SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") made as of the 1st day
of January, 1998, by CYANOTECH CORPORATION, a Nevada Corporation, whose address
is 73-4460 Queen Kaahumanu Highway, #102, Kailua-Kona, Hawaii 96740, hereinafter
referred to as the "Debtor", in favor and for the benefit of KIEWIT PACIFIC CO.,
a Delaware corporation, whose address is 1001 Kamokila Boulevard, Suite 305,
Kapolei, Hawaii 96707, hereinafter called the "Secured Party",
WITNESSETH THAT:
A. OBLIGATIONS AND LIABILITIES SECURED BY THIS SECURITY AGREEMENT. The Debtor
does hereby covenant and agree as follows:
1. THIS SECURITY AGREEMENT DOES HEREBY SECURE the repayment of that certain
loan (the "Loan") made by the Secured Party to the Debtor in the principal
amount of NINE HUNDRED SEVENTY FIVE THOUSAND AND NO/100 DOLLARS (U.S.
$975,000.00), and all renewals, extensions and modifications thereof, together
with interest thereon, and the payment (including, but not limited to, all sums
expended or advanced pursuant to), the observance and the performance of, all
covenants, conditions and agreements required to be paid, observed and performed
by the Debtor under the following loan documents:
(1) This Security Agreement covering the furniture, fixtures,
equipment, appliances, inventory, farm products and accounts receivable
and any other personal property now or hereafter acquired by the
Debtor, on the property described as Kalaoa 1st - 4th and Ooma 1st
North Kona, Island of Hawaii identified by Tax Map Key 7-3-43, portion
42 (3) and wherever else located, and all production equipment,
research and development lab equipment, tool and equipment and
stockpiled crushed rock, arising out of or respecting the operations of
the Debtor;
(2) That certain Promissory Note executed concurrently
herewith by the Debtor, as Maker, such note and any renewals,
extensions and modifications thereof being hereinafter referred to as
the "Note";
(3) That certain Financing Statement (UCC-1) covering the
furniture, fixtures, equipment, appliances, inventory and accounts
receivable and any other personal property now or hereafter acquired by
the Debtor, on the property described as Kalaoa 1st - 4th and Ooma 1st
North Kona, Island of Hawaii identified by Tax Map Key 7-3-43, portion
of 42 (3) and wherever else located, and all production equipment,
research and development lab equipment, tool and equipment and
stockpiled crushed rock, arising out of or respecting the operations of
the Debtor; and
(4) Any other instruments or agreements executed by any party
concurrently herewith or otherwise in connection with the loan
documents,
all of the foregoing loan documents, together with all future modifications
thereof, being hereinafter collectively referred to as the "Loan Documents";
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2. THIS SECURITY AGREEMENT DOES ALSO HEREBY SECURE the payment by the
Debtor to the Secured Party of all other sums now or hereafter loaned or
advanced by the Secured Party to the Debtor, or expended by the Secured Party
for the account of the Debtor, or otherwise owing by the Debtor to the Secured
Party, directly or indirectly, on any and every account whatsoever; and
3. THIS SECURITY AGREEMENT DOES ALSO HEREBY SECURE all judgment issued by
any court in favor of the Secured Party or the Secured Party's assigns against
the Debtor related to or arising out of any default of the Debtor under the Loan
Documents.
