Document:

ex4-1.htm

Exhibit 10.1

 

 

	
FIRST FOUNDATION BANK 
	
Date: June 3, 2016

 

 

 

 

REVOLVING CREDIT AGREEMENT

  

 

 

FIRST FOUNDATION BANK, a California corporation ("Bank"), makes this Agreement ("Agreement") to make loans (individually "Loan" and collectively "Loans") to CYANOTECH CORPORATION, a Nevada corporation, whose mailing address is 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii 96740 (the "Borrower"), from time to time up to an aggregate principal amount not to exceed the sum of TWO MILLION AND N0/100 DOLLARS ($2,000,000.00) (the "Commitment Amount"). Bank's agreement to lend to Borrower and Borrower's agreement to borrow from Bank are subject to the following terms and conditions:

 

	
 
	
1.
	
The Credit

 

Bank will lend Borrower on a revolving basis the Commitment Amount not exceeding the principal amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00). This revolving credit may be availed of by the Borrower for working capital.

 

Borrower and Bank hereby agree that all of Borrower's indebtedness to Bank antecedent to the date hereof, except the indebtedness incurred by Borrower in connection with those certain Promissory Notes dated August 14, 2012 in the original principal amounts of $2,250,000.00 and $3,250,000.00 and that certain Promissory Note dated June 3, 2016 in the principal amount of $2,500,000.00, shall be hereafter considered a borrowing under the Credit, and this Agreement shall apply to such indebtedness to the same effect as if such indebtedness had been duly incurred pursuant to the terms of this Agreement at the date hereof, except that such indebtedness shall be payable and paid at the time and with interest at the rate previously agreed on, to the extent such is in conflict with terms hereof.

 

	
 
	
2.
	
Repayment

 

	
 
	
(a)
	
Interest on all principal amounts outstanding under this Agreement shall be paid as specified in the Promissory Note executed concurrently herewith by Borrower (the "Note"), unless due earlier in accordance with the provisions below.

 

	
 
	
(b)
	
The principal amount of each Loan, together with accrued and unpaid interest on that Loan, shall be due by 4:00p.m., Hawaii Standard Time on the maturity date designated on the Note; but in no event shall the due date extend beyond the maturity date of this Agreement.

  

 

 

 

 

	
 
	
(c)
	
All principal and interest, and all other costs and expenses owing under this Agreement shall be paid in accordance with Sections 4 and 5.

 

	
 
	
(d)
	
Borrower may at any time or from time to time while any indebtedness incurred under this Agreement is outstanding, prepay such indebtedness in whole or in part, without premium or interest penalty; provided that each partial prepayment shall be in the minimum amount or in an integral multiple of ONE HUNDRED DOLLARS ($100.00), and, provided further that any whole or partial prepayment shall be accompanied by payment of interest accrued thereon to the date of prepayment. Any such prepayment should be received by Bank by 4:00p.m., Hawaii Standard Time.

 

	
 
	
3.
	
Collateral

 

Payment and performance of all sums and all other obligations under this Agreement and the Note signed for Loans under this Agreement shall be secured by the following:

 

	
 
	
(a)
	
that certain Mortgage, Security Agreement and Financing Statement (the "Mortgage"), in form and content satisfactory to the Bank, duly executed and acknowledged concurrently herewith by Borrower constituting at all times a valid and subsisting third lien upon that certain leasehold property located at 73-860 Makako Bay Drive, Kailua-Kona, Hawaii 96740, Tax Map Key No. (3) 7-3-043-063 (the "Property''), and on all structures and improvements constructed and located thereon and a valid and subsisting security interest in any and all other personal property now owned or hereafter acquired by the Borrower, and incorporated in the improvements or otherwise situated upon the Property;

 

	
 
	
(b)
	
that certain Assignment of Lessor's Interest in Leases and Rents (the "Assignment"), in form and content satisfactory to the Bank, duly executed and acknowledged concurrently herewith by Borrower, as assignor, unconditionally and absolutely assigning to the Bank all of the Borrower's right, title and interest in and to any leases, rents and proceeds arising out of the Property;

 

	
 
	
(c)
	
that certain Security Agreement (the "Security Agreement"), in form and content satisfactory to the Bank, duly executed and acknowledged by the Borrower, as debtor, constituting at all times a valid and subsisting lien on all of the assets and personal property of the Borrower, including, but not limited to, all furnishings, fixtures and equipment relating to or used in connection with the Property (the "Collateral");

 

	
 
	
(d)
	
that certain UCC Financing Statement (the "Financing Statement"), in form and content satisfactory to the Bank perfecting the Bank's security interest in and to the Collateral, including but not limited to, personal property related to the Property;

  

 

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(e)
	
that certain Hazardous Substances Certificate and Indemnity Agreement (the "Indemnity Agreement"), in form and content satisfactory to the Bank, duly executed and acknowledged by Borrower; and

 

	
 
	
(f)
	
that certain Sublessor's Consent to Mortgage of Sublease K-4; Estoppel Certificate and Subordination Agreement dated June 3, 2016 (the "Consent to Mortgage") given by the NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY, STATE OF HAWAII, as Sublessor.

 

This Agreement, the Note, the Mortgage, the Assignment, the Security Agreement, the Financing Statement, the Indemnity Agreement, the Consent to Mortgage, and all other agreements, instruments and documents of any kind evidencing, securing or governing the Credit, without limitation, and any and all amendments, modifications, extensions, replacements, substitutions and restatements thereto are hereafter collectively referred to as the "Credit Documents".

 

	
 
	
4.
	
Expiration Date

 

The Credit shall expire on August 30, 2017, at which time Borrower shall pay in full all principal and interest and any other amounts then outstanding or due hereunder. Provided, however, at the sole discretion of Bank, which discretion may be exercised in any manner it deems fit and which may be arbitrary, the terms of the Credit may be extended to a later date. Bank shall also have the like sole discretion to decrease, terminate or vary Bank's obligation hereunder at any time and from time to time without prejudice to any of Bank's rights hereunder. Bank may furnish written notice to Borrower of any such election of Bank of extension or amendment by mailing the same, postage prepaid, to the address of Borrower as herein provided or by personal delivery to Borrower.

 

	
 
	
5.
	
Interest and Fees

 

	
 
	
(a)
	
Fees.

 

 On execution of this Agreement, Borrower shall pay Bank a non-refundable processing fee of $5,000.00.

 

	
 
	
(b)
	
Rate of Interest.

 

Each Loan shall bear interest on the outstanding principal amount thereof from the date made until fully paid at a floating rate based upon the "Prime Rate" as defined below. The "Prime Rate" means the variable rate of interest that is TWO PERCENT (2.00%) per annum in excess of the variable rate of interest, on a per annum basis, which is announced and/or published in the Money Rates section in the Western Edition of the Wall Street Journal from time to time as its Prime Rate ("WSJ Prime Rate"). If the WSJ Prime Rate becomes unavailable, the Bank may designate a reasonable substitute index after notice to the Borrower.

 

 

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(c)
	
Default Rate of Interest.

 

During any period while Borrower is in default under this Agreement, or any note signed for Loans under this Agreement, the entire unpaid principal amount due hereunder shall bear interest at the rate of TWENTY-FOUR PERCENT (24.00%) per annum, until all amounts owing under this Agreement are paid in full.

 

	
 
	
(d)
	
Computation Method.

 

All fees and rates of interest shall be computed on the basis of the actual number of days elapsed over a 365-day year.

 

	
 
	
6.
	
