedness evidenced by the Term Note)
until the thirtieth (30th) day after written notice from Lender to Borrower of
said Event of Default or, in the Event of Default under Section 13.1
hereinabove, the tenth (10th) day after written notice. Written notice shall
specify the nature of all such Events of Default and will be provided according
to Section 15.8 hereinbelow.  If
Borrower has not cured all such Events of Default after receipt of such notice,
and the expiration of all cure periods, Lender shall be empowered to exercise
all of its remedies under this Agreement. 
Lender is only required to provide Borrower three (3) written
default notices in any given calendar year.

 

Notwithstanding anything in the foregoing Article, all requirements of
notice shall be deemed eliminated if Lender is prevented from giving such
notice by bankruptcy or other applicable law. 
The cure period, if any, shall then run from the occurrence of the Event
of Default rather than from the date of notice.

 

ARTICLE XIV

 

REMEDIES

 

Upon the occurrence or existence of any Event of Default, or at any
time thereafter, without prejudice to the rights of Lender to enforce its
claims against Borrower for damages for failure by Borrower to fulfill any of
its obligations hereunder, subject only to prior receipt by Lender of payment
in full of the Term Loan in a form acceptable to Lender, Lender shall have all
of the rights and remedies described in Sections 14.1 through 14.4, inclusive,
and it may exercise any one, more, or all of such remedies, in its sole
discretion, without thereby waiving any of the others.

 

14.1.                        Acceleration of the Term Loan.  Lender, at its option, subject
to Section 13.9, may declare the Term Loan to be immediately due and
payable, whereupon the same shall become immediately due and payable without
presentment, demand, protest, notice of nonpayment or any other notice required
by law relative thereto, all of which are hereby expressly waived by Borrower.

 

14.2.                        Remedies of a Secured Party.  As it relates to the personal property
collateral defined herein, Lender shall thereupon have the rights and remedies
of a secured party under the UCC in effect on the date thereof (regardless of
whether the same has been enacted in the jurisdiction where the rights or
remedies are asserted), including, without limitation, the right to take
possession of any of the Collateral, subject to the UCC, or the proceeds
thereof, to sell or otherwise dispose of the same, and to apply the proceeds
therefrom to the Term Loan in such order and manner as Lender, in its sole
discretion, may elect.  Lender shall give
Borrower written notice 

 

29

 

of
the time and place of any public sale of the Collateral or the time after which
any other intended disposition thereof is to be made.  The requirement of sending reasonable notice
shall be met if such notice is given to Borrower pursuant to Section 15.8
at least ten (10) days before such disposition.  Expenses of retaking, holding, insuring,
preserving, protecting, preparing for sale or selling or the like with respect
to the Collateral shall include, in any event, reasonable attorneys fees and
other legally recoverable collection expenses, all of which shall constitute
obligations of Borrower.

 

14.3.                        Repossession of the Collateral.  As it relates to the personal
property collateral defined herein, Lender may take the Collateral or any
portion thereof into its possession, by such means (without breach of the
peace) and through agents or otherwise as it may elect (and, in connection
therewith, demand that Borrower assemble the Collateral at a place or places
and in such manner as Lender shall prescribe), and sell, lease or otherwise
dispose of the Collateral or any portion thereof in its then condition or
following any commercially reasonable preparation or processing, which
disposition may be by public or private proceedings, by one or more contracts,
as a unit or in parcels, at any time and place and on any terms, so long as the
same are commercially reasonable.

 

14.4.                        Other and Additional Remedies.  In addition to the rights and
remedies of a secured party under the laws of the State of Hawaii and the rights and remedies granted in
this Agreement, Lender shall have all of the rights and remedies set forth in
the Mortgages, the Security Agreements, and in all of the other Loan Documents,
which rights and remedies may be exercised successively or concurrently.

 

ARTICLE XV

 

MISCELLANEOUS

 

15.1.                        Waiver.  No remedy conferred upon, or reserved to, Lender
in this Agreement or any of the other Loan Documents is intended to be
exclusive of any other remedy or remedies, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing in law or in equity. 
Exercise or omission to exercise any right of Lender shall not affect
any subsequent right of Lender to exercise the same.  No course of dealing between Borrower and
Lender or any delay on Lender’s part in exercising any rights shall operate as
a waiver of any of Lender’s rights.  No
waiver of any Event of Default under this Agreement or any of the other Loan
Documents shall extend to or shall affect any subsequent or other then existing
Event of Default or shall impair any rights, remedies or powers of Lender.  Except for any defense which would constitute
a compulsory counterclaim, Borrower hereby agrees that any and all causes of
action and claims which it may ever have against Lender shall not be raised by
Borrower as a defense or counterclaim in any suit or proceeding brought by
Lender against it for collection of the Loan Obligations or enforcement of this
Agreement, but shall instead be brought, if at all, by a separate suit or
proceeding.

 

15.2.                        Costs and Expenses.  Borrower will bear all taxes, fees and
reasonable expenses (including reasonable fees and expenses of counsel for
Lender) in connection with the preparation of this Agreement and the other Loan
Documents, and in connection with any modifications thereto 

 

30

 

and
the recording of any of the Loan Documents. 
If, at any time, a Default occurs or Lender becomes a party to any suit
or proceeding in order to protect its interests or priority in any collateral
for any of the Loan Obligations or its rights under this Agreement or any of
the Loan Documents, or if Lender is made a party to any suit or proceeding by
virtue of the Term Loan, this Agreement or any collateral for any Loan
Obligations and as a result of any of the foregoing, Lender employs counsel to
advise or provide other representation with respect to this Agreement, or to
collect the balance of the Loan Obligations, or to take any action in or with
respect to any suit or proceeding relating to this Agreement, any of the other
Loan Documents, any collateral for any of the Loan Obligations, or to protect,
collect, or liquidate any of the security for the Loan Obligations, or attempt
to enforce any security interest or lien granted to Lender by any of the Loan
Documents, then in any such events, all of the reasonable attorney’s fees
arising from such services, including fees on appeal and in any bankruptcy
proceedings, and any reasonable expenses, costs and charges relating thereto
shall constitute additional obligations of Borrower to Lender payable on demand
of Lender.  Without limiting the
foregoing, Borrower shall pay or reimburse Lender for all recording and filing
fees, revenue or documentary stamps or taxes, intangibles taxes, and other
expenses and charges payable in connection with this Agreement, any of the Loan
Documents, the Loan Obligations, or the filing of any financing statements or
other instruments required to effectuate the purposes of this Agreement.

 

15.3.                        Performance of Lender.  At its option, upon Borrower’s failure to do
so, Lender may make any payment or do any act on Borrower’s behalf that
Borrower or others are required to do to remain in compliance with this
Agreement or any of the other Loan Documents, and Borrower agrees to reimburse
Lender, on demand, for any payment made or expense reasonably incurred by
Lender pursuant to the foregoing authorization, including, without limitation,
reasonable attorneys’ fees.

 

15.4.                        Headings.  The headings of the Sections of this
Agreement are for convenience of reference only, are not to be considered a
part hereof, and shall not limit or otherwise affect any of the terms hereof.

 

15.5.                        Survival of Covenants.  All covenants, agreements, representations
and warranties made herein and in certificates or reports delivered pursuant
hereto shall be deemed to have been material and relied on by Lender,
notwithstanding any investigation made by or on behalf of Lender, and shall
survive the execution and delivery to Lender of the Term Note and this
Agreement.

 

15.6.                        No Assignment by Borrower.  No assignment hereof shall be made by
Borrower without the prior written consent of Lender.

 

15.7.                        Severability.  If any provision of any of the Loan Documents
or the application thereof to any party thereto shall be invalid or unenforceable
to any extent, the remainder of such Loan Documents and the application of such
provisions to any other party thereto shall not be affected thereby and shall
be enforced to the greatest extent permitted by law.

 

31

 

15.8.                        Notices. Any and all
notices, elections, demands, requests and responses thereto permitted or
required to be given under this Agreement shall be in writing, signed by or on
behalf of the party giving the same, and shall be deemed to have been properly
given and shall be effective upon being personally delivered, or upon being
deposited in the United States mail, postage prepaid, certified with return
receipt requested, or upon being deposited with an overnight commercial
delivery service requiring proof of delivery, to the other party or parties at
the address of such other party or parties set forth below or at such other
address within the continental United States as such other party or parties may
designate by notice specifically designated as a notice of change of address
and given in accordance herewith; provided, however, that the period in which a
response to any such notice, election, demand or request must be given shall
commence on the date of receipt thereof; and provided further that no notice of
change of address shall be effective until the date of receipt thereof.  Personal delivery to a party or to any
officer, partner, agent or employee of such party at said address shall
constitute receipt.  Rejection or other
refusal to accept or inability to deliver because of changed address of which
no notice, election, demand, request or response, if given to Lender, shall be
addressed as follows:

 

	
   

  	
  BRIDGEVIEW CAPITAL SOLUTIONS, L.L.C.

  
	
   

  	
  5881 Glenridge Drive, NE, Suite 130

  
	
   

  	
  Atlanta, Georgia 30328

  
	
   

  	
  Attn: John J. Seimetz

  
	
   

  	
   

  
	
  with a copy to:

  	
  YAMAMOTO & SETTLE

  
	
   

  	
  A Limited Liability Law Company

  
	
   

  	
  700 Bishop Street, Suite 200

  
	
   

  	
  Honolulu, Hawaii 96813

  
	
   

  	
  Attn:

  	
  Dean T. Yamamoto, Esq.

  
	
   

  	
   

  	
  Marie L. Misawa, Esq.

  
	
   

  	
  Telephone: (808) 526-4730

  
	
   

  	
  Telecopier: (808) 526-4735

  
	
   

  	
   

  
	
  and, if given to Borrower,
  shall be addressed as follows:

  
	
   

  	
   

  
	
   

  	
  CYANOTECH
  CORPORATION

  
	
   

  	
  73-4460 Queen
  Kaahumanu Highway, Suite 102

  
	
   

  	
  Kailua-Kona, Hawaii 96740

  
	
   

  	
  Attn: William R. Maris

  
	
   

  	
   

  
	
  with a copy to:

  	
  GOODSILL
  ANDERSON QUINN & STIFEL LLP

  
	
   

  	
  1099
  Alakea Street, Suite 1800

  
	
   

  	
  Honolulu,
  Hawaii 976813

  
	
   

  	
  Attn:

  	
  E.
  Laurence Gay, Esq.

  
	
   

  	
   

  	
  Harold
  Gregory Nasky, Esq.

  
	
   

  	
  Telephone:
  (808) 547-5600

  
	
   

  	
  Telecopier:
  (808) 547-5880

  

 

15.9.                        Benefits.  All of the terms and provisions of this
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns.  No
Person other than Borrower or Lender shall be entitled to rely upon this
Agreement or be entitled to the benefits of this Agreement.

 

32

 

15.10.                  Participation.  Borrower
acknowledges that Lender may, at its option, sell participation interests in
the Term Loan to other participating banks. 
Borrower agrees with each present and future participant in the Term
Loan that if an Event of Default should occur, each present and future
participant shall have all of the rights and remedies of Lender with respect to
any deposit due from any participant agreement with Lender, and the execution
by Borrower of this Agreement, regardless of the order of execution by Borrower
of this Agreement, regardless of the order of execution, shall evidence an
agreement between Borrower and said participant in accordance with the terms of
this Section.  Lender will maintain a
minimum of five percent (5%) of the unguaranteed portion of the total loan
amount of the Term Loan.  The remaining
unguaranteed portion can only be sold through participation with other lenders
and no part of the guaranteed or unguaranteed loan can be sold to the applicant
or anyone having an interest in the applicant.

 

15.11.                  Supersedes
Prior Agreements; Counterparts.  This Agreement and the instruments referred
to herein supersede and incorporate all representations, promises, and
statements, oral or written, made by Lender in connection with the Term
Loan.  This Agreement may not be varied,
altered, or amended except by a written instrument executed by an authorized
officer of Lender and the RD.  This
Agreement may be executed in any number of counterparts, each of which, when
executed and delivered, shall be an original, but such counterparts shall
together constitute one and the same instrument.

 

15.12.                  Time
of the Essence.  Time is of the essence in this Agreement and
the other Loan Documents.

 

15.13.                  Interpretation.  No
provision of this Agreement shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.

 

15.14.                  Lender
Not a Joint Venturer.  Neither this Agreement nor any agreements,
instruments, documents or transactions contemplated hereby (including the Loan
Documents) shall in any respect be interpreted, deemed or construed as making
Lender a partner or joint venturer with Borrower or as creating any similar
relationship or entity, and Borrower agrees that it will not make any contrary
assertion, contention, claim or counterclaim in any action, suit or other legal
proceeding involving Lender.

 

15.15.                  Jurisdiction.  Borrower
agrees that any legal action or proceeding with respect to this Agreement may
be brought in the courts of the State of Georgia in Fulton County or in the
courts of the State of Hawaii, all as Lender may elect.  By execution of this Agreement, Borrower
submits to each such jurisdiction, hereby expressly waiving whatever rights may
correspond to it by reason of its present or future domicile.  Nothing herein shall affect the right of
Lender to commence legal proceedings or otherwise proceed against Borrower in
any other jurisdiction or to serve process in any manner permitted or required
by law.

 

33

 

15.16                     Acceptance.  This Agreement, together with the other Loan
Documents, shall not become effective unless and until delivered to Lender at
its office located at 5881 Glenridge Drive, NE, Suite 130, Atlanta,
Georgia 30328 and accepted in writing by Lender thereafter at such office as
evidenced by its execution hereof (notice of which delivery and acceptance are
hereby waived by Borrower).

 

15.17.                  Payment
on Non-Business Days.  Whenever any payment to be made hereunder or
under the Term Note shall be stated to be due on a Saturday, Sunday or a public
holiday, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest hereunder or under the Term Note.