B. GRANT OF SECURITY INTEREST
THE DEBTOR DOES HEREBY grant, assign, convey, transfer, deliver, and
set over to the Secured Party, its successors and assigns, absolutely and
forever, the following described property, as a security interest, as that term
is defined in the Uniform Commercial code (Chapter 490, Hawaii Revised Statutes,
as amended), upon the terms and conditions hereinafter set forth:
FIRST:
All right, title and interest of the Debtor in and to any and
all assets and personal property interests of the Debtor (the "Debtor's
Property and Assets") related to or located at the property described
as Kalaoa 1st - 4th and Ooma 1st North Kona, Island of Hawaii
identified by Tax Map Key 7-3-43, portion 42 (3) (the "Property") or
wherever else located in the State of Hawaii, and in and to the
business carried on by the Debtor in any location, and in and to any
replacements thereof or additional or supplementary agreements related
thereto;
Together with all of the Debtor's rights and remedies under
the Debtor's Property and Assets, and the benefit of all covenants
therein;
SECOND:
All right, title and interest of the Debtor in and to any and
all furniture, furnishings, machinery, apparatus, appliances,
equipment, fittings, fixtures, improvements, decorations and articles
of personal property of every kind and nature whatsoever, now and
hereafter located in the building or buildings erected on the premises
located on the Property or wherever else located in the State of
Hawaii, or any part thereof, and used or usable in connection with the
business of the Debtor, or in connection with any present or future
occupancy of said building or buildings and now owned or hereafter
acquired by the Debtor (hereinafter called "furniture, fixtures and
equipment"), including, but without limiting the generality of the
foregoing, all heating, lighting, incinerating and power equipment,
engines, pipes, pumps, tanks, motors, conduits, switchboards, plumbing,
lifting, cleaning, fire prevention, fire extinguishing, refrigerating,
ventilating and communications apparatus, air attached cabinets,
partitions, ducts and compressors, save and except personal property,
if any, belonging to others than the Debtor, the Debtor hereby agreeing
that all such furniture, fixtures and equipment shall be a part and
parcel of the premises and appropriated to the use thereof and, whether
affixed or annexed to the premises or not;
Together with all substitutions therefor and additions and
accessions to the furniture, fixtures and equipment and parts used or
intended to be used therewith.
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THIRD:
All production equipment, research and development lab
equipment, tool and equipment and stockpiled crushed rock, arising out
of or respecting the operations of the Debtor;
Together with all substitutions therefor and additions and
accessions thereto.
FOURTH:
All accounts, accounts receivable, other receivables, contract
rights, chattel paper, instruments and documents, and notes; any other
obligations or indebtedness owed to the Debtor from whatever source
arising; all rights of the Debtor to receive any performance or any
payments in money or kind; all guaranties of the foregoing and security
therefor; all of the right, title and interest of the Debtor in and
with respect to the goods, services, or other property that gave rise
to or that secure any of the foregoing and insurance policies and
proceeds relating thereto, and all rights of the Debtor as an unpaid
seller of goods services, including, but not limited to, the rights to
stoppage in transit, replevin, reclamation, and resale; all of the
foregoing whether now owned or existing or hereafter created or
acquired by the Debtor, hereinafter separately and collectively
referred to as the "Accounts". The word "Accounts" as used in this
Security Agreement also includes "documents," "instruments" and
"chattel paper" as such terms are defined in the Uniform Commercial
Code.
Together with all of the Debtor's rights and remedies under
the Accounts, and the benefit of all covenants therein and all proceeds
therefrom.
FIFTH:
All of the right, title and interest of the Debtor in and to
any and all goods, merchandise, or other property, raw materials,
parts, supplies, work-in-process and finished products intended for
sale, of every kind and description, in the custody or possession,
actual or constructive, of the Debtor, including insurance proceeds
from insurance on any of the above, any returns upon any Accounts and
other proceeds, resulting from sale or disposition of any of the
foregoing, including without limitation, raw materials,
work-in-process, and finished goods, hereinafter separately and
collectively referred to as the "Inventory"; all of the foregoing
whether now owned or existing or hereafter created or acquired by the
Debtor.
Together with all substitutions therefor and additions and
accessions to the Inventory.
SIXTH:
All of the right, title and interest of the Debtor in and to
all crops, livestock, supplies used or produced in farming operations,
unmanufactured products of crops livestock or aquaculture, hereinafter
separately and collectively referred to as the "Farm Products"; all of
the foregoing whether now owned or existing or hereafter created or
acquired by the Debtor.
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All articles of property described in items FIRST through SIXTH are
hereinafter sometimes collectively called the "Personal Property" and the
"Collateral".
TOGETHER WITH all right, title and interest of the Debtor in, and to
use, lease or dispose of, the Collateral as well as any proceeds deriving from
such Collateral;
TO HAVE AND TO HOLD the same unto the Secured Party and its successors
and assigns, absolutely and forever, as security as aforesaid;
UPON CONDITION that if the Debtor shall well and truly pay to the
Secured Party the principal amount of the Note, with interest and premium, if
any, according to its provisions and effect and shall discharge any and all
obligations that now or hereafter may be or become owing, directly or
indirectly, by the Debtor to the Secured Party under the Loan Documents on any
and every account, whether or not the same are matured, of which obligations the
books of the Secured Party shall be prima facie evidence, and if the Debtor
shall fully and faithfully perform and observe all of the covenants, conditions
and agreements to be performed and observed by the debtor in the Loan Documents,
including this Security Agreement, and any and every other instrument or
document secured hereby, and if the Debtor shall pay the cost of release, the
Secured Party will, upon request of the Debtor, release the Collateral from the
security interest created by this Security Agreement and these presents shall be
void, it being understood, however, that an affidavit, certificate, letter or
statement of any officer of the Secured Party showing that any part of the
indebtedness remains unpaid or any terms, covenants, conditions and agreements
remain unperformed shall constitute evidence of the validity, effectiveness and
continuing force of this Security Agreement.