Representations and Warranties

 

Borrower represents and warrants to the Bank that as of the date hereof:

 

	
 
	
(a)
	
Borrower is a corporation duly registered, validly existing and in good standing under the laws of the State of Nevada. Borrower shall provide Bank with (i) resolutions and/or other documentation duly authorizing the execution and delivery of the documents required to be executed by such corporation; (ii) copies of its articles of incorporation certified by the State of Nevada; and (iii) its by-laws. Borrower has all requisite power and authority to carry on the business that it now carries on and to own the property it owns. Borrower has all requisite power and authority to execute and deliver the Credit Documents and to observe and perform all of the provisions and conditions thereof. No other corporate action is required to the execution and delivery of the Credit Documents;

 

	
 
	
(b)
	
Borrower shall preserve and keep its existence, whether corporate, limited liability company, partnership and/or trust, and all rights, qualifications, franchises, permits and licenses material to its business, in full force and effect;

 

	 	
(c) 
	
the execution and delivery by it of this Agreement, the addenda and Exhibit hereto and all other documents issued in connection herewith and the performance by it of the obligations contemplated herein and therein have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of third persons that has not already been obtained; (ii) violate or result in any breach of any of the terms or provisions of or constitute a default (or any event which, with the giving of notice of the lapse of time or both, would constitute a default) under any contract, agreement or other instrument to which it is a party or by which it is or its properties, assets or revenues may be bound or affected; (iii) violate any provision of any law, rule, regulation, judgment, order, writ, decree, determination or award applicable to it or its properties, assets or revenues; or (iv) result in, or require the creation or imposition of any mortgage, lien, charge or other security interest or encumbrance of any nature upon or with respect to any of its present or future properties, assets or revenue, except the lien and security interest of the Mortgage, Assignment and Security Agreement; and there is no default under any such contract, agreement, or other instrument (and no failure by it to comply with any such law, rule, regulation, judgment, order, writ, decree, determination or award, which default or failure to comply would have a material adverse effect on its condition, financial or otherwise, or on its business, properties, assets or operations);

  

 

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(d)
	
no approval, authorization, consent or other order of, and no filing with, any court or governmental body, which has not already been obtained, is or will be necessary for the valid execution, delivery and performance by it of this Agreement, the Exhibit or any other documents issued in connection herewith; its obligations under this Agreement and each thereof to the Bank for value are valid and legally binding obligations enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to or affecting the enforcement of creditors' rights;

 

	
 
	
(e)
	
its financial statements and related information previously delivered to Bank and to be subsequently delivered to Bank fairly present, and will fairly present, its financial condition, the results of operations, and the changes in financial position as of the dates thereof and for the periods covered thereby, all in accordance with generally accepted accounting principles and financial accounting standards;

 

	
 
	
(f)
	
there has been no material adverse change in its financial condition or operations except as disclosed by Borrower to Bank in writing prior to the signing of this Agreement; and

 

	
 
	
(g)
	
except as Borrower has notified Bank in writing prior to the signing of this Agreement, there are no tax assessments or tax liens, actions, suits or proceedings (whether or not covered by insurance) pending or threatened against or affecting Borrower or its properties, assets or operations, at law or in equity, and before any arbitrator of any kind or any governmental body, which, if determined adversely to Borrower would have a material adverse effect on the condition, financial or otherwise, of Borrower or on its business, properties, assets or operations.

 

	
 
	
7.
	
Conditions Precedent to Making Loans

 

The obligation of Bank to make Loans under this Agreement is subject to the conditions precedent that:

 

	
 
	
(a)
	
at the date of the Loan and after giving effect thereto, there shall have occurred no material adverse change in the Borrower's business or financial condition since the date specified in the Borrower's financial statement for the period most recently preceding the Loan;

  

 

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(b)
	
no Event of Default shall have occurred or be outstanding under this Agreement, the Note, any guarantee or any instrument securing the obligations of the Borrower, nor shall any of Borrower’s representations and warranties be untrue as of the date of the Loan; and

 

	
 
	
(c)
	
Bank shall have received all of the following in form and substance satisfactory to it: (i) an executed copy of this Agreement; (ii) fully executed (and, as required, notarized) originals of all the Exhibits specified herein and all other guarantees and documents required by Bank in connection herewith; (iii) fully executed security agreements and financing statements pertaining to the Collateral in form satisfactory to counsel for the Bank; (iv) title reports or equivalent evidence that the security interest and liens in favor of Bank are valid, enforceable, and prior to the rights and interests of others except as consented to in writing by Bank; (v) the resolutions evidencing approval of the transactions and other matters contemplated herein; (vi) if requested by Bank, a favorable opinion of counsel to Borrower as to the matters referred to in subsections (i) through (v); (vii) evidence of insurance required pursuant to Section 9(f) of this Agreement; and (viii) written Commercial Line of Credit Draw Request(s) for all Loans made prior to the date of the Loan.

  

	
 
	
8.
	
Procedures for Loans

 

Borrower designates GERALD R. CYSEWSKI, JOLE DEAL and GERARD WATTS, whose signatures appear below, as the persons initially authorized to request Loans under this Agreement. Until the authority of such individuals are revoked in writing and delivered to Bank by Borrower, Bank may make Loans to Borrower at the written request of any two (2) of the above-designated persons.

 

Borrower's duly authorized representative(s) shall initiate all requests for amounts of the Credit ("Advances") or renewals by delivery of an original or telefaxed facsimile of a duly executed Commercial Line of Credit Draw Request in the form of Exhibit "A", which is attached to and made a part of this Agreement. Within two (2) business days after the making of a facsimile request, Borrower shall deliver to Bank an original executed Commercial Line of Credit Draw Request confirming the transaction; provided, however, that the absence of such confirmation will not impair or limit the Bank's rights to repayment of any claims under this Agreement and provided further that Borrower agrees that any action taken by Bank pursuant to and in reliance upon such facsimile request shall be deemed binding upon and agreed to by Borrower.

 

Bank shall receive all requests for Advances or renewals under this Agreement by two o'clock (2:00) p.m., Hawaii Standard Time in order for the Bank to process and disburse funds on that same day. If Borrower's request is received after the designated time, the funds will be disbursed the next business day.

 

 

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Borrower may change the persons authorized to request Loans or renewals at any time, provided it furnishes Bank reasonable substantiation that the change has been legally authorized by Borrower. No such change shall affect the liability of any guarantor, if any, of Borrower's obligations under this Agreement. Bank may subsequently establish reasonable procedures to formalize or confirm such requests, including requirements for certifications as to the continued accuracy of Borrower's representations, as a condition precedent to such Loans.

 

If request is made by facsimile, except for Loans being renewed under this Agreement, Loans shall be disbursed to Borrower by depositing the Loan principal into an account maintained with Bank by Borrower. Individual Loans shall be in amounts not less than $500.00, unless this amount exceeds the undisbursed portion of the Commitment Amount, in which event the Loan shall equal the entire undisbursed portion.

 

	
 
	
9.
	
Covenants

 

So long as this Agreement is in effect and until payment in full of the Loans and performance by Borrower of all of its other obligations hereunder and pursuant to the Exhibit thereto, Borrower shall:

 

	
 
	
(a)
	
Financial Statements. If requested by Bank, furnish updated financial statements and tax returns of Borrower as of the last day of such fiscal/calendar year, all in reasonable detail and satisfactory in scope to Bank.

 

	
 
	
(b)
	
Statements to Shareholders. From time to time furnish to Bank all financial information including proxy statements, furnished by Borrower to its shareholders.

 

	
 
	
(c)
	
Additional Financial Statements. With reasonable promptness furnish to Bank such additional financial statements and such other data and information concerning the financial condition of Borrower as may reasonably be requested by Bank.

 

	
 
	
(d)
	
Legal Existence. Preserve and maintain its legal existence, franchises and privileges, its jurisdiction of registration or organization, and qualify and remain qualified as a foreign entity in each jurisdiction where such qualification is necessary.

 

Borrower will not change its location or place of organization or its name without at least thirty (30) days prior written notice to the Bank. Borrower shall keep the Bank current with respect to any such changes, and the Bank shall have no affirmative obligation to know about such changes.

 

	
 
	
(e)
	
Maintenance of Properties. Maintain its inventory, machinery, equipment and other properties in good condition and repair (normal wear and tear excepted), pay and discharge or cause to be paid or discharged when due, the cost of repairs to or maintenance of the same, and pay or cause to be paid all rental or mortgage payments due on any real estate used by Borrower.