 

15.17.                  Waiver
of Rights.  Borrower hereby waives all rights which it
has or may have regarding, without limitation, the right to notice and to a
judicial hearing prior to seizure of any Collateral by Lender.  In addition, Borrower waives any right which
it has or may have under the UCC to have Lender file UCC termination statements
with respect to the Collateral, or any part thereof, and Borrower further
agrees that Lender shall not be required to file such UCC termination
statements unless and until the Term Note has been paid in full; provided,
however, that after such event, Lender will file UCC termination statements
promptly upon request by Borrower.

 

15.18.                  Cure
of Defaults by Lender.  If, hereafter, Borrower defaults in the
performance of any duty or obligation to Lender hereunder, Lender may, at its
option, but without obligation, cure such default and any costs, fees and
expenses incurred by Lender in connection therewith including, without
limitation, for the purchase of insurance, the payment of taxes and the removal
or settlement of liens and claims, shall be deemed to be advances against the
Term Note, whether or not this creates an over-advance thereunder, and shall be
payable in accordance with its terms.

 

15.19.                  Attorney-in-Fact.  Borrower
hereby designates, appoints and empowers Lender irrevocably as its
attorney-in-fact, at Borrower’s sole cost and expense, to do in the name of
Borrower any and all actions which Lender may deem necessary or advisable to
carry out the terms hereof upon the failure, refusal or inability of Borrower
to do so and Borrower hereby agrees to indemnify and hold Lender harmless from
any costs, damages, expenses or liabilities arising against or incurred by
Lender in connection therewith.  Without
limitation, Borrower specifically authorizes all federal, state and municipal
authorities to furnish reports of examinations, records and other information
relating to the affairs of Borrower to Lender upon Lender’s request.

 

15.20.                  Prepayment Premium.  The
principal balance of this Term Loan may be prepaid in whole or in part at any
time provided that in each instance (a) Borrower shall give at least
thirty (30) days prior written notice of such prepayment to Lender; (b) Borrower
shall pay to Lender, contemporaneously with such prepayment, only if such
prepayment equals or exceeds five percent (5%) of the monthly payment amount of
the Term Note at the time of the prepayment (Borrower acknowledges that
Borrower can make only one (1) prepayment in any one (1) calendar
year), a prepayment premium in an amount equal to five percent (5%) of the
outstanding principal balance on the Term Loan, if prepaid during the first (1st)
year of the Term Loan; Borrower shall pay to Lender, contemporaneously with
such prepayment, a prepayment premium in an amount equal to four percent (4%)
of the outstanding principal balance on the Term Loan, if prepaid during the
second (2nd) year of the Term Loan; Borrower shall pay to Lender,
contemporaneously with such prepayment, a prepayment premium in an amount equal
to three percent (3%) of the outstanding principal balance on the Term Loan, if
prepaid during the third (3rd) year of the Term Loan; 

 

34

 

Borrower
shall pay to Lender, contemporaneously with such prepayment, a prepayment
premium in an amount equal to two percent (2%) of the outstanding principal
balance on the Term Loan, if prepaid during the fourth (4th) year of
the Note; Borrower shall pay to Lender, contemporaneously with such prepayment
a prepayment premium in an amount equal to one percent (1%) of the outstanding
principal balance on the Term Loan, if prepaid during the fifth (5th)
year of the Term Loan; and (c) no prepayment penalty is due for the
balance of the term of the Term Loan; provided, however, there shall be no
prepayment penalty during the first five (5) years of the Term Loan in the
event a prepayment equal to or in excess of five percent (5%) of the monthly
payment is made from insurance proceeds paid in connection with a casualty
loss.

 

Borrower
acknowledges that the prepayment premium described herein is consideration to
Lender for the privilege of prepaying the indebtedness evidenced by the Term
Note prior to maturity, and Borrower recognizes that Lender would incur
substantial additional costs and expenses in the event of a prepayment of the
indebtedness evidenced by the Term Note and that the prepayment premium is
reasonable and compensates Lender for such costs and expenses (including
without limitation, the loss of Lender’s investment opportunity during the
period from the date of prepayment until the Maturity Date).  Borrower agrees that Lender shall not, as a
condition to receiving the prepayment premium, be obligated to actually
reinvest the amount prepaid in any manner whatsoever.

 

Should Borrower elect to
refinance the Term Loan, Lender shall have the first right of refusal to match
any refinancing proposals.  In the event
that Lender elects to do so, Lender shall waive the applicable prepayment
premium.

 

15.21.                  Conflicts.  If there
is any conflict between this Agreement and the RD Conditional Commitment for Guarantee,
the RD Conditional Commitment for Guarantee shall control.

 

15.22.                  Force
Majeure.  Borrower agrees that Lender will not be
responsible for any loss or damage due to delays or failures to perform that
result from circumstances beyond Lender’s control, such as telecommunication or
electrical outages and malfunctions, postal strikes or delays, computer systems
failures, or natural disasters.

 

15.23.                  Assumption.  It is the express intent of
Borrower and Lender that this shall be a fully-assumable Loan.  Accordingly, Lender covenants and agrees that
this Term Loan shall be fully assumable by a third party, upon Borrower’s receipt of Lender’s prior written consent, which consent shall not
be unreasonably withheld; provided, that such third party’s net worth and credit shall be equal to or
greater than the net worth and credit of Borrower at the time Borrower made
application to Lender for the Term Loan herein, and that Lender shall be in
receipt of any proposed third party’s
application on Lender’s form and the financial statements of such third party
along with the payment of an assumption fee equal to one percent (1%) of the
outstanding principal balance of the Loan at the time of the assumption.  The foregoing is subject to the Term Loan
being current, and no Event of Default remaining uncured and that the third
party execute a formal assumption agreement, in form and substance satisfactory
to Lender.  Said assumption by any such
third party shall not relieve Borrower from any liability or obligation under
the Term Loan.

 

[remainder of page intentionally
left blank]

 

35

 

IN WITNESS WHEREOF, Borrower and Lender each have set their hands and
seals, as of the day and year first above written.

 

	
  BORROWER:

  	
   

  	
  CYANOTECH
  CORPORATION, a Nevada

  
	
   

  	
   

  	
  corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  	
  GERALD R. CYSEWSKI

  
	
   

  	
   

  	
   

  	
  Its President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  	
  WILLIAM R. MARIS

  
	
   

  	
   

  	
   

  	
  Its Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LENDER:

  	
   

  	
  BRIDGEVIEW
  CAPITAL SOLUTIONS, L.L.C.,

  
	
   

  	
   

  	
  a Delaware limited liability
  company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BY:

  	
  /s/ John J. Seimetz

  
	
   

  	
   

  	
   

  	
  JOHN J. SEIMETZ

  
	
   

  	
   

  	
   

  	
  Its President

  

 

36

 

TABLE OF EXHIBITS

 

	
  EXHIBIT

  	
   

  	
  DESCRIPTION OF EXHIBIT

  	
   

  	
  SECTION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  Facility/Land

  	
   

  	
  1.1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B

  	
   

  	
  Collateral
  Locations

  	
   

  	
  1.1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C

  	
   

  	
  Permitted
  Encumbrances

  	
   

  	
  1.1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D

  	
   

  	
  RD
  Conditional Commitment

  	
   

  	
  1.1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E

  	
   

  	
  Term
  Note

  	
   

  	
  1.1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F

  	
   

  	
  Repayment
  Schedule

  	
   

  	
  1.1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G

  	
   

  	
  Borrower’s
  Opinion of Counsel

  	
   

  	
  4.5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H

  	
   

  	
  Financial
  Statements

  	
   

  	
  10.4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Material
  Litigation

  	
   

  	
  10.10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  J

  	
   

  	
  Default
  in Material Obligations

  	
   

  	
  10.11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  K

  	
   

  	
  Adverse
  Contracts

  	
   

  	
  10.13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  L

  	
   

  	
  No
  Violations

  	
   

  	
  10.16

  

 

37

 

EXHIBIT “A”

 

FACILITY/LAND PROPERTY
DESCRIPTION

 

UNRECORDED
SUBLEASE NO. K-4

 

Sublessor: Natural Energy Laboratory of
Hawaii, a body corporate and a public instrumentality of the State of Hawaii
organized pursuant to Hawaii Revised Statutes, Chapter 227D

 

Sublessee: 
CYANOTECH CORPORATION, a Nevada corporation

 

Dated: 
December 29, 1995

 

Term: 
Thirty (30) years, commencing on January 1, 1996

 

The foregoing unrecorded Sublease No. K-4 was amended by the
following:

 

UNRECORDED SUPPLEMENTAL AGREEMENT NO. 1 TO AMEND SUBLEASE K-4

 

Dated: 
November 21, 1996

 

The foregoing unrecorded Sublease No. K-4 and unrecorded
Supplemental Agreement were set forth by the following:

 

SHORT FORM SUBLEASE NO. K-4

 

Effective As Of: December 29, 1995

Recorded: Document No. 2000-056138

 

THE REAL PROPERTY IN THE FOREGOING SUBLEASE AS AMENDED, BEING DESCRIBED
AS FOLLOWS:

 

That certain parcel of land situate on the westerly side of Keahole
Airport and the easterly side of the Roadway to the Natural Energy Laboratory
at KALAOA 1st to 4th and OOMA 1st, North Kona, Island and County of Hawaii,
State of Hawaii, being Parcel H-1 a portion of Parcel “A” (C.S.F. NO. 19968)
all of Lease Parcel “G” and Parcel H-2 a portion of Lot 9 a portion of H.S.S. Plat
315-A (C.S.F. No. 19934), and being more particularly described as
follows:

 

Beginning at the southwest corner of this leased parcel of land being
along the easterly side of the main roadway to the Natural Energy Laboratory,
the coordinates of said point of beginning referred to Government Survey
Triangulation Station “AKAHIPUU” being 9,099.64 feet south and 29,930.02 feet
west and running by azimuths measured clockwise from true South:

 

1. 213° 29’ 15.0” 825.97 feet along leased Parcel “A” to a point;

 

 

2. 123° 29’ 15.0” 249.34 feet along the remainder of Parcel “A” to a
point;

 

Thence, along the remainder of the Natural Energy Laboratory Site,
H.S.S. Plat 315-A (C.S.F. No. 19934) for the following four (4) courses;

 

3. 184° 50’ 25.0” 974.90 feet to a point;

 

Thence, along a curve to the right having a radius of 440.00 feet, the
chord azimuth and distance being:

 

4. 205° 30’ 12.5” 310.53 feet to a point;

 

5. 226° 10’ 00.0” 527.04 feet to a point;

 

6. 274° 50’ 25.0” 749.21 feet to a point;

 

7. 4° 50’ 25.0” 3,501.37 feet along the westerly side of Keahole
Airport (C.S.F. No. 19137) to a point;

 

Thence, along the remainder of Lot 9, along a curve to the right having
a radius of 435.00 feet, the chord azimuth and distance being:

 

8. 30° 13’ 39.5” 373.00 feet to a point;

 

9. 55° 36’ 54.0” 72.78 feet along the remainder of Lot 9 to a point;

 

10. 145° 36’ 54.0” 1726.08 feet along the easterly side of the main
roadway to the Natural Energy Laboratory to a point;

 

11. 123° 29’ 15.0” 86.79 feet along the easterly side of the main
roadway to the Natural Energy Laboratory to the point of beginning and
containing an area of 90.067 acres, more or less.

 

Saving and excepting therefrom the portion thereof lying seaward of the
debris line.

 

TOGETHER WITH Easement “1-A” for roadway purposes.

 

TOGETHER ALSO WITH Easement “6” for utility purposes, said Easement “6”
being more particularly described in that certain Short Form Sublease No. K-4
effective as of December 29, 1995, recorded in the Bureau of Conveyances,
State of Hawaii, as Document No. 2000-056138.

 

 

EXHIBIT “B”

 

COLLATERAL LOCATIONS

 

1.               73-4460 Queen
Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii  96740.

 

2.               Kaloko Industrial –
73-5581 Lawehana Street, Units B-3 and B-6, Kailua-Kona, Hawaii 96740.

 

3.               San Dimas – 555
West Allen Avenue, Unit No. 11, San Dimas, California 91733.

 

 

EXHIBIT “C”

 

PERMITTED ENCUMBRANCES

 

1.                                       Title to all
mineral and metallic mines reserved to the State of Hawaii.

 

2.                                       The property
borders on the ocean and is subject to the provisions of Hawaii Revised Statute
205A.  Sections 41 to 49 relative to
shoreline setbacks and prohibitions on use, and to the regulations of the Land
Use Commission and the County Planning Department.

 

3.                                       EASEMENT
“2-A” (Revised 2) for roadway purposes, as set forth in that certain Short Form Sublease
No. K-4

 

	
  Effective As Of:

  	
   

  	
  December 29,
  1995

  
	
  Recorded:

  	
   

  	
  Document
  No. 2000-056138

  

 

4.                                       EASEMENT
“3” for electrical purposes, as set forth and being more particularly described
in, that certain Short Form Sublease No. K-4

 

	
  Effective As Of:

  	
   

  	
  December 29,
  1995

  
	
  Recorded:

  	
   

  	
  Document
  No. 2000-056138

  

 

 

5.                                       EASEMENT
“5”
for electrical purposes, as set forth and being more
particularly described in, that certain Short Form Sublease No. K-4

 

	
  Effective As Of:

  	
   

  	
  December 29,
  1995

  
	
  Recorded:

  	
   

  	
  Document
  No. 2000-056138

  

 

6.                                       UNRECORDED
GENERAL LEASE NO. S-4717

 

Lessor:                                                         State
of Hawaii, by its Board of Land and Natural Resources

Lessee:                                                        NATURAL
ENERGY LABORATORY OF HAWAII, a body corporate and public instrumentality of the
State of Hawaii organized pursuant to Hawaii Revised Statutes, Chapter 227 (now
Chapter 227D)

Effective As
Of:                                   November 1,
1978

Term:                                                                  Sixty-five
(65) years, commencing on November 1, 1978

 

The foregoing
unrecorded General Lease No. S-4717 was set forth by the following:

 

SHORT FORM GENERAL
LEASE NO. S-4717

 

Effective As Of:           November 1, 1978

Recorded:                                          Document No. 2000-056137

 

 

7.                                     The
failure to comply with any of the terms, provisions, conditions and reservation
of that certain Sublease No. K-4, more particularly described in Exhibit A
herein.