Subject to the terms hereof, until the happening of an Event of
Default, as hereinafter defined, the Debtor shall be entitled to use and to
possess the Collateral.
C. EVENTS OF DEFAULT. If any one or more of the following events,
hereinafter called "Events of Default" shall occur:
(1) The Debtor shall default in the payment of principal or interest on the
Note or any other obligation secured hereby; or
(2) The Debtor shall default in the due and punctual observance or
performance of any other covenant, condition or agreement required to be
observed or performed under this Security Agreement, and such default shall not
be remedied within twenty (20 days) after the occurrence of such default; or
(3) Any one or more of the Events of Default defined in any of the Loan
Documents shall occur; or
(4) There shall be any attachment, execution or other judicial seizure of,
or affecting, the Collateral, or any part thereof, unless the Debtor sets aside,
dissolves, bonds off or otherwise eliminates such attachment, execution or
seizure within twenty (20 days) after its occurrence; or
(5) The Debtor shall become insolvent or shall admit in writing its
inability to meet its debts as they become due, or shall file a voluntary
petition in bankruptcy, or make an assignment for the benefit of creditors, or
consent to the appointment of a receiver or trustee for all or a substantial
part of its properties, or file a petition, answer or other instrument seeking
or acquiescing to the arrangement of its debts, or other relief under the
federal bankruptcy laws or any other applicable law of the United States of
America or any state or territory for the relief of debtors; or
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(6) A decree or order of a court having jurisdiction in the premises shall
be entered (i) adjudging the Debtor to be bankrupt or insolvent, or (ii)
appointing a receiver or trustee or assignee in bankruptcy or insolvency of the
Debtor or its properties, or (iii) directing the winding up or liquidation of
its affairs; or
(7) Any representation or warranty herein made by the Debtor shall be
untrue in any material respect; or
(8) The forfeiture or seizure by any governmental authority under 18 U.S.C.
ss.981, or under any other federal, state or other law, of any of the Collateral
or any of the properties which are covered by the security instruments which are
part of the Loan Documents; or
(9) The failure of the Debtor to file cash transaction receipts as required
by federal law; or limited to 18 U.S.C. ss.1956(a)(3).
D. REMEDIES FOR EVENT OF DEFAULT.
UPON THE OCCURRENCE OF ANY ONE OR MORE OF EVENTS OF DEFAULT, THEN, AND
IN ANY SUCH EVENT,
1. The Secured Party, without obligation to do so and without releasing or
waiving any of its rights, shall have the right, power, and authority, without
notice, presentment or demand to declare the unpaid principal amount of the Note
and any other indebtedness secured hereby, whether matured or not, together with
any interest thereon accrued and unpaid, to be immediately due and payable, and
such indebtedness and interest shall thereupon become and be immediately due and
payable, and shall bear interest until fully paid at the rate specified in the
Note to be paid in the event of default; and
2. The Secured Party may, at its option, without notice and irrespective of
whether declaration of default is required to be delivered to any party named in
the Loan Documents or other instrument or obligations securing the Note or
secured hereunder or whether remedies under other security instruments have been
exercised, exercise all rights and remedies contained in the Loan Documents,
including this Security Agreement, or any other security instruments and
obligations, and shall have all rights and remedies available to the Secured
Party under the Uniform Commercial code or other applicable laws.