 

 

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(f)
	
Insurance. Maintain and furnish Bank with evidence of public liability insurance and fire insurance, if applicable, on all of its assets, in such amounts as are consistent with industry practice and with such insurers as may be satisfactory to Bank. Such policies shall be payable to Borrower and Bank as their respective interest may appear. Borrower will furnish Bank with evidence of such insurance from time to time at Bank's request.

 

Maintain and furnish Bank with evidence of business insurance covering all of the Borrower's assets with Bank named as additional insured.

 

	
 
	
(g)
	
Payment of Taxes/ERISA Compliance. Timely pay all taxes and all tax and other returns and reports which Borrower is required to file in order to remain current with respect to tax and ERISA obligations.

 

	
 
	
(h)
	
Execute and deliver to Bank and, as necessary, pay for the filing of all documents Bank may request in connection with this Agreement, the Exhibit and the Collateral.

 

	
 
	
(i)
	
Notify Bank in writing of any material adverse change in the financial condition, properties or operations of Borrower or any subsidiary of Borrower. It shall be a continuing obligation and responsibility of Borrower to report any material adverse change of the financial condition to the Bank.

 

	
 
	
10.
	
Negative Covenants

 

Borrower covenants and agrees that unless all indebtedness incurred hereunder has been paid in full and Borrower no longer has the right to borrow hereunder, it will not without the prior written consent of the Bank:

 

	
 
	
(a)
	
Enter into any arrangement with any bank, insurance company or other lender or investor providing for the borrowing of money, except indebtedness incurred in the ordinary course of business which will not materially impair the ability of Borrower to repay the Credit;

 

	
 
	
(b)
	
Create, assume or permit to exist any mortgage, pledge, encumbrance, lien or charge of any kind upon any of its property or assets, whether now owned or hereafter acquired;

 

	
 
	
(c)
	
Assume, guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm or corporation; and

 

	
 
	
(d)
	
Merge or consolidate with any other corporation or limited liability company, or sell, lease, transfer or otherwise dispose of all or a substantial part of its assets.

  

 

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11.
	
Default, Acceleration and Termination

 

The occurrence of any of the following events (''Events of Default") shall terminate any obligation on the part of Bank to make Loans under this Agreement. Upon the occurrence of an Event of Default, at the option of the Bank, all sums of interest and principal outstanding under the Credit may be declared immediately due and payable, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character. Bank may also, upon the occurrence of any Event of Default, exercise its rights against the Collateral, as provided for in this Agreement or any mortgage or security agreement affecting the Collateral. This may include but is not limited to set-offs of amounts which may be owed by Bank to Borrower against delinquent amounts owed by Borrower.

 

Events of Default include:

 

	
 
	
(a)
	
Borrower's failure to make any payment required by this Agreement within ten (10) days of the date on which it is due;

 

	
 
	
(b)
	
Borrower's breach of any other promise or covenant in this Agreement, or any other document described in Section 3 of this Agreement, unless cured within ten (10) days of the date on which it occurred;

 

	
 
	
(c)
	
Default by Borrower in any payment of principal or interest under any other indebtedness of Borrower to Bank;

 

	
 
	
(d)
	
Any representation or warranty made by Borrower hereunder being or at any time becoming incorrect in any material respect;

 

	
 
	
(e)
	
Default by Borrower under the terms of any agreement or instrument pursuant to which Borrower has borrowed money from any person, financial institution or lender;

 

	
 
	
(f)
	
The failure of Borrower promptly to pay and discharge any judgment or levy or any attachment, execution or other process against the assets of Borrower, if such judgment be not satisfied, or such levy or other process be not removed within twenty (20) days after the entry of levy thereof, or at least five (5) days prior to the time of any proposed sale under any such judgment or levy;

 

	
 
	
(g)
	
The entry of any decree or order by a court having jurisdiction in respect of Borrower in an involuntary case under a federal or state bankruptcy, insolvency or other similar law, or the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) for Borrower or for any substantial part of Borrower's property, or the winding-up, dissolution or liquidation of Borrower's affairs is ordered;

   

 

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(h)
	
Commencement by Borrower of a voluntary case under a federal or state bankruptcy, insolvency or other similar law, or Borrower's consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Borrower or of any substantial part of Borrower's property, or makes any assignment for the benefit of creditors, or fails generally to pay debts as such debts become due, or Borrower takes any action in furtherance of any of the foregoing or to voluntarily wind-up, dissolve or liquidate Borrower's affairs;

 

	
 
	
(i)
	
A material adverse change in Borrower's financial condition from that indicated by Borrower's most recent financial statements given to Bank prior to the date of this Agreement; or

   

	
 
	
(j)
	
Any other material event which Bank reasonably believes impairs Borrower's ability to repay any Loans made or to be made under this Agreement.

 

During any grace period specified in this Agreement within which Borrower may cure any default under this Agreement or any related mortgage, security agreement or the Note, Bank's obligation to make Loans to the Borrower shall be suspended.

 

	
 
	
12.
	
Right of Set-Off; Deduction from Account

 

Whenever a default exists, the Bank is authorized to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Bank to or for the credit or the account of the Borrower against any and all of Borrower's obligations under this Agreement, whether or not then due and payable. The Bank shall be deemed to have exercised its right of set-off immediately at the time of its election even though any charge therefor is made or entered on the Bank's records subsequent to that time. All costs, and expenses, including, without limitation, attorney's fees, paid or incurred by the Bank in connection with any such set-off shall be paid by the Borrower on demand.

  

Whether or not a default has occurred, Borrower authorizes Bank to charge any account Borrower maintains with Bank for the amount of any principal or interest owing under this Agreement on the date on which it is due.

 

	
 
	
13.
	
Indemnification

 

	
 
	
(a)
	
After receipt of any payment of all or any part of the Loans, if the Bank is for any reason compelled to surrender such payment to any person or entity, because such payment is determined to be void or voidable as a preference, impermissible set-off, or a diversion of trust funds, or for any other reason, then: the Loans or part thereof intended to be satisfied shall be revived and continue as if such payment had not been received by the Bank; this Agreement shall continue in full force with respect to any indebtedness owed to Bank; and the Borrower shall be liable to, and shall indemnify and hold the Bank harmless for, the amount of such payments surrendered.

 

 

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The provisions of this Section 13(a) shall be without prejudice to the Bank's other rights under this Agreement or any other instrument or document signed in connection with this Agreement, and shall be deemed to have been conditioned upon such payment having become final and irrevocable.

 

	
 
	
(b)
	
If Bank is, without fault on its part, made a party to any judicial proceedings arising out of this Agreement, Borrower shall indemnify and hold Bank harmless from all costs and expenses, including reasonable attorney's fees, incurred by Bank as a result.

 

	
 
	
(c)
	
The provisions of Section 13(a) and (b) shall survive the termination of this Agreement.

 

	
 
	
14.
	
Marshaling

 

The Borrower hereby waives, to the extent permitted by law, any and all rights to require any security given hereunder to be marshaled and agrees and acknowledges that after the occurrence of any Event of Default, the Bank may, in its sole and absolute discretion, proceed to enforce its rights under the Credit Documents and to realize on any or all of the security for the line of credit or any portion or portions thereof, irrespective of the differing nature of such security and whether or not the same constitutes real or personal property.

 

	
 
	
15.
	
Other Terms and Conditions

 

	
 
	
(a)
	
Late Charges.

 

Any payment required to be made to Bank by Borrower which is not received by Bank within ten (10) days of the date such payment is due shall be subject to a late charge equal to five percent (5.0%) of such payment.

 

	
 
	
(b)
	
Assignments.

 

This Agreement shall be binding on and inure to the benefit of the parties hereto and Bank's successors and assigns. Borrower may not assign this Agreement or any of the rights, duties or obligations of Borrower hereunder.

 

	
 
	
(c)
	
Bank As Borrower's Attorney-In-Fact.