 

8.                                     REAL
PROPERTY MORTGAGE; SECURITY AGREEMENT; ASSIGNMENT OF RENTS; AND FINANCING
STATEMENT

 

	
  Mortgagor:

  	
   

  	
  Cyanotech Corporation, a
  Nevada corporation

  
	
  Mortgagee:

  	
   

  	
  B & I LENDING, LLC,
  a Delaware limited liability company

  
	
  Dated:

  	
   

  	
  April 21, 2000

  
	
  Recorded:

  	
   

  	
  Document No. 2000-056139

  
	
  Principal Amount:

  	
   

  	
  $3,500,000.00

  

 

CONSENT

 

	
  Consent By:

  	
   

  	
  STATE OF
  HAWAII, by the Chairperson of the Board of Land and Natural Resources

  
	
  Dated:

  	
   

  	
  April 21,
  2000

  
	
  Recorded:

  	
   

  	
  Document
  No. 2000-056140

  

 

LESSOR’S
ESTOPPEL CERTIFICATE

 

	
  Dated:

  	
   

  	
  April 21,
  2000

  
	
  Recorded:

  	
   

  	
  Document
  No. 2000-056141

  

 

CONSENT

 

	
  Consent By:

  	
   

  	
  THE NATURAL
  ENERGY LABORATORY OF HAWAII AUTHORITY, State of Hawaii

  
	
  Dated:

  	
   

  	
  April 21,
  2000

  
	
  Recorded:

  	
   

  	
  Document
  No. 2000-056142

  

 

11.                               UCC
FINANCING STATEMENT

 

	
  Recorded:

  	
   

  	
  April 26,
  2000

  
	
   

  	
   

  	
  Document No. 2000-056 143

  
	
  Debtor:

  	
   

  	
  Cyanotech
  Corporation, a Nevada corporation

  
	
  Secured
  Party:

  	
   

  	
  B &
  I LENDING, LLC, a Delaware limited liability company

  

 

CONTINUATION OF UCC FINANCING STATEMENT

 

	
  Recorded:

  	
   

  	
  March 21, 2005

  
	
   

  	
   

  	
  Document No. 2005-055329

  

 

 

12.                               UCC
FINANCING STATEMENT

 

Recorded:                                                                                          April 26,
2000 Document No. 2000-056 144

Debtor:                                                                                                         Nutrex, Inc.,
a Hawaii corporation

Secured Party:                                                                   B &
I LENDING, LLC, a Delaware limited liability company

 

CONTINUATION
OF UCC FINANCING STATEMENT

 

Recorded:                                                                                          March 21,
2005

Document No. 2005-055330

 

 

EXHIBIT D

 

	
  Form 4279-3

  	
   

  	
  UNITED STATES DEPARTMENT OF
  AGRICULTURE

  	
   

  	
  FORM APPROVED

  
	
  (Rev.
  07-05)

  	
   

  	
  RURAL DEVELOPMENT

  	
   

  	
  OMB
  NO. 0570-0017

  

 

CONDITIONAL
COMMITMENT

(Business and Industry and Section 9006 Program)

 

	
  TO:
  Lender

  	
   

  	
  Case
  No.

  
	
    BRIDGEVIEW
  CAPITAL SOLUTIONS (BCS), LLC

  	
   

  	
   

  	
  61-005-911206026

  
	
  Lender’s
  Address

  	
   

  	
  State

  
	
    5881
  GLENRIDGE DRIVE, SUITE 130

  	
   

  	
   

  	
  HAWAII

  
	
    ATLANTA
  GA 30328

  	
   

  	
   

  
	
  Borrower

  	
   

  	
  Principal
  Amount of Loan

  
	
    CYANOTECH
  CORPORATION

  	
   

  	
   

  	
  $1,078,400.00

  
					

 

From an
examination of information supplied by the Lender and other relevant
information, it appears that the transaction can properly be completed.

 

Therefore, the
United States of America acting through the United States Department of
Agriculture (USDA) hereby agrees that, in accordance with applicable provisions
of the regulations, it will execute Form 4279-5, “Loan Note Guarantee,”
subject to the conditions and requirements specified in the regulations and
herein.

 

The Loan Note
Guarantee fee payable by the lender to USDA will be the amount as specified in
the regulations on the date of this Conditional Commitment for Guarantee. The
interest rate for the loan is Variable, Prime + 1.0% (1/). If a variable rate
is used, it must be tied to a base rate agreed to by the Lender and USDA which
cannot change more often than quarterly and must be published periodically in a
financial publication specifically agreed to by the Lender and Borrower.

 

A Loan Note
Guarantee will not be issued until the Lender certifies that there has been no
adverse change in the Borrower’s financial condition, nor any other adverse
change in the borrower’s condition, for any reason, during the period of time
from USDA’s issuance of this Conditional Commitment for Guarantee to issuance
of the Loan Note Guarantee regardless of the cause or causes of the change and
whether the cause or causes of the change were within the Lender’s or Borrower’s
control. The Lender’s certification must address all adverse changes and be
supported by financial statements of the Borrower and its guarantors executed
not more than 60 days before the time of certification. As used in this
paragraph only, the term “Borrower” includes any parent, affiliate, or
subsidiary of the Borrower.

 

In the event of
the Government’s failure to issue a guarantee in a situation where it is found
to be in breach, the other party’s remedy is limited to a suit for the
guaranteed portion of principal and interest which ultimately remains unpaid.

 

This agreement
becomes null and void unless the conditions are accepted by the Lender and Borrower
within 60 days from the date of issuance by USDA.

 

Except as set out
below, the purposes for which the loan funds will be used and the amounts to be
used for such purposes are set out in the Application for Loan Guarantee. Once
this instrument is executed and returned to USDA no major change of conditions
or approved loan purpose as listed on the forms will be considered. Additional
Conditions and Requirements including Source and Use of Funds: (2/)

 

If the conditions
set forth in this commitment are not met within 90 days from the date of this
commitment, USDA reserves the right to discontinue the processing of the
application and terminate its commitment. If USDA decides to terminate this
commitment USDA will provide the Lender a written notice at least 14 days prior
to termination. (3/)

 

	
   

  	
  UNITED
  STATES OF AMERICA

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lorraine P. Shin

  
	
   

  	
   

  	
  LORRAINE
  P. SHIN

  
	
   

  	
   

  	
  State
  Director, Acting on Behalf of

  
	
  Date:

  	
  02-12-2008

  	
   

  	
   

  	
  Rural
  Business-Cooperative Service

  
	
   

  	
   

  	
  (Title)

  
					

 

According to the Paperwork Reduction Act of 1995, no persons
are required to respond to a collection of information unless it displays a
valid OMB control number. The valid OMB control number for this information
collection is 0575-0170. The time required to complete this information is
estimated to average 15 minutes per response, including the time for reviewing
instructions, searching existing data sources, gathering and maintaining the
data needed, and completing and reviewing the collection of information.

 

Position 2

 

1

 

ACCEPTANCE OF CONDITIONS

 

To: USDA
(4/)

 

The conditions of this
Conditional Commitment for Guarantee including attachments are acceptable and
the undersigned intends to proceed with the loan transaction and request
issuance of a Loan Note Guarantee within          days.

 

 

	
   

  	
   

  	
  BRIDGEVIEW CAPITAL SOLUTIONS (BCS), LLC

  
	
   

  	
   

  	
  (Name of Lender)

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (Signature for Lender)

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature for Borrower)

  

 

 

(1/)              Insert fixed interest rate or, if authorized by
regulations, variable interest rate followed by a “V” and the appropriate loan
subsidy rate, if applicable.

 

(2/)              Insert any additional conditions or requirements in
this space or on an attachment referred to in this space; otherwise, insert “NONE”.

 

(3/)              USDA will determine and insert the date by which
conditions should be met.

 

(4/)              Return completed and signed copy of this
form to USDA issuing office.

 

2

 

	
  Form RD 1940-3

  	
  UNITED STATES
  DEPARTMENT OF AGRICULTURE

  
	
  (Rev 01-05)

  	
  RURAL DEVELOPMENT

  
	
   

  	
  FARM SERVICE
  AGENCY

  
	
   

  	
   

  
	
   

  	
  REQUEST
  FOR OBLIGATION OF FUNDS

  
	
   

  	
  GUARANTEED
  LOANS

  

 

	
   

  	
   

  	
  INSTRUCTIONS:

  
	
   

  	
   

  	
  Complete items 1 through 25 and
  applicable items 26 through 35. See FMI.

  
	
   

  	
   

  	
   

  

 

	
  1. CASE NUMBER

       ST   CO   BORROWER
  ID

          61-005-911206026

  	
  2. LOAN NUMBER

  

      02

  	
  3. FISCAL YEAR

  

     2008

  	
  4. SOURCE OF FUNDS

  

      1 (See FMI)

  
	
  5. BORROWER NAME

  

     CYANOTECH
  CORPORATION

  	
   

  
	
   

  	
  6. NUMBER NAME FIELDS

  

      (1, 2, or 3 from Item 5)

  
	
  7. STATE NAME

  

  HAWAII

  	
  8. COUNTY NAME

  

  HAWAII

  
	
  9. RACE CODE

   1 - WHITE 4 - HISPANIC

   2 - BLACK 5 - A/PI

   3 - ASIAN

  	
  10. EMPLOYEE  RELATIONSHIP CODE

        (See FMI)

  	
  11. SEX CODE  

      1
  - MALE

      2
  - FEMALE

      3 - FAMILY UNIT

  	
   

  4 - ORGANIZATION

  MALE OWNED

  5 - ORGANIZATION

  FEMALE OWNED

  6 - PUBLIC BODY

  	
   

  7 - NONPROFIT-

  SECULAR

  8 - NONPROFIT-FAITH BASED

  	
  12. MARITAL  STATUS

      1
  - MARRIED

      2
  - SEPARATED

      3 - UNMARRIED

  (INCLUDES WIDOWED OR DIVORCED)

  
	
  13. VETERAN CODE

         1
  - YES

     0   2
  - NO

  	
  14. TYPE OF PAYMENT

         
  1 - MONTHLY         3 - SEMI-ANNUALLY

    1    2
  - ANNUALLY      4 - QUARTERLY

  	
  15. COMMUNITY SIZE

         1
  - 10,000 OR LESS (FOR SFH

              ONLY

         2
  - OVER 10,000

  
	
  16. TYPE  OF ASSISTANCE

         076    (See FMI)

  	
  17. PURPOSE CODE

  	
  18. GUARANTEE PERCENT OF        LOAN

          80%

  
	
  19. TERM OF INTEREST

         ASSISTANCE

   

  	
  20. SUBMISSION CODE

           1 - INITIAL

     2    2 - SUBSEQUENT

  	
  21.  AMOUNT OF LOAN

            $1,078,400.00

  
	
  22. APPROVAL DATE

        MO      DA     
  YR

        02-04-2008

  	
  23. NOTE INTEREST RATE

                     8.2500%

  	
  24. BORROWER EFFECTIVE        INTEREST RATE

         8.2500%

  
	
  25. REPAYMENT PERIOD 

            7

  	
  26. INCOME CATEGORY

         1
  - VERY LOW

         2
  - LOW

         3
  - MODERATE

  	
  27. ADJUSTED FAMILY INCOME

  
	
  28. TYPE OF UNIT

         1
  - FARM TRACT

         2
  - NON-FARM TRACT

  	
  29. DWELLING TYPE USE OF

  FUNDS CODE

        (See FMI)

  	
  30. INTEREST ASSISTANCE      CODE

        1
  - ELIGIBLE FOR INTEREST            ASSIST
  PROGRAM

        2
  - INELIGIBLE FOR INTEREST            ASSIST
  PROGRAM

  
	
  31. PERCENT OF INTEREST       ASSISTANCE

                             %

  	
  32. HIGH COST AREA

           Y
  = YES

           N
  = NO

   

  	
  33. BORROWER HISTORY CODE

  04    (See FMI)

  
	
  34. AMOUNT AGENCY DIRECT DEBT REFINANCE

  	
  35. OBLIGATION DATE  (Finance Office use
  only)

         MO   DA  
  YR

         02-12-2008

  
	
  36. BEGINNING FARMER/RANCHER

         (See FMI)

  
												

 

	
  ORIGINAL - Borrower’s Case
  Folder

  	
   

  	
  COPY 1 - Applicant

  	
   

  	
  COPY 2 - Lender

  	
   

  	
  COPY 3 - State Office

  

 

Position 2

 

3

 

CERTIFICATION APPROVAL

 

APPROVAL
CONDITIONS:

 

(1) 
(Farm Loan Programs Only) This loan guarantee is approved subject to the
availability of funds. If this loan guarantee is not issued for any reason
within 90 calendar days from the date of approval on this document, the
approval official may request updated information concerning the lender and the
loan applicant. The approval official will have 14 working days to review any
updated information and decide whether to submit this document for obligation
of funds.

 

(2) This
loan guarantee is approved subject to the conditions on the Conditional Commitment.