 

Borrower appoints Bank its attorney-in-fact, which is an agency coupled with an interest, so that Bank may demand, sue for, collect and receive monies, dividends or other assets which Bank alone may determine to be necessary. Bank may also file any claim, proof of claim or other instrument on behalf of Borrower in Bank's own name or in the name of Borrower.

 

 

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Borrower agrees to execute and deliver any other powers of attorney which Bank may request to accomplish the purpose of this Agreement.

 

	
 
	
(d)
	
Time Is Of The Essence.

 

The timely performance of the terms, promises and obligations in this Agreement are vital.

 

	
 
	
(e)
	
Complete Agreement.

 

This Agreement and other applicable documents are the complete and only statement concerning the Bank's commitment to make Loans to Borrower. It supersedes all prior communications and agreements between Bank and Borrower as to this commitment. Any modification or amendment of this Agreement shall be effective only if it is in writing and signed by both Bank and Borrower.

 

	
 
	
(f)
	
Inconsistent Provisions.

 

In the event of any conflict between the provisions of this Agreement and any other document relating to this Agreement, the provisions of this Agreement shall prevail; except that where conflicts occur between the provision of this Agreement and any mortgages or security agreements related to this Agreement, the provisions of the mortgages or security agreements shall prevail.

 

	
 
	
(g)
	
Severability.

 

If any court should determine that any term or provision of this Agreement is invalid or unenforceable, that determination will not affect the rest of this Agreement.

 

	
 
	
(h)
	
Headings.

 

The headings used in this Agreement do not in any way limit, alter or affect matters contained in this Agreement.

 

	
 
	
(i)
	
Meaning of Terms.

 

Unless the context otherwise requires, all terms used in this Agreement shall have the meanings, if any, specified in the Uniform Commercial Code of the State of Hawaii.

 

 

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(j)
	
Written Consents and Waivers; Benefit of Covenants.

 

No consent or waiver by Bank under this Agreement shall be effective unless in writing. No waiver of any breach or default shall be deemed a waiver of any breach or default thereafter occurring nor shall any custom or practice inconsistent with the terms of this Agreement impair Bank's right, upon reasonable prior notice, to abandon or modify that custom or practice or to insist upon compliance with the terms of this Agreement. All affirmative and negative covenants of Borrower are solely for the benefit of Bank, which may waive or fail to enforce any or all of them without affecting the liability of Borrower or any guarantor.

 

	
 
	
(k)
	
Governing Law.

 

This Agreement, and any instrument or agreement required under this Agreement, shall be governed by and construed under the laws of the State of Hawaii.

 

	
 
	
(l)
	
Joint and Several Liability.

 

The obligations of the parties signing this Agreement as Borrower are joint and several. Bank may sue any or all persons signing this Agreement, without giving up its rights against the others.

 

	
 
	
(m)
	
Waiver Of Right To Jury Trial; No Offset By Borrower.

 

BANK AND BORROWER WAIVE THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.

 

BORROWER WAIVES THE RIGHT TO ASSERT AS AN OFFSET TO ITS LIABILITY UNDER THIS AGREEMENT ANY COUNTERCLAIM IT MAY HAVE AGAINST BANK, IT BEING AGREED THAT BORROWER'S LIABILITY TO BANK UNDER THIS AGREEMENT SHALL BE DISTINCT AND INDEPENDENT OF ANY LIABILITY OWED BY BANK TO BORROWER.

 

	
 
	
(n)
	
Rights Are Cumulative.

 

Any and all rights, remedies and powers that Bank has under this Agreement or the other related Credit Documents and the law shall be cumulative and not exclusive of any other, and may be exercised by Bank at any time and from time to time. The pursuit of one remedy is not a waiver of or election against other remedies.

 

 

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(o)
	
Notices.

 

Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by another, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be either delivered in person or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

	
To Bank at:
	
FIRST FOUNDATION BANK

	
 
	
18101 Von Karman Avenue, Suite 750

	
 
	
Irvine, California      92612

	 	Facsimile No.: (808) 457-3930

  

	
To Borrower at:
	
CYANOTECH CORPORATION

	
 
	
73-4460 Queen Kaahumanu Highway, Suite 102

	
 
	
Kailua-Kona, Hawaii 96740

	 	Attention: Jole Deal, CFO
	 	 
	 	with a copy to:	Gregory Nasky
	 	 	Goodsill Anderson Quinn & Stifel LLP
	 	 	999 Bishop Street, Suite 1600
	 	 	Honolulu, Hawaii      96813 

  

	
 
	
(p)
	
Freedom of Insurance.

 

Wherever this Agreement requires Borrower to obtain insurance, Borrower is free to procure such insurance from any insurance company authorized to do business in the State of Hawaii.

 

	
 
	
(q)
	
Attorney's Fees And Costs.

 

In the event of any breach of this Agreement by Borrower, Borrower shall pay Bank's reasonable attorney's fees and costs, and all other expenses incurred by Bank and resulting from that breach, whether or not a legal action to enforce this Agreement is commenced.

 

	
 
	
(r)
	
Receipt.

 

Borrower acknowledges receipt of a copy of this Agreement.

 

 

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16.
	
Sharing Information with Affiliates

 

Under the Fair Credit Reporting Act, Bank has the right to share information about Bank's experiences or transactions with Borrower. Unless Borrower instructs otherwise, Bank also has the right to share information about Borrower with any of Bank's Affiliates (persons related by common ownership or affiliated by corporate control, now or in the future) either directly or for example, through a central database. This other information may include but is not limited to application information, credit reports from reporting agencies, and any other information Bank has about Borrower. If Borrower does not want Bank to share this other information with Bank's affiliates, Borrower can direct Bank not to by writing to Bank at its address shown in this Agreement.

 

	
 
	
17.
	
Holidays

 

In the event any payment falls on a Saturday, Sunday or holiday observed by the Bank, then such due date shall be extended to the next succeeding full business day, and interest shall be payable during such extension.

 

	
 
	
18.
	
Patriot Act Notice

 

Federal law requires all financial institutions to obtain, verify, and record information that identifies each person establishing an account (loan or deposit) relationship with such financial institution. In the course of processing this credit facility and the application therefor, Bank has and may, in the future, ask for Borrower's name, address, date of birth, and other information that will allow Bank to identify Borrower. Bank may also ask to see a driver's license or other identifying documents. Borrower by executing this instrument agrees to comply with all such requests.

 

	
 
	
19.
	
Use of Proceeds; Margin Stock Regulations

 

Borrower will use the proceeds of the Credit solely for the purposes specified in this Agreement. No part of the proceeds of the Credit will be used for the purpose of purchasing or acquiring any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with Regulations T, U, X or any other regulations of such Board of Governors, or for any purposes prohibited by any statute, rule or regulation.

 

	
 
	
20.
	
Counterparts

 

The parties hereto agree that this instrument may be executed in counterparts, each of which shall be deemed an original, and said counterparts shall together constitute one and the same agreement, binding all of the parties hereto, notwithstanding all of the parties are not signatory to the original or the same counterparts. For all purposes, including, without limitation, recordation, filing and delivery of this instrument, duplicate unexecuted and unacknowledged pages of the counterparts may be discarded and the remaining pages assembled as one document.

 

 

15

 

 

By signing in the space below, the undersigned parties agree to be bound by all terms of this Agreement.

 

	
BANK:
	
BORROWER:

	
 
	
 

	
FIRST FOUNDATION BANK 
	
CYANOTECH CORPORATION, 

a Nevada corporation

	
 
	
 

	
By: /s/ Douglas R. Weld                              
	
By: /s/ Gerald R. Cysewski

	Douglas R. Weld	Gerald R. Cysewski
	Its Senior Vice President	Its Interim President & CEO
	 	 
	 	 
	 	By: /s/ Jole Deal
	 	Jole Deal
	 	Its CFO

      

 

 

 

Authorized signatures for Loan requests:

 

/s/ Gerald R. Cysewski

Gerald R. Cysewski

 

/s/ Jole Deal

Jole Deal

 

/s/ Gerard Watts

Gerard Watts

 

 

 

 

 

 

 

The following comprises the Exhibit which is a part of this Agreement:

 

Exhibit A:     Commercial Line of Credit Draw Request

  

 

 

 

 

EXHIBIT "A"

 

COMMERCIAL LINE OF CREDIT DRAW REQUEST 

 

Date:                                                                      

 

 

 

	
TO:
	
FIRST FOUNDATION BANK, a California corporation  

 

	
FROM:
	
CYANOTECH CORPORATION, a Nevada corporation  

 

	
 
	
CHARGE:
	
Loan No.                                                                                          

 

	
 
	
CREDIT:
	
Checking Account No.                                                                               

 

	
 
	
AMOUNT:
	
                                                                                                                                   DOLLARS

	
 
	

	
  ($                                                          _)

 

 

In connection with said draw request, Borrower hereby certifies as follows:

 

 1.          The representations and warranties set forth in the Revolving Credit Agreement dated (the "Agreement"), as applicable, are true and correct on and as of the date hereof. The undersigned are authorized persons who are authorized to request draws for and on behalf of the Borrower under the Line of Credit.

 

 2.          As of the date hereof, no event has occurred and is continuing that: (a) constitutes an Event of Default under the Agreement; or (b) with the giving of notice or passage of time, or both, would constitute an Event of Default. The Borrower has observed and performed all of Borrower's covenants and other agreements, and satisfied every condition, contained in the Agreement and in the other Credit Documents, to be observed, performed or satisfied by Borrower.

 

	
 
	
BORROWER:

	
 
	 	
 

	
 
	
CYANOTECH CORPORATION,

	
 
	
a Hawaii corporation

	
 
	 	
 

	
 
	By	 
	
 
	 	
 

	
 
	 	
  Its

	 	 	 
	 	 	 
	 	By	 
	 	 	 
	 	 	  Its
	 	 	 
	 	 	
Authorized PersonExhibit 4.1

 

NICOCORP DEVELOPMENTS LTD. 

(the
“Company”)

 

2016 INCENTIVE STOCK OPTION PLAN 

 

		1.	OBJECTIVES 

 

The Plan is intended as an incentive to enable the Company to:

 

		(a)	attract and retain qualified directors, officers, employees
and consultants of the Company and its Affiliates,

 

		(b)	promote a proprietary interest in the Company and its Affiliates
among its employees, officers, directors and consultants, and

 

		(c)	stimulate the active interest of such persons in the development
and financial success of the Company and its Affiliates.

 

		2.	DEFINITIONS 

 

As used in the Plan, the terms set forth below will have the
following respective meanings:

 

		“	Affiliate”
has the meaning ascribed thereto in the Securities Act, as amended from time to time; 

 

		“	Associate”
has the meaning ascribed thereto in the Securities Act, as amended from time to time; 

 

		“	Board”
means the board of directors of the Company; 

 

		“	Committee”
means the Compensation and Organization Committee of the Board; 

 

“Consultant”
has the meaning set forth in National Instrument 45-106, as amended or superseded from time to time; 

 

“Company”
means Nicocorp Developments Ltd., a company subsisting under the Business Corporations Act (British Columbia) and its successor
corporations; 

 

		“	Director”
means a member of the Board; 

 

		“	Employees”
means an employee of the Company or any of its Affiliates and includes: 

 

		(a)	an individual who is (or would be if he were employed in
Canada) considered an employee of the Company or any of its Affiliates under the Income Tax Act (Canada);

 

		(b)	an individual who works full-time for the Company
or any of its Affiliates providing services normally provided by an employee and who is subject to the same direction and control
by the Company or such Affiliate over the details and methods of work as an employee of the Company or such Affiliate; and

 

    	 	 	 

     

    

  

		(c)	an individual who works for the Company or any of its Affiliates
on a continuing and regular basis for a minimum amount of time per week or month providing services normally provided by an employee
and who is subject to the same control and direction by the Company or such Affiliate over the details of work as an employee
of the Company or such Affiliate;

 

		“	Insider”
has the meaning ascribed thereto in the TSX Company Manual; 

 

“Management
Company Employee” means an Employee of a person providing
management services to the Company or an Affiliate of the Company (not including promotional or investor relations services); 

 

“Non-Employee
Director” means a director of the Company or of an Affiliate
of the Company who is not an Employee or an Officer; 

 

		“	Officer”
has the meaning ascribed thereto in the Securities Act; 

 

		“	Option”
means an option to purchase Shares granted under or subject to the terms of the Plan; 

 

“Option
Agreement” means a written agreement between the Company
and an Optionee that sets forth the terms, conditions and limitations applicable to an Option; 

 

		“	Option Period”
means the period for which an Option is granted; 

 

		“	Optioned Shares”
means the Shares for which an Option is or may become exercisable; 

 

“Optionee”
means a person to whom an Option has been granted under the terms of the Plan or who holds an Option that is otherwise subject
to the terms of the Plan; 

 

		“	Plan”
means this 2016 Incentive Stock Option Plan of the Company; 

 

“Securities
Act” means the Securities Act (British Columbia),
R.S.B.C. 1996 c.418, as amended from time to time; 

 

“Shares”
means common shares without par value in the capital stock of the Company as the same are presently constituted; and 

 

		“	TSX”
means the Toronto Stock Exchange or any successor thereto. 

 

		3.	ADMINISTRATION OF THE PLAN 

 

		3.1	The
Plan will be administered by the Committee, which will have the duties and responsibilities in respect thereof as set out in the
Company’s Compensation and Organization Committee Charter.
Notwithstanding the existence of any such Committee, the Board itself will retain independent and concurrent power to undertake
any action hereunder delegated to the Committee, whether with respect to the Plan as a whole or with respect to individual Options
granted or to be granted under the Plan.

 

		3.2	Subject to the limitations of the Plan, the Board, based
upon the recommendation(s) of the Committee, has full power to grant Options, to determine the terms, limitations, restrictions
and conditions respecting such Options and to settle, execute and deliver Option Agreements and bind the Company accordingly,
to interpret the Plan and to adopt such rules, regulations and guidelines for carrying out the Plan as it may deem necessary or
proper and to reserve, allot, fix the price of, and issue Shares pursuant to the grant and exercise of Options, all of which powers
must be exercised in the best interests of the Company and in keeping with the objectives of the Plan.

 

    	 	- 2 -	 

     

    

  

		3.3	Any
decision of the Board or Committee in the interpretation and administration of the Plan lies within its absolute discretion and
is final, conclusive and binding on all parties concerned. No member of the Board or Committee is liable for anything done or
omitted to be done by such member, by any other member of the Board or Committee or by any officer of the Company, in connection
with the performance of any duties under the Plan, except those which arise from such member’s
own wilful misconduct or as expressly provided by statute.

 

		3.4	The Company will pay all administrative costs of the Plan.

 

		4.	ELIGIBILITY FOR OPTIONS 

 

		4.1	Options may be granted to Employees, Officers, Directors
(including Non-Employee Directors), Management Company Employees, and Consultants of the Company and its Affiliates who are, in
the opinion of the Committee, in a position to contribute to the success of the Company or any of its Affiliates or who, by virtue
of their service to the Company or any predecessors thereof or to any of its Affiliates, are in the opinion of the Committee,
worthy of special recognition. Except as may be otherwise set out in this Plan, the granting of Options is entirely discretionary.
Nothing in this Plan will be deemed to give any person any right to participate in this Plan or to be granted an Option and the
designation of any Optionee in any year or at any time will not require the designation of such person to receive an Option in
any other year or at any other time. The Committee will consider such factors as it deems pertinent in selecting participants
and in determining the amounts and terms of their respective Options for recommendation to the Board.

 

		4.2	If an Optionee who is granted an Option is an Employee,
Management Company Employee or Consultant of the Company or any of its Affiliates, the Option Agreement pertaining to such Option
will contain a representation by the Optionee that the Optionee is a bona fide Employee, Management Company Employee or
Consultant of the Company or its Affiliates.