 

37.
          COMMENTS AND REQUIREMENTS OF
CERTIFYING OFFICIAL

 

Approval
of this loan contingent upon the applicant being in compliance with all
provision of Rural Development procedures applicable to this loan. If the
financial circumstance of the applicant change before this loan is closed or if
false information was given to Rural Development on which the loan approval was
based, this assistance may be withdrawn.

 

Approval
of financial assistance is subject to the terms and conditions of the Conditional
Commitment and attached additional conditions dated February 12, 2008.

 

Sent
via facsimile to LPAS in the National Office on February 4, 2008. The loan
was approved on February 4, 2008. The obligation date is February 12,
2008.

 

38.           I HEREBY CERTIFY that all
determinations and certifications required by the respective United States
Department of Agriculture (USDA) Agency regulations prerequisite to providing
assistance of the type indicated above have been made and that evidence thereof
is in the docket, and that all requirements of pertinent regulations have been
complied with. I hereby approve the above-described assistance in the amount
set forth above, subject to the availability of funds, and subject to conditions
prescribed by Agency regulations applicable to this type of assistance.

 

I
further certify that USDA has complied with the applicable provisions of Title
XI, Public Law 95-630, seeking financial information regarding the applicant.

 

	
   

  	
  /s/
  Lorraine P. Shin

  
	
   

  	
  LORRAINE
  P. SHIN

  
	
   

  	
  (Signature of Approval Official)

  
	
   

  	
   

  
	
   

  	
  State
  Director, Acting on Behalf of

  
	
   

  	
  Rural
  Business-Cooperative Service

  

 

	
  Date
  Approved 

  	
  02-04-2008

  	
   

  	
  Title:

  	
   

  

 

39.           TO THE APPLICANT/LENDER: As of this
date 2/12/08, this is notice that your application for the above loan
guarantee/Interest Assistance from USDA has been approved, as indicated above,
subject to the availability of funds and other conditions required by the
respective USDA Agency. If you have any questions contact the Approval Official.

 

4

 

ATTACHMENT TO CONDITIONAL COMMITMENT FOR GUARANTEE

CYANOTECH CORPORATION

ADDITIONAL CONDITIONS AND REQUIREMENTS

 

No provision stated herein shall be amended or waived without
the prior written consent of the lender and USDA Rural Development. Any loans
or advances made to the Borrower by the lender after issuance of the Loan Note
Guarantee will not be covered by the guarantee, except authorized protective
advances. Regulations contained in RD Instructions 4279-A and 4279-B, 4287-B,
and Form 4279-4, “Lender’s Agreement,” will apply.

 

1.                                      GUARANTEED LOAN FUNDS

 

The
guaranteed loan is not to exceed $1,078,400 and
is to be guaranteed at the rate of eighty
percent (80%) of the principal and interest of any loss that might
occur.

 

The
lender is required to hold in its own portfolio or retain a minimum of five percent (5%) of the total guaranteed
loan amount. The amount required to be retained must be of the unguaranteed
portion of the loan and cannot be participated to another. The lender may sell
the remaining amount of the unguaranteed portion of the loan only through
participation. No part of the guaranteed or unguaranteed loan can be sold to
the applicant or anyone having an interest in the applicant.

 

2.                                      REPAYMENT TERMS

 

The
guaranteed loan is for a term of seven (7) years on $1,078,400
to be paid monthly, with interest
rate not to exceed one point
over the prime rate. The interest rate
cannot be changed more often than quarterly, and
must rise and fall with the selected base rate. The lender must incorporate
within the variable rate Promissory Note at loan closing, the provision for
adjustment of payment installments coincident with an interest rate adjustment.
No increases in interest rates will be permitted except the normal fluctuations
in approved variable interest rates unless a temporary interest-rate reduction
occurred. The loan is to be fully amortized with monthly installments and no balloon
payments. No Loan Note Guarantee will be issued on any loan that prohibits the
borrower from prepaying the loan. Reasonable prepayment penalties are
permissible.

 

The
Promissory Note may not contain any default interest rate exceeding the note
rate. Any Promissory Note provision calling for interest on interest, including
default provision, will void the guarantee.

 

The
Promissory Note may contain a late payment charge; but in the case of default,
such late charges will not be covered under the Loan Note Guarantee.

 

3.                                      USE OF LOAN FUNDS

 

A.                                   All guaranteed loan funds are to be utilized
in connection with the borrower’s facilities located at Kailua-Kona, Hawaii more particularly
described as:

 

Hawaii Ocean Science and Technology Park at Keahole
Point 

73-4460 Queen Kaahumanu Hwy., Ste. 102

 

5

 

B.                                     The lender will furnish Rural Development a
certified disbursement statement at loan closing showing the disbursement of
all loan funds. The disbursement will be for:

 

	
  Working Capital

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  Loan Fees

  	
   

  	
  78,400

  	
   

  
	
  TOTAL

  	
   

  	
  $

  	
  1,078,400

  	
   

  

 

C.                                     The lender is prohibited from disbursing any
of the loan funds under this guarantee to the owner(s), partners, stockholders
or beneficiaries of the applicant or members of their families when such
persons will retain any portion of their equity in the business.

 

4.             SECURITY

 

A.                                   The loan will be secured by the following
collateral:

 

	
  Collateral

  	
   

  	
  Lien Position

  
	
   

  	
   

  	
   

  
	
  Leasehold improvements on real estate located at
  Kailua-Kona, North Kona District, Island, County And State of Hawaii Further
  described as TMK (3) 7-3-43:42

  	
   

  	
  2nd

  
	
   

  	
   

  	
   

  
	
  Business assets including machinery and equipment,
  inventory, furniture and fixtures, accounts receivable

  	
   

  	
  2nd

  

 

B.                                     All future purchases made by the borrower at
these facilities will also secure the guaranteed loan. Therefore, the
mortgage(s) must contain an after-acquired clause.

 

C.                                     The entire loan will be secured by the same
security with equal lien priority for the guaranteed and unguaranteed portions
of the loan. The unguaranteed portion of the loan will neither be paid first
nor given any preference or priority over the guaranteed portion.

 

D.                                    The lender must assure that the owners have
good and marketable title to all of the above required security in connection
with this loan and that they enjoy peaceful and undisturbed possession of
security.

 

E.                                      The lender will ensure that security
instruments are recorded in the appropriate County and/or State where any piece
of collateral is located and that liens are perfected on each and every piece
of collateral.

 

F.                                      The lender is prohibited from requiring
compensating balances or other collateral as a means of eliminating the
lender’s exposure for the unguaranteed portion of the loan.

 

G.                                     The real property is defined in appraisals
prepared by Lesher Chee Stadlbauer, Inc., dated October 12, 2007.

 

H.                                    The lender is to obtain confirmation that the
sublessee’s interest under the sublease which is taken as collateral for the
loan is assignable in the event
of foreclosure. The term of the borrower’s leasehold interest must exceed the
term of the guaranteed loan.

 

5.                                      INSURANCE

 

A.                                   During the life of the loan, the lender will
require the borrower to maintain fire and hazard insurance with a standard
mortgage clause naming the lender as loss payee in an amount that is at least
the greater of the depreciated replacement value of the property being insured
or the amount of the loan. A fidelity bond is to be provided for the positions
of officials who have access to the funds of the borrower equal to the maximum
funds on hand at any time.

 

6

 

B.                                     Worker’s compensation insurance as required
in accordance with State Law.

 

6.                                      EQUITY

 

A
minimum of ten percent (10%) tangible
balance sheet equity will be required at loan closing. Tangible balance sheet
equity will be determined in accordance with Generally Accepted Accounting
Principles and will not include subordinated debt or appraisal surplus. Prior
to issuance of the Loan Note Guarantee, the lender will provide Rural
Development with a pro forma balance sheet, reflecting new debt. The lender
must certify that the equity requirement was determined using balance sheets
prepared in accordance with GAAP and met upon giving effect to the entirety of
the loan in the calculation, whether or not the loan itself is fully advanced,
as of the date the guaranteed loan is closed. This certification will include,
among other things, a breakdown of the sources which constitute this equity.

 

7.                                      EQUAL CREDIT OPPORTUNITY

 

Rural
Development’s Equal Opportunity and Non-Discrimination requirements must be
met.

 

8.                                      FLOOD PLAIN DETERMINATION
AND ENVIRONMENTAL REQUIREMENTS

 

The
Lender must certify that the project is not located within a special flood
hazard area. The enclosed FEMA Form 81-93, “Standard Flood Hazard Determination,”
is to be submitted to evidence compliance with this condition item. If the
project is in a flood hazard area, maximum flood insurance will be obtained and
evidence thereof must be provided.

 

The
lender must determine prior to loan closing that the borrower is currently
meeting safety and environmental regulations.

 

9.                                      11.                               OTHER CERTIFICATIONS

 

The lender will certify to Rural Development that all
regulatory approvals (federal, state and local) relative to the operation of
the facility have been obtained and are in proper order.

 

10.                               LENDER’S LOAN AGREEMENT WITH
BORROWER

 

In
addition to such requirements as the lender may wish to include, the Loan
Agreement between the lender and the borrower must include Rural Development’s
requirements as set forth in this Conditional Commitment for Guarantee, which
relates to the requirements of the borrower, plus the following:

 

A.                                   Borrower will furnish the lender:

 

1.                                       At the close of its fiscal year, an audited financial
report of their affairs prepared by an independent certified public accountant
prepared in accordance with Generally Accepted Accounting Principles, which
report shall contain among other matters, a balance sheet as of the end of the
fiscal year, a profit and loss statement showing the result of operations for
the fiscal year, a reconciliation of surplus, and the auditor’s notes.

 

7

 

The
lender must submit annual financial statements to the Agency within 120 days of
the end of the borrower’s fiscal year. The lender must analyze the financial
statements and provide the Agency with a written summary of its analysis and
conclusions, including trends, strengths, weaknesses, extraordinary
transactions, and other indications of the financial condition to the borrower.
Spreadsheets of the new financial statements must be included. Any adverse
action should be reported to Rural Development immediately.

 

2.                                       Promptly from time to time on request, such
other information concerning the business, conditions and affairs of the
corporation as the lender shall reasonably request.

 

B.                                     By signing this Loan Agreement, the borrower
certifies that there are no actions, suits, or proceedings pending or to the
knowledge of the principals or officers of the borrower threatened against the
borrower at law or in equity (whether or not reportedly on behalf of the
borrower) before or by a federal, state or municipal or other governmental
department, commission, board, bureau, agency, or instrumentality which may
result in any adverse change in business, operations, properties, or assets, or
in the conditions, finances, or otherwise of the borrower.

 

C.                                     Borrower will conduct and carry on its
business in substantially the same field of activity as has been originally
planned and as documented in the loan application.

 

D.                                    The borrower will permit the lender’s
representatives at any reasonable time and from time to time, to visit and
inspect any of the properties, to examine its books and records, and to make
extraction’s therefrom.

 

E.                                      The borrower shall not expend in excess of $500,000 for capital improvements during
any fiscal year without prior approval of the lender and Rural Development.
This restriction is not intended to apply in cases where machinery and/or
equipment are being replaced due to depreciation and/or obsolescence.

 

F.                                      Loans from stockholders, owners, officers, or
affiliates will be subordinated to the guaranteed loan or converted to stock.
The borrower shall, during the life of the guaranteed loan, refrain from declaring
cash dividends or bonuses to officers or owners, unless after tax profit was
made in the preceding fiscal year, all of the borrower’s debts are paid to
current status, and prior written approval of the lender is obtained. Borrower
will not make loans to the officers and owners without concurrence from lender.

 

G.                                     Salaries and compensations of officers and
owners will not be increased unless an after tax profit was made in the
preceding fiscal year, all of the borrower’s debts are paid to current status,
and prior written approval of the lender is obtained.

 

H.                                    A specific section detailing payment and
amortization of the loan will be a part of the loan agreement.

 

I.                                         The borrower will refrain from co-signing or
endorsing liabilities or obligations or indebtedness of other persons or
entities during the life of this loan. Also, its principals will refrain from
co-signing or endorsing any liability or obligation which will substantially
weaken their financial condition. Under no circumstances will they obligate
themselves without approval of the lender for contingent liabilities in excess
of $100,000 outside the normal
course of business.

 

J.                                        Borrower’s debt-to-tangible net worth, based
upon year-end financial statements and as defined by Generally Accepted
Accounting Principles (GAAP), shall not exceed 1.30 to 1, and
the borrower’s current ratio, similarly defined, shall maintain a minimum of 1.30 to 1
Tangible balance sheet equity will be determined in accordance with
GAAP and therefore, will not include subordinated debt, appraisal surplus, or
other intangibles.

 

8

 

K.                                    The borrower shall not directly or indirectly
purchase or acquire any stock or other securities, or make any other investment
in any corporation, association, partnership, organization, or individual,
except as may be approved by the lender.

 

L.                                      During the life of the guaranteed loan, the
project will not derive more than 10 percent of its annual gross revenue from
gambling activity in accordance with RD Instruction 4279-B, section
4279.114(h).

 

11.                               CHANGE OF OWNERSHIP

 

Any
change in ownership of the borrower, subsequent to the date of this Conditional
Commitment, must be concurred in by the lender.

 

12.                               CURRENT FINANCIAL STATEMENTS

 

If,
by the time of loan closing, the borrower’s financial statements are more than
90 days old, the lender must obtain current statements. The statements will be
provided to Rural Development along with the lender analysis.

 

13.                               LENDER’S CERTIFICATION

 

“Bridgeview Capital Solutions, LLC certifies that by accepting this Conditional
Commitment for a guarantee of a $1,078,400 loan,
the lender understands that the intent is that no adverse change may occur
during the period of time from Rural Development’s issuance of the Conditional
Commitment to issuance of the Loan Note Guarantee relating to Cyanotech Corporation regardless of the
cause or causes of the change and whether the change or cause(s) of the
change were within the lender’s or borrower’s control.” Prior to each
disbursement, lender shall be in receipt of satisfactory evidence that there
has been no unremedied adverse change in the financial or any other condition
of the borrower since the date of the application or since any preceding
disbursements which would warrant withholding or not making further
disbursements.