 

		4.3	Subject to:

 

		(a)	the acceptance of this Plan for filing by the TSX; and

 

		(b)	the approval of this Plan by the shareholders,

 

any
options over securities of the Company previously granted by the Company which remain outstanding as at January t,
2016 [NTD: date of approval of Plan by Board], will be deemed to have been issued under and will be governed by the terms of the
Plan provided that, in the event of inconsistency between the terms of the agreements governing such options previously granted
and the terms of the Plan, the terms of such agreements will govern. 

 

		4.4	Subject to any applicable regulatory approvals, Options
may also be granted under the Plan in exchange for outstanding options granted by the Company or any predecessor Company thereof
or any Affiliate thereof, whether such outstanding options were granted under the Plan, under any other stock option plan of the
Company or any predecessor Company or any Affiliate thereof, or under any stock option agreement with the Company or any predecessor
Company or Affiliate thereof.

 

		4.5	Subject to any applicable regulatory approvals, Options
may also be granted under the Plan in substitution for outstanding options of one or more other companies in connection with a
plan of arrangement or exchange, amalgamation, merger, consolidation, acquisition of property or shares, or other reorganization
between or involving such other companies the Company or any of its Affiliates.

 

    	 	- 3 -	 

     

    

  

		5.	NUMBER OF SHARES RESERVED UNDER THE PLAN 

 

		5.1	The number of Shares that may be reserved for issuance under
the Plan is limited as follows:

 

		(a)	the maximum aggregate number of Shares which may be made
issuable pursuant to the exercise of Options granted under the Plan at any particular time (together with those Shares which may
be issued pursuant to any other security-based compensation plan of the Company or any other options for services granted by the
Company at such time) will be a maximum of ten percent (10%) of the number of issued and outstanding Shares at such time, provided
that if any Option subject to the Plan is exercised, forfeited, expires, is terminated or is cancelled for any reason whatsoever,
then the Shares previously subject to such Option are automatically reloaded and available for future Option grants; and

 

		(b)	if and for so long as the Shares are listed on the
TSX:

 

		(i)	the maximum aggregate number of Shares that may be reserved
under the Plan or other share compensation arrangements of the Company for issuance to Insiders at any particular time will not
exceed ten percent (10%) of the issued and outstanding number of Shares at such time; and

 

		(ii)	the number of Shares issued to Insiders pursuant to the
Plan (together with any Shares issued to Insiders pursuant to any other share compensation arrangements of the Company) within
a 12 month period will not exceed ten percent (10%) of the issued and outstanding number of Shares.

 

		6.	NUMBER OF OPTIONED SHARES PER OPTION 

 

		6.1	Subject
always to the limitations in subsection 5.1, the number of Optioned Shares under an Option will be determined by the Committee,
in its discretion, at the time such Option is granted, taking into consideration the Optionee’s
present and potential contribution to the success of the Company and taking into account all other Options
then held by such Optionee.

 

		7.	PRICE 

 

		7.1	The exercise price per Optioned Share under an Option will
be determined by the Committee, in its discretion, at the time such Option is granted, but such price will be not less than the
greater of:

 

		(a)	the closing price of the Shares on the TSX on the trading
day immediately preceding the day on which the Option is granted (provided that if there are no trades on such day then the last
closing price within the preceding ten trading days will be used, and if there are no trades within such ten-day period, then
the simple average of the bid and ask prices on the trading day immediately preceding the day of grant will be used); and

 

		(b)	the volume weighted average trading price (calculated by
dividing the total value by the total volume of Shares traded on the TSX during the relevant period) of the Shares on the TSX
for the five trading days immediately prior to the date of grant.

 

The exercise price at which, and the number of optioned
securities for which, an outstanding Option may be exercised following a subdivision or consolidation of the Shares will be subject
to adjustment in accordance with section 11.

 

    	 	- 4 -	 

     

    

  

		7.2	The exercise price per Optioned Share under an Option may
be reduced at the discretion of the Committee if:

 

		(a)	at least six months has elapsed since the later of the date
such Option was granted and the date the exercise price for such Option was last amended; and

 

		(b)	shareholder approval is obtained, including disinterested
shareholder approval if required by the TSX, for any reduction in the exercise price under an Option;

 

provided that none of the conditions in this subsection
7.2 will apply in the case of an adjustment made under section 11.

 

		8.	OPTION PERIOD AND EXERCISE OF OPTIONS 

 

		8.1	The Option Period for an Option will be determined by the
Committee at the time the Option is granted and may be up to 10 years from the date the Option is granted. At the time an Option
is granted, the Committee may determine that, with respect to that Option, upon the occurrence of one of the events described
in subsection 10.1 there will come into force a time limit for exercise of such Option which is different than the Option Period,
and in the event of such a determination, the Option Agreement for such Option will contain provisions which specify the events
and time limits related to that determination. Subject to the applicable maximum Option Period provided for in this subsection
8.1 and subject to applicable regulatory requirements and approvals, the Committee may extend the Option Period of an outstanding
Option beyond its original expiration date, provided that shareholder approval, including disinterested shareholder approval if
required by the TSX, is obtained for any extension of the Option Period of an outstanding Option.

 

		8.2	The Committee may determine when any Option will become
exercisable and may determine that the Option will be exercisable in instalments.

 

		8.3	If there is a takeover bid or tender offer made for all
or any of the issued and outstanding Shares, then the Board may, in its sole and absolute discretion and if permitted by applicable
legislation and the policies and rules of any stock exchange or regulatory body having jurisdiction over the securities of the
Company, unilaterally determine that outstanding Options, whether fully vested and exercisable or subject to vesting provisions
or other limitations on exercise, will be conditionally exercisable in full to enable the Optioned Shares subject to such Options
to be conditionally issued and tendered to such bid or offer, subject to the conditions that if the bid or offer is not duly completed
the exercise of such Options and the issue of such Shares will be rescinded and nullified and the Options, including any vesting
provisions or other limitations on exercise which were in effect will be re-instated.

 

		8.4	The vested portions of Options will be exercisable, in whole
or in part, at any time after vesting. If an Option is exercised for fewer than all of the Optioned Shares for which the Option
has then vested, the Option will remain in force and exercisable for the remaining Optioned Shares for which the Option has then
vested, according to the terms of such Option.

 

		8.5	The exercise of any Option will be contingent upon receipt
by the Company of payment in full for the exercise price of the Shares being purchased in cash by way of certified cheque or bank
draft. Neither an Optionee nor the legal representatives, legatees or distributees of such Optionee will be, or will be deemed
to be, a holder of any Shares subject to an Option under the Plan unless and until:

 

    	 	- 5 -	 

     

    

  

		(a)	certificates for such Shares are issuable to the Optionee
or such other persons pursuant to the Option or the Plan; or

 

		(b)	such Shares are registered in the name of the Optionee or
such other persons pursuant to the Option or the Plan in accordance with any system of direct registration that may be adopted
by the Company.

 

		8.6	Notwithstanding
the provisions of subsection 8.1 or the date of expiration of an Option determined in accordance with this Plan (“Fixed
Term”), the date of expiration of an Option will be
adjusted, without being subject to Board or Committee discretion, to take into account any blackout period imposed on the Optionee
by the Company as follows:

 

		(a)	if
the Fixed Term expiration date falls within a blackout period imposed on the Optionee by the Company, then the Fixed Term expiration
date is extended to the close of business on the 10th business day after the end of such blackout period (the “Blackout
Expiration Term”); or

 

		(b)	if the Fixed Term expiration date falls within two business
days after the end of a blackout period imposed on the Optionee by the Company, then the Fixed Term expiration date will be that
date which is the Blackout Expiration Term reduced by that number of business days between the Fixed Term expiration date and
the end of such blackout period (i.e. Options whose Fixed Term expires two business days after the end of the blackout period
will only have an additional eight business days to exercise.)

 

		9.	STOCK OPTION AGREEMENT 

 

		9.1	Upon the grant of an Option to an Optionee, the Company
and the Optionee will enter into an Option Agreement setting out the number of Optioned Shares subject to the Option, the Option
Period and, if applicable, the vesting schedule for the Option, and incorporating the terms and conditions of the Plan and any
other requirements of regulatory authorities and stock exchanges having jurisdiction over the securities of the Company, together
with such other terms and conditions as the Committee may determine in accordance with the Plan.

 

		10.	EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH

 

		10.1	An outstanding Option will remain in full force and effect
and exercisable according to its terms for the Option Period notwithstanding that the holder of such Option ceases to be an Employee,
Officer, Director (including a Non-Employee Director), Management Company Employee, or Consultant of the Company or an Affiliate
for any reason, including death, subject always to any express term in any Option Agreement made pursuant to subsection 8.1 which
provides that upon the occurrence of one of such events there will come into force a time limit for exercise of such Option which
is different than the Option Period. So long as the Shares are listed on the TSX (unless otherwise permitted by the TSX) the maximum
period within which the heirs or administrators of a deceased Optionee may exercise any portion of an outstanding Option is one
year from the date of death or the balance of the Option Period, whichever is earlier.

 

		10.2	In
the event of the death of an Optionee, an Option which remains exercisable may be exercised in accordance with its terms by the
person or persons to whom such Optionee’s rights under the
Option will have passed under the Optionee’s will or pursuant
to law.

 

    	 	- 6 -	 

     

    

  

		11.	ADJUSTMENT IN SHARES SUBJECT TO THE PLAN

 

		11.1	Following the date an Option is granted, the exercise price
for and the number of Optioned Shares which are subject to an Option will be adjusted, with respect to the then unexercised portion
thereof, by the Committee from time to time (on the basis of such advice as the Committee considers appropriate, including, if
considered appropriate by the Committee, a certificate of the auditor of the Company) in the events and in accordance with the
provisions and rules set out in this section 11, with the intent that the rights of Optionees under their Options are, to the
extent possible, preserved notwithstanding the occurrence of such events. The Committee will conclusively determine any dispute
that arises at any time with respect to any adjustment pursuant to such provisions and rules, and any such determination will
be binding on the Company, the Optionee and all other affected parties.

 

		11.2	The number of Optioned Shares to be issued on the exercise
of an Option will be adjusted from time to time to account for each dividend of Shares (other than a dividend in lieu of cash
dividends paid in the ordinary course), so that upon exercise of the Option for an Optioned Share the Optionee will receive, in
addition to such Optioned Share, an additional number of Shares (“Additional
Shares”), at no further cost, to adjust for each such
dividend of Shares. The adjustment will take into account every dividend of Shares that occurs between the date of the grant of
the Option and the date of exercise of the Option for such Optioned Share. If there has been more than one such dividend, the adjustment
will also take into account that the dividends that are later in time would have been distributed not only on the Optioned Share
had it been outstanding, but also on all Additional Shares which would have been outstanding as a result of previous dividends.

 

		11.3	If the outstanding Shares are changed into or exchanged
for a different number or kind of shares or into or for other securities of the Company or securities of another Company or entity,
whether through an arrangement, amalgamation or other similar procedure or otherwise, or a share recapitalization, subdivision
or consolidation, then on each exercise of the Option which occurs following such events, for each Optioned Share for which the
Option is exercised, the Optionee will instead receive the number and kind of shares or other securities of the Company or other
Company into which such Option Share would have been changed or for which such Option Share would have been exchanged if it had
been outstanding on the date of such event.

 

		11.4	If the outstanding Shares are changed into or exchanged
for a different number or kind of shares or into or for other securities of the Company or securities of another Company or entity,
in a manner other than as specified in subsections 11.2 or 11.3, then the Committee, in its sole discretion, may make such adjustment
to the securities to be issued pursuant to any exercise of the Option and the exercise price to be paid for each such security
following such event as the Committee in its sole and absolute discretion determines to be equitable to give effect to the principle
described in subsection 11.1 and such adjustments will be effective and binding upon the Company and the Optionee for all purposes.

 

		11.5	If the Company distributes, by way of a dividend or otherwise,
to all or substantially all holders of Shares, property, evidences of indebtedness or shares or other securities of the Company
(other than Shares) or rights, options or warrants to acquire Shares or securities convertible into or exchangeable for Shares
or other securities or property of the Company, other than as a dividend in the ordinary course, then, if the Committee, in its
sole discretion, determines that such action equitably requires an adjustment in the exercise price under any outstanding Option
or in the number(s) of Optioned Shares subject to any such Option, or both, such adjustment may be made by the Committee and will
be effective and binding on the Company and the Optionee for all purposes.

 

    	 	- 7 -	 

     

    

 

		11.6	No adjustment or substitution provided for in this section
11 will require the Company to issue a fractional share in respect of any Option. Fractional shares will be eliminated.

 

		11.7	The grant or existence of an Option will not in any way
limit or restrict the right or power of the Company to effect adjustments, reclassifications, reorganizations, arrangements or
changes of its capital or business structure, or to amalgamate, merge, consolidate, dissolve or liquidate, or to sell or transfer
all or any part of its business or assets.

 

		11.8	Any adjustment or substitution provided for in this section
11 will require the acceptance for filing thereof by the TSX.

 

		12.	NON-ASSIGNABILITY

 

		12.1	Neither the Options nor the benefits and rights of any Optionee
under any Option or under the Plan will be assignable or otherwise transferable, except as specifically provided in subsection
10.2 in the event of the death of the Optionee. During the lifetime of the Optionee, all such Options, benefits and rights may
only be exercised by the Optionee.

 

		13.	EMPLOYMENT

 

		13.1	Nothing contained in the Plan will confer upon any
Optionee, or any person employing a Management Company Optionee, any right with respect to employment or continuance of employment
with, or the provision of services to, the Company or any of its Affiliates, or interfere in any way with the right of the Company
or any of its Affiliates to terminate the Optionee’s
employment or the services of any such person at any time. Participation in the Plan by an Optionee is voluntary.

 

		14.	REGULATORY ACCEPTANCES

 

		14.1	The Plan is subject to the acceptance of the Plan for filing
by the TSX, and the Committee is authorized to amend the Plan from time to time in order to comply with any changes required from
time to time by such applicable regulatory authorities, whether as conditions to the acceptance for filing of the Plan or otherwise,
provided that no such amendment will in any way derogate from the rights held by Optionees holding Options (vested or unvested)
at the time thereof without the consent of such Optionees.

 

		14.2	The obligation of the Company to issue and deliver Optioned
Shares pursuant to the exercise of any Options granted under the Plan is subject to the acceptance of the Plan for filing by the
TSX. If any Shares cannot be issued to any Optionee for any reason, including, without limitation, the failure to obtain such
acceptance for filing, then the obligation of the Company to issue such Optioned Shares will terminate and any amounts paid to
the Company for such Optioned Shares will be returned to the Optionee forthwith without interest or deduction.

 

		15.	SECURITIES REGULATION AND TAX WITHHOLDING

 

		15.1	Where necessary to enable the Company to use an exemption
from requirements to register Optioned Shares or file a prospectus or use a registered dealer to distribute Optioned Shares under
securities laws applicable to the securities of the Company in any jurisdiction, an Optionee, upon the acquisition of any Optioned
Shares by the exercise of Options and as a condition to such exercise, will provide to the Committee such evidence as the Committee
requires to demonstrate that the Optionee or recipient will acquire such Optioned Shares with investment intent (i.e. for investment
purposes) and not with a view to their distribution, including an undertaking to that effect in a form acceptable to the Committee.
The Committee may cause a legend or legends to be placed upon any certificates for the Optioned Shares
to make appropriate reference to applicable resale restrictions, and the Optionee or recipient will be bound by such restrictions.
The Committee also may take such other action or require such other action or agreement by such Optionee or proposed recipient
as may from time to time be necessary to comply with applicable securities laws. This provision will in no way obligate the Company
to undertake the registration or qualification of any Options or the Optioned Shares under any securities laws applicable to the
securities of the Company.