 

14.                               DEBT COLLECTION IMPROVEMENT
ACT

 

By
accepting this Form 4279-3, Conditional Commitment, Cyanotech Corporation certifies that it is
not delinquent on any Federal debt.

 

15.                               REPORTING REQUIREMENTS

 

	
  A.

  	
   

  	
  Prior
  to issuance of Loan Note Guarantee, the lender must determine that the
  applicant has filed all required tax reports and returns and is current on
  all tax liabilities. The lender will furnish Rural Development a statement to
  this effect.

  
	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  The
  borrower will submit a report to the lender and Rural Development annually as
  of December 31 indicating the total number of employees as of that date.
  The report will be broken down to show permanent employees, part-time
  employees, and seasonal employees.

  
	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  The
  lender will submit to Rural Development Form RD 1980-41, Guaranteed Loan
  Status Report, semi-annually, no later than January 31 and July 31.

  

 

9

 

16.                               GUARANTEE FEES

 

A.                                   Initial Guarantee Fee – The initial fee of 2%
is paid at the time the Loan Note guarantee is issued. The fee will be the rate
multiplied by the principal loan amount, multiplied by the percent of
guarantee.

 

B.                                     Annual Renewal Fee - The annual renewal fee
is paid once a year and is required to maintain the enforceability of the
guarantee as to the lender.

 

The
rate of the annual renewal fee is one-quarter
of 1 percent, multiplied by the outstanding principal loan balance
as of December 31 of each year, multiplied by the percent of guarantee.
This rate will remain in effect for the life of the loan.

 

Annual
renewal fees are due on January 31. Payments not received by April 1
are considered delinquent and, at the Agency’s discretion, may result in
cancellation of the guarantee to the lender. For loans where the Loan Note
Guarantee is issued between October 1 and December 31, the first
annual renewal fee payment will be due January 31 of the second year
following the date the Loan Note Guarantee was issued.

 

17.                               LOAN CLOSING REQUIREMENTS

 

The
following are to be supplied to Rural Development no later than the date of the
Loan Note Guarantee:

 

A.                                   A guarantee fee of $17,254.40 made payable to USDA Rural Development.

 

B.                                     Form RD 1980-19, Guaranteed Loan Closing
Report.

 

C.                                     This guarantee will be governed by the
executed Form RD 4279-4 (Rev. 11-06), Lender’s Agreement.

 

D.                                    Copy of promissory note, term loan agreement,
recorded loan security documents, personal guarantee(s), executed lease, and
lender’s statement of closing.

 

E.                                      The business must have a tangible balance
sheet equity position of no less than ten
percent (10%) at the time the Loan Note Guarantee is issued. Lender
must certify that the equity requirement was determined using current balance
sheets (not more than 90 days old) prepared in accordance with Generally
Accepted Accounting Principles. The balance sheet must reflect the post-loan
closing status of the business.

 

F.                                      FEMA Form 81-93, “Standard Flood Hazard
Determination.”

 

G.                                     Other documents as deemed necessary by Rural
Development.

 

18.                               LENDER’S AGREEMENT

 

Bridgeview Capital Solutions, LLC must execute Form RD 4279-4 (Rev.
11-06), “Lender’s Agreement prior to issuance of the Loan Note Guarantee. This
form sets forth the lender’s loan responsibilities when obtaining the Loan Note
Guarantee.

 

Agency
personnel and any person(s) accompanying Agency personnel shall be
authorized to enter upon the premises and into any building thereon, whether
permanent or temporary, jointly or separately, with personnel of the lender to
carry out the functions involving their interests. Scheduled and unscheduled
inspections may be conducted by these personnel to determine the effectiveness
of the loan program.

 

10

 

The
lender will always retain the responsibility for loan servicing and for
notifying the Agency of any violations of the terms of the Loan Agreement or
Conditional Commitment. Agency regulations require the lender to provide a loan
classification, with justification, for each loan. Whenever there is a change
in the loan that would impact the original classification, a revised
classification will be completed and sent to the Agency. The lender will
arrange with the borrower and the Agency for a visit during the first year and,
at a minimum, every three years thereafter. Lender visits will be conducted by
the Agency at least annually.

 

19.                               TIME FRAMES

 

Failure to take action on this Commitment within sixty (60)
days from the date of signature shown on Page 1 shall void this Commitment
in its entirety. Requested
changes or requests for closing and the issuing of the Loan Note Guarantee
shall be presented to Rural Development in writing at least thirty (30) days
prior to the date of action desired by the lender and borrower.

 

END OF EXHIBIT D

 

11

 

EXHIBIT E

 

TERM NOTE

 

	
  $1,078,400.00

  	
   

  	
  DATE:
  February 20, 2008

  
	
  USDA
  Loan Identification Number: 61-005-91120626 

  	
   

  	
   

  
	
  Lender’s
  Identifying Number: 10000243

  	
   

  	
   

  

 

FOR VALUE RECEIVED, the
undersigned CYANOTECH CORPORATION, a
Nevada corporation (hereinafter referred to as “Maker”), promises to pay to the
order of BRIDGEVIEW
CAPITAL SOLUTIONS, L.L.C., a
Delaware limited liability company (hereinafter referred to as “Payee”; Payee,
and subsequent holder(s) hereof, being hereinafter referred to
collectively as “Lender”), at the office of Payee at 5881 Glenridge Drive NE,
Suite 130, Atlanta, Georgia 30328, or at such other place as Lender may
designate to Maker in writing from time to time, the principal sum of ONE MILLION SEVENTY-EIGHT
THOUSAND FOUR HUNDRED AND 00/100 DOLLARS ($1,078,400.00), or so much thereof as may be hereinafter
disbursed hereunder, together with interest thereon, or on so much thereof as
is from time to time outstanding and unpaid, from the date of each advance of
principal, at the rates hereinafter set forth, in lawful money of the United
States of America, which shall at the time of payment be legal tender in
payment of all debts and dues, public and private, such principal and interest
to be paid in the following manner, to wit:

 

The initial interest rate on
this Note shall be Seven Percent (7.00%). Thereafter, the interest rate (the
“Interest Rate”) shall mean the floating and fluctuating rate per annum equal
to the rate of interest published as the prime interest rate in the Wall Street Journal (the “Prime Rate”) plus one percentage point
(1.00%). The Prime Rate in effect as of the close of business on the first of
each quarter (January 1, April 1, July 1, and October 1)
shall be the applicable Prime Rate for that quarter in determining the applicable
Interest Rate. If the Prime Rate is discontinued as a standard or becomes
unascertainable, Lender shall designate in writing to Maker a comparable
reference rate.

 

Interest shall be calculated
on the basis of 360 days per year for the actual number of days elapsed.

 

Commencing on the first (1st)
day of April, 2008, and continuing on the first (1st) day of each month thereafter, payments of
principal and interest shall be due and payable monthly, on the basis of an
eighty-four (84) month amortization period through and including the first (1st)
day of March, 2015 (each a “Payment”, and collectively the “Payments”). Any
change in the Interest Rate, as provided for above, shall result in an
adjustment to the amount of the Payment. The adjusted Payment amount shall be
calculated utilizing the Interest Rate and outstanding principal balance at the
time of calculation as well as the remaining number of months in the
amortization period. In any event, the entire outstanding principal balance
hereof, together with all accrued but unpaid interest thereon, shall be due and
payable in full on or before the first (1st) day of March, 2015.

 

All payments hereunder shall
be first applied to interest, then charges, and the balance to principal.

 

1

 

The indebtedness evidenced
by this Note and the obligations created hereby are secured by, among other
matters, that certain Real Property Mortgage; Security Agreement; Assignment of
Rents; and Financing Statement covering that certain leasehold real property
located in North Kona, County of Hawaii, State of Hawaii, as more particularly
described therein, the other Security Instruments, as such term is defined in
that certain Term Loan Agreement (the “Loan Agreement”) between Maker and
Lender of even date herewith (together with all other documents evidencing or
securing or in any way relating to the indebtedness evidenced hereby or any
guaranty given in connection with this Note, herein referred to collectively as
the “Loan Documents”) entered into this day between Maker and Lender; some of
which Loan Documents are to be filed for record on or about the date hereof in
the appropriate public records.

 

It is hereby expressly
agreed that should any default be made in the payment of principal or interest
as stipulated above, or should any default be made in the performance of any of
the covenants or conditions contained in the Loan Documents, or any of them,
then, and in such event, the principal indebtedness evidenced hereby, and any
other sums advanced hereunder or under the Loan Documents, or any of them,
together with all unpaid interest accrued thereon, shall, at the option of
Lender without notice to Maker, at once become due and payable and may be
collected forthwith, regardless of the stipulated date of maturity. Failure to
exercise the above options shall not constitute a waiver of the right to
exercise the same in the event of any subsequent Event of Default. All such
interest shall be paid at the time of and as a condition precedent to the
curing of any such default should Lender, at its sole option, allow such
default to be cured. Time is of the essence of this Note. In the event this
Note, or any part hereof, is collected by or through an attorney-at-law, Maker
agrees to pay all costs of collection including, but not limited to, reasonable
attorneys’ fees.

 

In the event that Maker
shall fail to pay within ten (10) days after the date on which the same
shall be due any payment of principal or interest which shall be due and payable
pursuant to this Note, Maker shall pay a late charge of five percent (5%) of
the Payment which Maker shall have failed to pay on the date same was due. Such
late charge shall help to defray the added expense that shall be incurred by
Lender in handling any such delinquent Payment.

 

If an Event of Default shall
occur hereunder as defined in the Loan Documents, then at the option of Lender,
the entire principal sum then remaining unpaid and accrued interest thereon
shall immediately become due and payable without notice or demand, or in the
case of certain Events of Default set forth in the Loan Documents, the entire
principal sum and interest accrued thereon shall become automatically due and
payable. Failure to exercise the above options shall not constitute a waiver of
the right to exercise the same in the event of any subsequent Event of Default.

 

All parties liable for the
payment of this Note agree to pay Lender reasonable attorneys’ fees and costs,
whether or not an action be brought, for the services of counsel employed after
maturity or default to collect this Note or any principal or interest due
hereunder, or to protect the security, if any, or enforce the performance of
any other agreement contained in this Note or in any instrument of security
executed in connection with this loan, including costs and attorneys’ fees on
any appeal, or in any proceedings under the United States Bankruptcy Code or in
any post judgment proceedings. All parties liable for the payment of this Note
agree to pay Lender hereof reasonable attorneys’ fees for the services of
counsel employed to collect this Note, whether or not suit be

 

2

 

brought,
and to indemnify and hold Lender harmless against liability for the payment of
state intangible, documentary and recording taxes, and other taxes (including
interest and penalties, if any) which may be determined to be payable with
respect to this Term Note and related transaction.

 

In no event shall the amount
of interest due or payable hereunder exceed the maximum rate of interest
allowed by applicable law, and in the event any such payment is inadvertently
paid by Maker or inadvertently received by Lender, then such excess sum shall
be credited as a payment of principal, unless Maker shall notify Lender, in
writing, that Maker elects to have such excess sum returned to it forthwith. It
is the express intent hereof that Maker not pay and Lender not receive,
directly or indirectly, in any manner whatsoever, interest in excess of that
which may be lawfully paid by Maker under applicable law.

 

The principal balance of
this Note may be prepaid in whole or in part at any time provided that in each
instance (a) Maker shall give at least thirty (30) days’ prior written
notice of such prepayment to Lender and (b) Maker shall pay to Lender,
contemporaneously with such prepayment, only if such prepayment equals or
exceeds five percent (5%) of the monthly payment amount of the Note at the time
of prepayment (Maker acknowledges that Maker can make only one
(1) prepayment in any one (1) calendar year), a prepayment premium in
an amount equal to five percent (5%) of the outstanding principal balance
amount of the Note at the time of prepayment, if prepaid during the first (1st)
year of the Note; Maker shall pay to Lender, contemporaneously with such
prepayment, a prepayment premium in an amount equal to four percent (4%) of the
outstanding principal balance amount of the Note at the time of prepayment, if
prepaid during the second (2nd) year of the Note; Maker shall pay to
Lender, contemporaneously with such prepayment, a prepayment premium in an
amount equal to three percent (3%) of the outstanding principal balance amount
of the Note at the time of prepayment, if prepaid during the third (3rd)
year of the Note; Maker shall pay to Lender, contemporaneously with such
prepayment, a prepayment premium in an amount equal to two percent (2%) of the outstanding principal balance amount of the Note at the time of
prepayment, if prepaid during the fourth (4th) year of the Note;
Maker shall pay to Lender, contemporaneously with such prepayment, a prepayment
premium in an amount equal to one percent (1%) of the outstanding principal
balance amount of the Note at the time of prepayment, if prepaid during the fifth
(5th) year of the Note; and (c) no prepayment penalty is due
for the balance of the term of the Note; provided, however, there shall be  no
prepayment penalty during the first five (5) years of the Term Note in the
event a prepayment equal to or in excess of five percent (5%) of the monthly
payment is made from insurance proceeds paid in connection with a casualty
loss.

 

Maker acknowledges that the
prepayment premium described herein is consideration to Lender for the
privilege of prepaying the indebtedness evidenced by the Note prior to
maturity, and Maker recognizes that Lender would incur substantial additional
costs and expenses in the event of a prepayment of the indebtedness evidenced
by the Note and that the prepayment premium is reasonable and compensates
Lender for such costs and expenses (including without limitation, the loss of
Lender’s investment opportunity during the period from the date of prepayment
until the Maturity Date). Maker agrees that Lender shall not, as a condition to
receiving the prepayment premium, be obligated to actually reinvest the amount
prepaid in any manner whatsoever.

 

3

 

Should Maker elect to
refinance this loan, Lender shall have the first right of refusal to match any refinancing
proposals. In the event that Lender elects to do so, Lender shall waive the
applicable prepayment premium.

 

Presentment for payment,
demand, protest and notice of demand, protest and non-payment and all other
notices are hereby waived by Maker except as provided herein or in the Loan
Documents. No failure to accelerate the debt evidenced hereby by reason of
default hereunder, acceptance of a past due installment, or indulgences granted
from time to time shall be construed (i) as a novation of this Note or as
a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or
of the right of Lender hereafter to insist upon strict compliance with the
terms of this Note, or (ii) to prevent the exercise of such right of
acceleration or any other right granted hereunder or by the laws of the State
of Hawaii; and Maker hereby expressly waives the benefit of any statute or
rule of law or equity now provided, or which may hereafter be provided,
which would produce a result contrary to or in conflict with the foregoing. No
extension of the time for the payment of this Note or any installment due
hereunder, made by agreement with any person now or hereafter
liable for the payment of this Note shall operate to release, discharge,
modify, change or affect the original liability of Maker under this Note,
either in whole or in part, unless Lender agrees otherwise in writing. This
Note may not be changed orally, but only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.

 

Maker hereby waives and
renounces for itself, its heirs, successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption, appraisement,
exemption and homestead now provided, or which may hereafter be provided by the
Constitution and laws of the United States of America and of any state thereof,
both as to itself and in and to all of its property, real and personal, against
the enforcement and collection of the obligations evidenced by this Note. Maker
hereby transfers, conveys and assigns to Lender a sufficient amount of property
or money set apart as exempt to pay the indebtedness evidenced hereby, or any
renewal thereof, and does hereby appoint Lender the attorney-in-fact for Maker
to claim any and all homestead exemptions allowed by law.

 

If from any circumstances
whatsoever, fulfillment of any provision of this Note or of any other
instrument evidencing or securing the indebtedness evidenced hereby, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity presently prescribed by any applicable usury statute or any
other applicable law, with regard to obligations of like character and amount,
then, the obligation to be fulfilled shall be reduced to the limit of such
validity, so that in no event shall any exaction be possible under this Note or
under any other instrument evidencing or securing the indebtedness evidenced
hereby, that is in excess of the current limit of such validity, but such
obligation shall be fulfilled to the limit of such validity.

 

Any and all notices,
elections, demands, requests and responses thereto permitted or required to be
given under this Note shall be in writing, signed by or on behalf of the party
giving the same, and shall be deemed to have been properly given and shall be
effective upon being personally delivered, or upon being deposited in the
United States mail, postage prepaid, certified with return receipt requested
(the delivery date being the date of the confirmed return receipt requested),
or upon being deposited with an overnight commercial delivery service requiring
proof of delivery, or by telecopier to the other party or parties at the
address as the case may be of such

 

4

 

other
party or parties set forth below or at such other address within the United
States as such other party or parties may designate by notice specifically
designated as a notice of change of address and given in accordance herewith;
provided, however, that the period in which a response to any such notice,
election, demand or request must be given shall commence on the date of receipt
thereof; and provided further that no notice of change of address shall be
effective until the date of receipt thereof. Personal delivery to a party or to
any officer, partner, agent or employee of such party at said address shall
constitute receipt. Rejection or other refusal to accept or inability to
deliver because of changed address of which no notice has been received shall
also constitute receipt. All notices, requests, demands or documents that are
required or permitted to be given or served hereunder shall be addressed as
follows:

 

	
  If
  to Lender:

  	
   

  	
  BRIDGEVIEW
  CAPITAL SOLUTIONS, L.L.C.

  
	
   

  	
   

  	
  5881
  Glenridge Drive NE, Suite 130

  
	
   

  	
   

  	
  Atlanta,
  Georgia 30328

  
	
   

  	
   

  	
  Attn:
  John Seimetz

  
	
   

  	
   

  	
  Telephone:
  (404) 267-1177

  
	
   

  	
   

  	
  Telecopier:
  (404) 267-1040

  
	
   

  	
   

  	
   

  
	
  with
  a copy to:

  	
   

  	
  YAMAMOTO &
  SETTLE

  
	
   

  	
   

  	
  A
  Limited Liability Law Company

  
	
   

  	
   

  	
  700
  Bishop Street, Suite 200 

  
	
   

  	
   

  	
  Honolulu,
  Hawaii 96813

  
	
   

  	
   

  	
  Attn:
  Dean T. Yamamoto, Esq.

  
	
   

  	
   

  	
   

  	
  Marie
  L. Misawa, Esq.

  
	
   

  	
   

  	
  Telephone:
  (808) 526-4730

  
	
   

  	
   

  	
  Telecopier:
  (808) 526-4735

  
	
   

  	
   

  	
   

  
	
  If
  to Maker:

  	
   

  	
  CYANOTECH
  CORPORATION

  
	
   

  	
   

  	
  73-4460
  Queen Kaahumanu Highway, # 102

  
	
   

  	
   

  	
  Kailua-Kona,
  Hawaii 96740

  
	
   

  	
   

  	
  Attn:
  William R. Maris

  
	
   

  	
   

  	
  Telephone:
  (808) 326-1353

  
	
   

  	
   

  	
  Telecopier:
  (808) 334-9484

  
	
   

  	
   

  	
   

  
	
  with
  a copy to:

  	
   

  	
  GOODSILL
  ANDERSON QUINN & STIFEL

  
	
   

  	
   

  	
  Alii
  Place, Suite 1800

  
	
   

  	
   

  	
  1099
  Alakea Street

  
	
   

  	
   

  	
  Honolulu,
  Hawaii 96813

  
	
   

  	
   

  	
  Attn:
  Laurence E. Gay, Esq.

  
	
   

  	
   

  	
   

  	
  Harold
  Gregory Nasky, Esq.

  
	
   

  	
   

  	
  Telephone:
  (808) 547-5641

  
	
   

  	
   

  	
  Telecopier:
  (808) 547-5880

  

 

Either party may change its
address to another single address by notice given as herein provided, except
any change of address notice must be actually received in order to be
effective.

 

5

 

This Note is intended as a
contract under and shall be construed and enforceable in accordance with the
laws of the State of Hawaii.

 

As used herein, the terms
“Maker” and “Lender” shall be deemed to include their respective heirs,
successors, legal representatives and assigns, whether by voluntary action of
the parties or by operation of law. In the event that more than one person,
firm or entity is a Maker hereunder, then all references to “Maker” shall be
deemed to refer equally to each of said persons, firms, or entities, all of
whom shall be jointly and severally liable for all of the obligations of Maker
hereunder.

 

Maker and Lender entered
into the Loan Agreement. Capitalized terms not otherwise defined herein have
the meanings provided in the Loan Agreement.

 

Maker acknowledges and
agrees that Lender may assign this Note or any portion thereof to a third
party, who will become a holder of the Note.

 

Maker acknowledges that
nonpayment of any monthly payment when due and nonpayment at maturity (whether
or not resulting from acceleration due to an event of default under the Loan
Documents) will result in damages to Lender by reason of the additional
expenses incurred in servicing the indebtedness evidenced by this Note and by
reason of the loss to Lender of the use of the money due and frustration to
Lender in meeting its other commitments. Maker also acknowledges and agrees
that the occurrence of any other event of default under the Loan Documents will
result in damages to Lender by reason of the detriment caused thereby. Maker
further acknowledges that it is and will be extremely difficult and impracticable
to ascertain the extent of such damages caused by nonpayment of any sums when
due or resulting from any other event of default under the Loan Documents.
Maker by its execution and delivery hereof and Lender hereof by the acceptance
of this Note agree that a reasonable estimate of such damages must be based in
part upon the duration of the default and that the late charge specified above
with respect to delinquent payments and the rate of interest prescribed above
with respect to the amount due and payable after maturity or acceleration would
not unreasonably compensate Lender for such damages.

 

[remainder of page intentionally left blank]

 

6

 

IN WITNESS WHEREOF, Maker intending to be legally bound, has caused
this Note to be executed by its duly authorized officers, as of the date first
above written.

 

 

	
  MAKER:

  	
  CYANOTECH CORPORATION, a Nevada

  
	
   

  	
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ Gerald R. Cysewski

  
	
   

  	
   

  	
  GERALD R. CYSEWSKI

  
	
   

  	
   

  	
  Its President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ William R. Maris

  
	
   

  	
   

  	
  WILLIAM R. MARIS

  
	
   

  	
   

  	
  Its Secretary

  

 

END OF EXHIBIT E

 

7

 

EXHIBIT F

 

Cyanotech
2

 

	
  Compound
  Period

  	
  :
  

  	
  Exact
  Days

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Nominal
  Annual Rate

  	
  :
  

  	
   

  	
  7.000%

  
	
  Effective
  Annual Rate

  	
  :
  

  	
  Undefined

  	
   

  
	
  Periodic
  Rate

  	
  :
  

  	
   

  	
  0.0194%

  
	
  Daily
  Rate

  	
  :
  

  	
   

  	
  0.01944%

  
					

 

CASH
FLOW DATA

 

	
  Event

  	
   

  	
  Start Date

  	
   

  	
  Amount

  	
   

  	
  Number Period

  	
   

  	
  End Date

  
	
  1
  Loan

  	
   

  	
  03/01/2008

  	
   

  	
  1,078,400.00

  	
   

  	
  1

  	
   

  	
   

  
	
  2
  Payment

  	
   

  	
  04/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  84 Monthly

  	
   

  	
  03/01/2015

  

 

AMORTIZATION SCHEDULE - Normal Amortization,
360 Day Year

 

	
  Date

  	
   

  	
  Payment

  	
   

  	
  Interest

  	
   

  	
  Principal

  	
   

  	
  Balance

  	
   

  
	
  Loan 03/01/2008

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,078,400.00

  	
   

  
	
    1
  04/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  6,500.36

  	
   

  	
  9,831.35

  	
   

  	
  1,068,568.65

  	
   

  
	
    2
  05/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  6,233.32

  	
   

  	
  10,098.39

  	
   

  	
  1,058,470.26

  	
   

  
	
    3
  06/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  6,380.22

  	
   

  	
  9,951.49

  	
   

  	
  1,048,518.77

  	
   

  
	
    4
  07/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  6,116.36

  	
   

  	
  10,215.35

  	
   

  	
  1,038,303.42

  	
   

  
	
    5 08/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  6,258.66

  	
   

  	
  10,073.05

  	
   

  	
  1,028,230.37

  	
   

  
	
    6
  09/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  6,197.94

  	
   

  	
  10,133.77

  	
   

  	
  1,018,096.60

  	
   

  
	
    7
  10/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  5,938.90

  	
   

  	
  10,392.81

  	
   

  	
  1,007,703.79

  	
   

  
	
    8
  11/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  6,074.21

  	
   

  	
  10,257.50

  	
   

  	
  997,446.29

  	
   

  
	
    9
  12/01/2008

  	
   

  	
  16,331.71

  	
   

  	
  5,818.44

  	
   

  	
  10,513.27

  	
   

  	
  986,933.02

  	
   

  
	
  2008 Totals

  	
   

  	
  146,985.39

  	
   

  	
  55,518.41

  	
   

  	
  91,466.98

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10 01/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,949.01

  	
   

  	
  10,382.70

  	
   

  	
  976,550.32

  	
   

  
	
  11 02/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,886.43

  	
   

  	
  10,445.28

  	
   

  	
  966,105.04

  	
   

  
	
  12 03/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,259.91

  	
   

  	
  11,071.80

  	
   

  	
  955,033.24

  	
   

  
	
  13 04/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,756.73

  	
   

  	
  10,574.98

  	
   

  	
  944,458.26

  	
   

  
	
  14 05/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,509.34

  	
   

  	
  10,822.37

  	
   

  	
  933,635.89

  	
   

  
	
  15 06/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,627.75

  	
   

  	
  10,703.96

  	
   

  	
  922,931.93

  	
   

  
	
  16 07/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,383.77

  	
   

  	
  10,947.94

  	
   

  	
  911,983.99

  	
   

  
	
  17 08/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,497.24

  	
   

  	
  10,834.47

  	
   

  	
  901,149.52

  	
   

  
	
  18 09/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,431.93

  	
   

  	
  10,899.78

  	
   

  	
  890,249.74

  	
   

  
	
  19 10/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,193.12

  	
   

  	
  11,138.59

  	
   

  	
  879,111.15

  	
   

  
	
  20 11/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,299.09

  	
   

  	
  11,032.62

  	
   

  	
  868,078.53

  	
   

  
	
  21 12/01/2009

  	
   

  	
  16,331.71

  	
   

  	
  5,063.79

  	
   

  	
  11,267.92

  	
   

  	
  856,810.61

  	
   

  
	
  2009 Totals

  	
   

  	
  195,980.52

  	
   

  	
  65,858.11

  	
   

  	
  130,122.41

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22 01/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  5,164.66

  	
   

  	
  11,167.05

  	
   

  	
  845,643.56

  	
   

  
	
  23 02/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  5,097.35

  	
   

  	
  11,234.36

  	
   

  	
  834,409.20

  	
   

  
	
  24 03/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,542.89

  	
   

  	
  11,788.82

  	
   

  	
  822,620.38

  	
   

  
	
  25 04/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,958.57

  	
   

  	
  11,373.14

  	
   

  	
  811,247.24

  	
   

  
	
  26 05/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,732.28

  	
   

  	
  11,599.43

  	
   

  	
  799,647.81

  	
   

  
	
  27 06/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,820.10

  	
   