 

    	 	- 8 -	 

     

    

  

		15.2	The
Committee and the Company may take all such measures as they deem appropriate to ensure that the Company’s
obligations under the withholding provisions under income tax laws applicable to the Company and other provisions of applicable
laws are satisfied with respect to the issuance of Shares pursuant to the Plan or the grant or exercise of Options under the Plan.

 

		15.3	Without
limiting the generality of subsection 15.2, the Company will have the right to deduct and withhold from any amount payable or
consideration deliverable to an Optionee (a “Participant”),
either under the Plan or otherwise, such amount or consideration as may be necessary to enable the Company to comply with the
applicable requirements of any federal, provincial, state or local law, or any administrative policy of any applicable tax authority,
relating to the deduction, withholding or remittance of tax or any other required deductions or remittances with respect to awards
hereunder (“Withholding Obligations”).
The Company will also have the right in its discretion to satisfy any liability for any Withholding Obligations by withholding
and selling, or causing a broker to sell, on behalf of any Participant, such number of Shares issued to the Participant pursuant
to an exercise of Options hereunder as is sufficient to fund the Withholding Obligations (after deducting commissions payable
to the broker and other costs and expenses), or retaining any amount or consideration which would otherwise be paid, delivered
or provided to the Participant hereunder. The Company may require a Participant, as a condition to granting an Option or the exercise
of an Option, to make such arrangements as the Company may in its discretion require so that the Company can satisfy applicable
Withholding Obligations, including, without limitation:

 

		(a)	requiring the Participant to remit the amount of any such
Withholding Obligations to the Company in advance;

 

		(b)	requiring the Participant to indemnify and reimburse the
Company for any such Withholding Obligations;

 

		(c)	withholding and selling Shares acquired by the Participant
under the Plan, or causing a broker to sell such Shares on behalf of the Participant, withholding from the proceeds realized from
such sale the amount required to satisfy any such Withholding Obligations, and remitting such amount directly to the Company;
or

 

		(d)	any combination thereof.

 

		15.4	Any Shares of a Participant that are sold by the Company, or by a broker engaged by the Company
                                                                              (the “Broker”),
                                                                              to fund Withholding Obligations will be sold as soon as practicable in transactions effected on the exchange on which the
                                                                              Shares are then listed for trading, if any. In effecting the sale of any such Shares, the Company or the Broker will exercise
                                                                              its sole judgment as to the timing and manner of sale and will not be obligated to seek or obtain a minimum price. Neither
                                                                              the Company nor the Broker will be liable for any loss arising out of any sale of such Shares including any loss relating to
                                                                              the manner or timing of such sales, the prices at which the Shares are sold or otherwise. In addition, neither the Company
                                                                              nor the Broker will be liable for any loss arising from a delay in transferring any Shares to a Participant. The sale price
                                                                              of Shares sold
on behalf of Participants will fluctuate with the market price of the Company’s
shares and no assurance can be given that any particular price will be received upon any such sale. 

 

    	 	- 9 -	 

     

    

  

		15.5	Issuance of Shares or delivery of share certificates for
or direct registration of Shares purchased pursuant to the Plan may be delayed, at the discretion of the Committee, until the
Committee is satisfied that the applicable requirements of income tax laws and other applicable laws have been met.

 

		16.	AMENDMENT AND TERMINATION OF PLAN

 

		16.1	Subject to the policies, rules and regulations of any lawful
authority having jurisdiction (including the TSX or any other stock exchange on which the Shares may be listed), the Board may,
at any time, without further action or approval by the shareholders of the Company, amend the Plan, any Option or Option Agreement
in such respects as it may consider advisable to:

 

		(a)	ensure that the Options granted hereunder will comply with
any provisions respecting stock options in tax and other laws in force in any country or jurisdiction of which a Optionee to whom
an Option has been granted may from time to time be resident or a citizen;

 

		(b)	make amendments of an administrative nature;

 

		(c)	correct any defect, supply any omission or reconcile
any inconsistency in the Plan, any Option or Option Agreement;

 

		(d)	change the vesting provisions of an Option or the
Plan;

 

		(e)	change termination provisions of an Option provided
that the expiry date does not extend beyond the original expiry date;

 

		(f)	add or modify a cashless exercise feature providing
for payment in cash or securities upon the exercise of Options;

 

		(g)	make any amendments required to comply with applicable
laws or the requirements of the TSX or any regulatory body or stock exchange with jurisdiction over the Company;

 

		(h)	add or change provisions relating to any form of financial
assistance provided by the Company to participants under the Plan that would facilitate the purchase of securities under the Plan;
and

 

provided that shareholder approval must be obtained
for any amendment that results in:

 

		(i)	an increase in the Shares issuable under Options granted
pursuant to the Plan;

 

		(j)	a change in the persons who qualify as participants eligible
to participate under the Plan; 

 

		(k)	a reduction in the exercise price of an Option;

 

		(l)	the cancellation and reissuance of any Option;

 

		(m)	the extension of the term of an Option;

 

		(n)	a change in the Insider participation limit contained in
subsection 5.1(b);

 

    	 	- 10 -	 

     

    

 

		(o)	Options becoming transferable or assignable other than for
the purposes described in section 10; and

 

		(p)	a change in the amendment provisions contained in this section
16.

 

		16.2	No Shares will be issued under any amendment to this Plan
unless and until the amended Plan has been accepted for filing by the TSX.

 

		16.3	The Plan may be abandoned or terminated in whole or in part
at any time by the Board, except with respect to any Option then outstanding under the Plan.

 

		16.4	The Board may not, without the consent of the affected Optionee(s),
alter or impair any of the rights or obligations under any Option then outstanding under the Plan.

 

		17.	NO REPRESENTATION OR WARRANTY

 

		17.1	The Company makes no representation or warranty as to the
future market value of any Shares or Optioned Shares.

 

		18.	GENERAL PROVISIONS

 

		18.1	Nothing contained in the Plan will prevent the Company or
any of its Affiliates from adopting or continuing in effect other compensation arrangements (subject to shareholder approval if
such approval is required by TSX) and such arrangements may be either generally applicable or applicable only in specific cases.

 

		18.2	The validity, construction and effect of the Plan, the grants
of Options, the issue of Optioned Shares, any rules and regulations relating to the Plan any Option Agreement, and all determinations
made and actions taken pursuant to the Plan, will be governed by and determined in accordance with the laws of the Province of
British Columbia and the laws of Canada applicable therein.

 

		18.3	If any provision of the Plan or any Option Agreement is
or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any person or Option, or would disqualify
the Plan or any Option under any law deemed applicable by the Committee, such provision will be construed or deemed amended to
conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Option, such provision will be stricken as to such jurisdiction, person, or
Option and the remainder of the Plan and any such Option Agreement will remain in full force and effect.

 

		18.4	Neither the Plan nor any Option will create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any of its Affiliates
and an Optionee or any other person.

 

		18.5	Headings are given to the sections of the Plan solely as
a convenience to facilitate reference. Such headings will not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.

 

    	 	- 11 -	 

     

    

 

		19.	TERM OF THE PLAN

 

		19.1	The
Plan will be effective as of January t,
2016, subject to its approval by the shareholders of the Company and acceptance for filing by the TSX pursuant to section 14.

 

		19.2	The
Plan will be effective until January t,
2026 unless the Plan is earlier terminated by the Board pursuant to section 16, and no Option will be granted under the Plan after
that date. Unless otherwise expressly provided in the Plan or in an applicable Option Agreement, the Option Period for any Option
granted hereunder will, and any authority of the Board to amend, alter, adjust, suspend, discontinue or terminate any such Option
or to waive any conditions or rights under any such Option will, continue after termination of the Plan on January ________, 2016
or any earlier termination date of the Plan, notwithstanding such termination.

 

	Adopted by the Board 	 
	(subject to Shareholder and TSX approval):	January t, 2016
	 	 
	Accepted for filing by the TSX:	t 
	 	 
	Approved by the Shareholders:	t 

 

    	 	- 12 -

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