  	
  11,511.61

  	
   

  	
  788,136.20

  	
   

  
	
  28 07/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,597.46

  	
   

  	
  11,734.25

  	
   

  	
  776,401.95

  	
   

  
	
  29 08/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,679.98

  	
   

  	
  11,651.73

  	
   

  	
  764,750.22

  	
   

  

 

1

 

	
  Date

  	
   

  	
  Payment

  	
   

  	
  Interest

  	
   

  	
  Principal

  	
   

  	
  Balance

  	
   

  
	
  30 09/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,609.74

  	
   

  	
  11,721.97

  	
   

  	
  753,028.25

  	
   

  
	
  31 10/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,392.66

  	
   

  	
  11,939.05

  	
   

  	
  741,089.20

  	
   

  
	
  32 11/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,467.12

  	
   

  	
  11,864.59

  	
   

  	
  729,224.61

  	
   

  
	
  33 12/01/2010

  	
   

  	
  16,331.71

  	
   

  	
  4,253.81

  	
   

  	
  12,077.90

  	
   

  	
  717,146.71

  	
   

  
	
  2010 Totals

  	
   

  	
  195,980.52

  	
   

  	
  56,316.62

  	
   

  	
  139,663.90

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  34 01/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  4,322.80

  	
   

  	
  12,008.91

  	
   

  	
  705,137.80

  	
   

  
	
  35 02/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  4,250.41

  	
   

  	
  12,081.30

  	
   

  	
  693,056.50

  	
   

  
	
  36 03/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,773.31

  	
   

  	
  12,558.40

  	
   

  	
  680,498.10

  	
   

  
	
  37 04/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  4,101.89

  	
   

  	
  12,229.82

  	
   

  	
  668,268.28

  	
   

  
	
  38 05/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,898.23

  	
   

  	
  12,433.48

  	
   

  	
  655,834.80

  	
   

  
	
  39 06/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,953.23

  	
   

  	
  12,378.48

  	
   

  	
  643,456.32

  	
   

  
	
  40 07/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,753.50

  	
   

  	
  12,578.21

  	
   

  	
  630,878.11

  	
   

  
	
  41 08/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,802.79

  	
   

  	
  12,628.92

  	
   

  	
  618,349.19

  	
   

  
	
  42 09/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,727.27

  	
   

  	
  12,604.44

  	
   

  	
  605,744.75

  	
   

  
	
  43 10/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,533.51

  	
   

  	
  12,798.20

  	
   

  	
  592,946.55

  	
   

  
	
  44 11/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,574.15

  	
   

  	
  12,757.56

  	
   

  	
  580,188.99

  	
   

  
	
  45 12/01/2011

  	
   

  	
  16,331.71

  	
   

  	
  3,384.44

  	
   

  	
  12,947.27

  	
   

  	
  567,241.72

  	
   

  
	
  2011 Totals

  	
   

  	
  195,980.52

  	
   

  	
  46,075.53

  	
   

  	
  149,904.99

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  46 01/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  3,419.21

  	
   

  	
  12,912.50

  	
   

  	
  554,329.22

  	
   

  
	
  47 02/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  3,341.37

  	
   

  	
  12,990.34

  	
   

  	
  541,338.88

  	
   

  
	
  48 03/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  3,052.55

  	
   

  	
  13,279.16

  	
   

  	
  528,059.72

  	
   

  
	
  49 04/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  3,183.03

  	
   

  	
  13,148.68

  	
   

  	
  514,911.04

  	
   

  
	
  50 05/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  3,003.65

  	
   

  	
  13,328.06

  	
   

  	
  501,582.98

  	
   

  
	
  51 06/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  3,023.43

  	
   

  	
  13,308.28

  	
   

  	
  488,274.70

  	
   

  
	
  52 07/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  2,848.27

  	
   

  	
  13,483.44

  	
   

  	
  474,791.26

  	
   

  
	
  53 08/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  2,861.94

  	
   

  	
  13,469.77

  	
   

  	
  461,321.49

  	
   

  
	
  54 09/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  2,780.74

  	
   

  	
  13,550.97

  	
   

  	
  447,770.52

  	
   

  
	
  55 10/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  2,611.99

  	
   

  	
  13,719.72

  	
   

  	
  434,050.80

  	
   

  
	
  56 11/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  2,616.36

  	
   

  	
  13,715.35

  	
   

  	
  420,335.45

  	
   

  
	
  57 12/01/2012

  	
   

  	
  16,331.71

  	
   

  	
  2,451.96

  	
   

  	
  13,879.75

  	
   

  	
  406,455.70

  	
   

  
	
  2012 Totals

  	
   

  	
  195,980.52

  	
   

  	
  35,194.50

  	
   

  	
  160,786.02

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  58 01/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  2,450.02

  	
   

  	
  13,881.69

  	
   

  	
  392,574.01

  	
   

  
	
  59 02/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  2,366.35

  	
   

  	
  13,965.36

  	
   

  	
  378,608.65

  	
   

  
	
  60 03/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  2,061.31

  	
   

  	
  14,270.40

  	
   

  	
  364,338.25

  	
   

  
	
  61 04/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  2,196.15

  	
   

  	
  14,135.56

  	
   

  	
  350,202.69

  	
   

  
	
  62 05/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  2,042.85

  	
   

  	
  14,288.86

  	
   

  	
  335,913.83

  	
   

  
	
  63 06/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  2,024.81

  	
   

  	
  14,306.90

  	
   

  	
  321,606.93

  	
   

  
	
  64 07/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  1,876.04

  	
   

  	
  14,455.67

  	
   

  	
  307,151.26

  	
   

  
	
  65 08/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  1,851.44

  	
   

  	
  14,480.27

  	
   

  	
  292,670.99

  	
   

  
	
  66 09/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  1,764.16

  	
   

  	
  14,567.55

  	
   

  	
  278,103.44

  	
   

  
	
  67 10/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  1,622.27

  	
   

  	
  14,709.44

  	
   

  	
  263,394.00

  	
   

  
	
  68 11/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  1,587.68

  	
   

  	
  14,744.03

  	
   

  	
  248,649.97

  	
   

  
	
  69 12/01/2013

  	
   

  	
  16,331.71

  	
   

  	
  1,450.46

  	
   

  	
  14,881.25

  	
   

  	
  233,768.72

  	
   

  
	
  2013 Totals

  	
   

  	
  195,980.52

  	
   

  	
  23,293.54

  	
   

  	
  172,686.98

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  70 01/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  1,409.11

  	
   

  	
  14,922.60

  	
   

  	
  218,846.12

  	
   

  
	
  71 02/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  1,319.16

  	
   

  	
  15,012.55

  	
   

  	
  203,833.57

  	
   

  

 

2

 

	
  Date

  	
   

  	
  Payment

  	
   

  	
  Interest

  	
   

  	
  Principal

  	
   

  	
  Balance

  	
   

  
	
  72 03/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  1,109.76

  	
   

  	
  15,221.95

  	
   

  	
  188,611.62

  	
   

  
	
  73 04/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  1,136.91

  	
   

  	
  15,194.80

  	
   

  	
  173,416.82

  	
   

  
	
  74 05/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  1,011.60

  	
   

  	
  15,320.11

  	
   

  	
  158,096.71

  	
   

  
	
  75 06/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  952.97

  	
   

  	
  15,378.74

  	
   

  	
  142,717.97

  	
   

  
	
  76 07/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  832.52

  	
   

  	
  15,499.19

  	
   

  	
  127,218.78

  	
   

  
	
  77 08/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  766.85

  	
   

  	
  15,564.86

  	
   

  	
  111,653.92

  	
   

  
	
  78 09/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  673.03

  	
   

  	
  15,658.68

  	
   

  	
  95,995.24

  	
   

  
	
  79 10/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  559.97

  	
   

  	
  15,771.74

  	
   

  	
  80,223.50

  	
   

  
	
  80 11/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  483.57

  	
   

  	
  15,848.14

  	
   

  	
  64,375.36

  	
   

  
	
  81 12/01/2014

  	
   

  	
  16,331.71

  	
   

  	
  375.52

  	
   

  	
  15,956.19

  	
   

  	
  48,419.17

  	
   

  
	
  2014 Totals

  	
   

  	
  195,980.52

  	
   

  	
  10,630.97

  	
   

  	
  185,349.55

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  82 01/01/2015

  	
   

  	
  16,331.71

  	
   

  	
  291.86

  	
   

  	
  16,039.85

  	
   

  	
  32,379.32

  	
   

  
	
  83 02/01/2015

  	
   

  	
  16,331.71

  	
   

  	
  195.18

  	
   

  	
  16,136.53

  	
   

  	
  16,242.79

  	
   

  
	
  84 03/01/2015

  	
   

  	
  16,331.71

  	
   

  	
  88.92

  	
   

  	
  16,242.79

  	
   

  	
  0.00

  	
   

  
	
  2015 Totals

  	
   

  	
  48,995.13

  	
   

  	
  575.96

  	
   

  	
  48,419.17

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Grand Totals

  	
   

  	
  1,371,863.64

  	
   

  	
  293,463.64

  	
   

  	
  1,078,400.00

  	
   

  	
   

  	
   

  

 

Last
interest amount increased by 0.49 due to rounding.

 

END OF EXHIBIT F

 

3

 

EXHIBIT G

 

GOODSILL ANDERSON QUINN & STIFEL

 

A LIMITED LIABILITY LAW PARTNERSHIP LLP

 

ALII
PLACE, SUITE 1800 ·
1099 ALAKEA STREET

HONOLULU,
HAWAII 96813

 

MAIL
ADDRESS: P.O. Box 3196

HONOLULU,
HAWAII 96801

 

TELEPHONE
(808) 547-5600 ·
FAX (808) 547-5880

info@goodsill.com
· www.goodsill.com

 

CONRAD
M. WEISER

DAVID
J. REBER

JOHN
R. LACY

THOMAS
W. WILLIAMS, JR.

WILLIAM
S. MILLER

JACQUELINE
LS. EARLE

LANI
L. EWART

RANDALL
K. STEVERSON

PATRICIA
Y. LEE

GARY
M. SLOVIN

LISA
WOODS MUNGER

ERNEST
J. T. LOO

BRUCE
L. LAMON

PETER
T. KASHIWA

RUSSELL
S. KATO

LANT
A. JOHNSON

VINCENT
A. PIEKARSKI

LEIGHTON
J.H.S. YUEN

CORLIS
J. CHANG

BARBARA
A. PETRUS

PATRICIA
M. NAPIER

MIKI
OKUMURA

AUDREY
E.J. NG

ALAN
S. FUJIMOTO

WALTER
C. DAVISON

RAYMOND
K. OKADA

OAIL
O. AYABE

DALE
E. ZANE

LINDALEE
K. FARM

CAROL
A. EBLEN

KELLIE M.
N. SEKIYA

JUDY Y. LEE

LENNES
N. OMURO

PETER
Y. KIKUTA

THOMAS
BENEDICT

EDMUND
K. SAFFERY

LISA
A. BAIL

CAROLYN
K. GUGELYK

DONNA
H. KALAMA

JOACHIM
P. COX

SCOTT
G. MORITA

ROBERT
K. FRICKE

REGAN
M. IWAO

H.
GREGORY NASKY

CHRISTOPHER
O. PABLO

 

 

ANNE
T. HORIUCHI

LORI
M. HIRAOKA

DAWN
T. SUGIHARA

PAMELA
ANN FONG

LIANN
Y. EBESUGAWA

MIHOKO
E. ITO

ALICIA
G. HUFFMAN

JENNIFER
M. YOUNG

KIMBERLY
J. KOIDE

JONATHAN
E. SHARLOW

RONALD
H. W. LUM, JR.

SIEU
K. CHE

ROSEMARIE
S. J. SAM

SETH
K. WEAVER

DAMON
L. SCHMIDT

WILLIAM
K. TANAKA

NICOLAS
T. KELSEY

CLAIRE
E. GOLDBERG

REBECCA
L. DAYHUFF

 

 

COUNSEL:

E.
LAURENCE GAY

KAHBO
DYE. CHIEW

NATALIE
S. HIU

ROBERT
J. HACKMAN

 

 

OF
COUNSEL:

MARTIN
ANDERSON

GENRO
KASHIWA

RONALD
H. W. LUM

DAVID
J. DEZZANI

 

MARSHALL
M. GOODSILL

(1916-2004)

WILLIAM
F. QUINN

(1919-2006)

RICHARD
E. STIFEL

(1920-1993)

 

February 20, 2008

 

BRIDGEVIEW CAPITAL SOLUTIONS, L.L.C. 

Attn: John J. Seimetz, President and CEO

5881 Glenridge Drive, Suite 130

Atlanta, Georgia 30328

 

Re:                               $1,078,400.00 Loan
from BRIDGEVIEW CAPITAL

SOLUTIONS, L.L.C. to CYANOTECH CORPORATION

 

Ladies and Gentlemen:

 

At
the request of CYANOTECH CORPORATION, a Nevada corporation (the “Borrower”), we
have acted as counsel for the Borrower in connection with the proposed loan
from BRIDGEVIEW CAPITAL SOLUTIONS, L.L.C., a Delaware limited liability company
(the “Lender”) to the Borrower. You (the “Lender”) will provide the Borrower
with a term loan in the principal amount of $1,078,400.00 in accordance with
that certain Term Loan Agreement dated February 20, 2008 (the “Loan
Agreement”) executed by the Borrower and the Lender. All capitalized terms have
the meanings given to them in the Loan Agreement, unless otherwise defined
herein.

 

We
have examined and relied on originals or copies, certified or otherwise
identified to our satisfaction as being true copies, of all such records of the
Borrower, all such agreements and certificates of officers of the Borrower and
others, and such other documents, certificates and corporate or other records,
as we have deemed necessary as a basis for the opinions expressed in this
letter, including, without limitation, the following:

 

A.            The Loan Agreement;

 

B.            Term Note in the principal amount of
$1,078,400.00; which is dated February 20, 2008, and made by the Borrower
payable to the Lender (collectively, the “Term Note”);

 

C.            Real Property Mortgage; Security
Agreement; Assignment of Rents; and Financing Statement, dated
February 14, 2008, entered into by the Borrower in favor of the Lender
(the “Mortgage”);

 

1

 

D.            Security Agreement, dated February 20, 2008, entered
into by the Borrower in favor of the Lender (the “Cyanotech Security
Agreement”);

 

E.             Three (3) Uniform Commercial Code—Financing
Statements on Form UCC-1, naming the Borrower and/or Nutrex (as defined
below) as debtor and the Lender as secured party (collectively, the “Financing
Statements”);

 

F.             Certificate of Secretary of the Borrower, dated
February 12, 2008, together with the Exhibits thereto (the “Officer’s
Certificate”);

 

G.            Certificate of Good Standing for the Borrower, issued by
the Secretary of State of the State of Nevada (the “Nevada Good Standing
Certificate);

 

H.            Certificate of Good Standing for the Borrower, issued by
the Department of Commerce and Consumer Affairs of the State of Hawaii (the
“Hawaii Good Standing Certificate”);

 

I.              Articles of Incorporation and Bylaws of the Borrower;

 

J.             Tax Clearance Certificate for the Borrower issued by the
Department of Taxation of the State of Hawaii (the “Borrower Tax Clearance
Certificate”);

 

K.            Resolutions of the Board of Directors of the Borrower
authorizing the Loan Agreement, the Term Note, the Mortgage, the Security
Agreement, the Financing Statements and the documents and agreements relating
thereto or delivered in connection therewith (collectively, the “Loan
Documents”), and the transactions contemplated thereby; and

 

L.             United States Department of Agriculture; Rural Business
Cooperative Service (RBS) Conditional Commitment dated February 12, 2008,
Case No. 61-005-911206026, issued to the Lender regarding a “Loan Note
Guarantee” in the amount of 1,078,400.00.

 

M.           Security Agreement, dated February 20, 2008, entered
into by Nutrex Hawaii, Inc., a Hawaii corporation (“Nutrex”) wholly owned by
the Borrower, in favor of the Lender (the “Nutrex Security Agreement”);

 

N.            Certificate of Secretary of Nutrex, dated
February 12, 2008, together with the exhibits attached thereto (the
“Nutrex Officer’s Certificate”);

 

O.            Certificate of Good Standing for Nutrex issued by the
Department of Commerce and Consumer Affairs of the State of Hawaii (the “Nutrex
Good Standing Certificate”);

 

P.             Articles of Incorporation and Bylaws of Nutrex;

 

2

 

Q.            Tax Clearance Certificates for Nutrex issued by the
Department of Taxation of the State of Hawaii (the “Nutrex Tax Clearance
Certificates”); and

 

R.            Resolutions of the Board of Directors of Nutrex
authorizing the Nutrex Security Agreement, the Financing Statements (as they
pertain to Nutrex) and any other documents relating thereto or delivered
therewith (the “Nutrex Documents”), and the transactions contemplated thereby.

 

This opinion letter is
governed by and shall be interpreted in accordance with the Legal Opinion
Accord (the “Accord”) of the ABA Section of Business Law (1991) as
modified by the Report on Adaptation of the Legal Opinion Accord of the ABA
Section of Real Property, Probate and Trust Law and the American College
of Real Estate Lawyers (1993) (“Report”) as to opinions pertaining to Real
Estate Secured Transactions or to security interests in Real Property and by
the customs and practices in the State of Hawaii as described in the Hawaii
2000 Report, 22 U. Haw. L. Rev. 347. As a consequence, it is subject to a
number of qualifications, exceptions, definitions, limitations on coverage and
other limitations in addition to those described in this letter, but all as
more particularly described in the Accord, the Report and the Hawaii 2000
Report and this opinion letter should be read in conjunction therewith. Any and
all qualifications, exceptions and limitations set forth herein are in addition
to and not in lieu of or in limitation of any qualifications, exceptions and
limitations described in the Accord. Without limiting the foregoing, the term
“knowledge” as used herein means “Actual Knowledge” as defined in the Accord.

 

In our examination, we have
assumed (without independent investigation or verification) the genuineness of
all signatures other than the signatures of officers of the Borrower, the
authenticity and accuracy of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the accuracy and completeness of all corporate
records of the Borrower made available to us. We are not aware and have no
reason to believe that the corporate records of the Borrower, as presented to
us, were not accurate and complete.

 

We have also assumed (without
independent investigation or verification), except as to the Borrower and
Nutrex, that each entity that is a party to the Loan Documents has been duly
organized or formed and is validly existing and in good standing as a
corporation or other organization under the laws of its jurisdiction of
organization and is qualified to do business and is in good standing as a
foreign corporation or other organization in each jurisdiction where by law it
is required to be so qualified; that the Loan Documents have been duly
authorized, executed and delivered by each other party and constitutes such
party’s valid and binding obligation, enforceable against such party in
accordance with its terms; that each other party has the requisite corporate or
other organizational power and authority to perform such party’s obligations
under the Loan Documents; that each other party to the Loan Documents has
performed and will perform such party’s obligations under such agreements; that
there exist no other agreements, understandings or negotiations among the
parties to the Loan Documents that

 

3

 

would
modify, qualify or alter the terms of the Loan Documents or the respective
rights or obligations of the parties thereunder; and that any consents,
approvals, filings or registrations required by the laws of any state, or in
connection with the businesses or assets of any of the parties to Loan
Documents, have been duly made or obtained.

 

Based upon the foregoing,
and having regard for legal considerations which we deem relevant, and subject
to the additional qualifications, exceptions, assumptions and limitations
expressed herein and in the Accord, we are of the opinion that:

 

1.             Organization, Standing and Authority of the Borrower. The Borrower: (i) is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Nevada; (ii) qualified to do business and is in good standing
under the laws of the State of Hawaii; (iii) has all requisite corporate
power and authority to carry on the business it is presently engaged in, and
(iv) has all requisite corporate 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 have been
duly authorized by all necessary corporate action on the part of Borrower under
the laws of the State of Nevada, have been duly executed and delivered by
Borrower, do not and will not conflict with, result in a breach of, or
constitute a default under the articles of incorporation or bylaws of the
Borrower and no other action of the Borrower or its stockholders is requisite
to the execution and delivery of the Loan Documents.

 

2.             Organization, Standing and Authority of the Nutrex. Nutrex is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Hawaii;
(ii) has all requisite corporate power and authority to carry on the
business it is presently engaged in, and (iii) has all requisite corporate
power and authority to execute and deliver the Nutrex Documents and to observe
and perform all of the provisions and conditions thereof. The execution and
delivery of the Nutrex Documents have been duly authorized by all necessary
corporate action on the part of Nutrex under the laws of the State of Hawaii,
have been duly executed and delivered by Nutrex, do not and will not conflict
with, result in a breach of, or constitute a default under the articles of
incorporation or bylaws of the Nutrex and no other action of the Nutrex or its
stockholders is requisite to the execution and delivery of the Nutrex
Documents.

 

3.             Compliance with Other Instruments, None Burdensome. To our knowledge, the Borrower is not in
violation of or in default with respect to any material term or provisions of
any mortgage, indenture, contract, agreement or instrument applicable to the
Borrower 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
the Loan Agreement and there is no term or provision of any mortgage,
indenture, contract, agreement or instrument applicable to the Borrower by
which they may be bound which, to the current actual knowledge of the
undersigned, adversely affects or in the future (so far as the Borrower can now
foresee) would adversely affect the business or prospects or condition
(financial or other) of the Borrower or of any of its properties or assets.

 

4

 

4.             Compliance with Law. The consummation of the
transactions related to and contemplated by the Loan Documents, will not
conflict with or result in a material breach of any Federal, Nevada or Hawaii
law, statute, ordinance, regulation, order, writ, injunction, decree or
judgment of any Federal, Nevada or Hawaii court or governmental
instrumentality.

 

5.             Tax Returns and Payments. All tax returns and
reports of the Borrower required by Federal or Hawaii law to be filed have been
duly filed, other than Federal and State of Hawaii returns for the fiscal year
2007 for which net operating losses are available as disclosed to Lender, 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 their respective properties or assets or
income which are due and payable, have been paid.

 

6.             Governmental Authorization. To our knowledge, no
consent, approval or authorization of or registration, declaration or filing
with any Federal, Nevada or Hawaii governmental or public body or authority is
required in connection with the valid execution and delivery of each of the
Loan Documents, other than the Lessor’s Consent to Mortgage of Sublease K-4,
Lessor’s Estoppel Certificate, Lessor’s Subordination Agreement and Sublessor’s
Consent to Mortgage of Sublease K-4; Estoppel Certificate and Subordination
Agreement.

 

7.             Binding Obligations. The Loan Documents, when
executed and delivered, will be enforceable in accordance with their terms and
shall constitute the valid and legally binding obligations of the Borrower. The
Nutrex Documents, when executed and delivered, will be enforceable in
accordance with their terms and shall constitute the valid and legally binding
obligations of Nutrex.

 

8.             Litigation. To our knowledge, there is no action,
suit, proceeding or investigation pending at law or in equity or before any
Federal, Nevada or Hawaii state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality or, threatened against or
affecting the Borrower, the Land or the Collateral, as defined in the Loan
Agreement, which might materially affect the Borrower’s ability to perform its
obligations under the Loan Documents.

 

9.             Representations. To our knowledge, all
representations contained in the Loan Agreement by the Borrower are true,
correct and complete in all material respects.

 

In
rendering the foregoing opinions and statement, we have relied as to factual
matters to the extent we deemed such reliance appropriate, on certificates and
other communications from public officials and officers of the Borrower and
Nutrex, and upon the representations of the Borrower set forth in the Loan
Documents. We have also assumed the truth and accuracy of those matters
contained in the Officer’s Certificate and in the Nutrex Officer’s Certificate.

 

5

 

This opinion letter relates
solely to, and the opinions expressed herein are limited to, the laws of the
States of Hawaii and Nevada and Federal law of the United States; as noted, our
consideration of the laws of Nevada pertain only to our opinions numbered 1, 4
and 6, above. We are not licensed in any jurisdiction other than Hawaii, but
one of our partners, H. Gregory Nasky, is also licensed in the State of Nevada
and he has reviewed and approved under Nevada law the Loan Documents which are
governed by Nevada law. To the extent that the meaning, interpretation or
effect of an agreement or other document that is the subject of or basis for
any opinion herein is governed by or relates to the laws of a State other than
the State of Hawaii or Nevada, we have assumed that the applicable laws of such
other State are identical in all material respects to the laws of the State of
Hawaii.

 

Our opinions rendered in
Paragraph 1 as to the due qualification and good standing of the Borrower are
based solely on the Nevada Good Standing Certificate and the Hawaii Good
Standing Certificate. Our opinions rendered in Paragraphs 4 and 6 are based upon our review of those laws, rules and
regulations which, in our experience, are normally applicable to transactions
of the type contemplated by the Loan Documents and those laws, rules and
regulations applicable to corporations conducting businesses similar to those
of the Borrower. Our opinions rendered in Paragraph 5 are based solely on the
Tax Clearance Certificates and the affidavits of the Borrower and Nutrex
referred to in Section 3.15 of the Loan Agreement.

 

Our opinions set forth in
this letter as to the validity, binding effect and enforceability of the Loan
Documents are specifically qualified to the extent that the validity, binding
effect or enforceability of any obligations of the Borrower under such
documents, or the availability or enforceability of any of the remedies
provided in such documents, may be subject to or limited by
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other statutory or decisional laws, now or hereafter in effect,
affecting the rights of creditors generally, (ii) the exercise of judicial or
administrative discretion in accordance with general equitable principles
(regardless of whether enforcement is sought in a proceeding at law or in
equity), (iii) the application by courts of competent jurisdiction of laws
containing provisions determined to have a paramount public interest, and
(iv) the availability of particular remedies, of exculpatory provisions
and of waivers contained in Loan Documents, which particular remedies,
exculpatory provisions and waivers of rights may be limited by or subject to
equitable principles, applicable laws, rules, regulations, court decisions and
constitutional requirements and the discretion of the court before which any
proceeding for relief may be brought.

 

The opinions in this letter
are rendered to the Lender in connection with the transactions contemplated by
the Loan Documents. This opinion is not to be quoted in whole or in part or
otherwise referred to and no one other than the Lender is entitled to rely on
this opinion in any manner. The opinions expressed in this letter are based on
the law in effect on the date of this letter and are subject to any changes in
such law including judicial and administrative

 

6

 

interpretations
which may occur or be reported subsequent to the date of this letter. We assume
no obligation to advise you of facts, circumstances, events or developments
which hereafter may be brought to our attention and which may alter, affect or
modify the opinions expressed herein.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  GOODSILL
  ANDERSON QUINN &  STIFEL

  
	
   

  	
  A
  LIMITED LIABILITY LAW PARTNERSHIP LLP

  
	
   

  	
   

  
	
   

  	
  /s/ Goodsill
  Anderson Quinn &  Stifel

  

 

 

END OF EXHIBIT G

 

7

 

EXHIBIT “H”

FINANCIAL STATEMENTS

[TO BE INSERTED]

 

 

EXHIBIT “I”

MATERIAL LITIGATION

NONE

 

 

EXHIBIT “J”

DEFAULT IN MATERIAL OBLIGATIONS

NONE

 

 

EXHIBIT “K”

ADVERSE CONTRACTS

NONE

 

 

EXHIBIT
“L”

NO VIOLATIONS

NONE

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