3. Without limiting the generality of the foregoing, upon the occurrence of
an Event of Default:
a. The Secured Party may, at the Secured Party's option and at the
Debtor's expense, either in the Secured Party's own right or in the name of the
Debtor and in the same manner and to the same extent that the Debtor might
reasonably so act if this Security Agreement had not been made:
(1) demand, sue for, collect, recover, receive and otherwise
enforce payment of all proceeds and other sums due and payable from the
Collateral, the Debtor hereby requesting and instructing all other
parties liable to the Debtor in connection with the Collateral to make
all payments then due or which may thereafter become due thereunder or
thereby to the Secured Party, and the Debtor further agreeing that the
receipt by the Secured Party of any such
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payments shall be a complete release and discharge of the obligor or
obligors thereof to the extent of the payment or payments so made;
(2) to exercise all the rights, remedies and privileges of the
Debtor arising from the Collateral, or any party thereof, including the
compromising, waiving, excusing, or in any manner releasing or
discharging of any obligation of any party to or arising from the
Collateral;
(3) take possession of the books, papers, and accounts of the
Debtor, wherever located, relating to the Collateral;
(4) receive, and the Debtor will forthwith surrender to the
Secured Party, the possession of the Collateral, and, to the extent
permitted by law, the Secured Party may itself or by such officers or
agents as it may appoint (A) manage or operate the Collateral or any
part thereof, (B) exclude the Debtor, its agents and servants
therefrom, (C) fix or modify purchase prices, and lease the Property or
Personal Property, or any part thereof, and (D) do all acts, including
the making of contracts, which the Secured Party deems necessary for
the care or management of the Property or Personal Property; and
(5) sue or otherwise collect and receive money.
b. The Secured Party may foreclose this Security Agreement in the
manner now or hereafter provided or permitted by law, including treatment of the
Collateral as real property subject to judicial foreclosure pursuant to Chapter
667, Hawaii Revised Statutes, as amended, and shall have the immediate right to
receivership on ex parte order and without bond pending foreclosure, and may
sell, assign, transfer or otherwise dispose of the Collateral at public or
private sale, in whole or in part, and the Secured Party may, in its own name or
as the irrevocably appointed attorney-in-fact of the Debtor, effectually assign
and transfer the Collateral, or any part thereof, absolutely, and execute and
deliver all necessary assignments, deeds, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporations with
like power; and, if the Secured Party so instructs the Debtor, the Debtor shall
assemble, without expense to the Secured Party, all of the Collateral at a
convenient place on the island where the Property is located, and the Debtor
shall ratify and confirm any such sale or transfer by delivering all proper
instruments to such persons or corporations as may be designated in any such
request. Any such foreclosure sale, assignment or transfer shall, to the extent
permitted by law, be a perpetual bar, both at law and in equity, against the
Debtor and all persons and entities lawfully claiming by or through or under the
Debtor. Any such sale may be adjourned from time to time. Upon any sale, the
Secured Party may bid for and purchase the Collateral, or any part thereof, and
upon compliance with the terms of sale, may hold, retain and possess and dispose
of the Collateral, in its absolute right without further accountability, and any
purchaser, including the Secured Party, at any such sale may, if permitted by
law, after allowing for the proportion of the total purchase price required to
be paid in cash for the costs and expenses of the sale, commissioner's
compensation and other charges, in paying purchase money, turn in the Note,
including interest and charges thereon, in lieu of cash, up to the amount which
shall, upon distribution of the net proceeds of such sale, be payable thereon.
c. In case of any Event of Default, neither the Debtor nor anyone
claiming by, through or under the Debtor, to the extent the Debtor may lawfully
so agree, shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption law now or hereafter in
force in any locality where any of the Collateral is situated in order to
prevent or hinder the enforcement of this Security Agreement, or the absolute
sale of the Collateral, or the final and absolute putting into possession
thereof, immediately after such sale, of the purchasers thereat; and the Debtor
in the Debtor's own right and for all who may claim under the
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Debtor, hereby waives, to the full extent that the Debtor may lawfully do so,
the benefit of all such laws and any and all right to have the estates comprised
in the security intended to be created hereby marshalled upon any enforcement of
the lien hereof and agrees that the Secured Party or any court having
jurisdiction to foreclose such lien may sell the Collateral in parts or as an
entirety. The Secured Party may apply the proceeds of any such sale first, to
the costs and expenses of such sale and all proceedings in connection therewith,
including counsel fees; next, to the payment of any disbursements made by the
Secured Party for taxes or assessments or other charges prior to the Security
interest of this Security Agreement which the Secured Party shall deem it
expedient to pay; next, to the repayment of any other disbursements made by the
Secured Party according to the terms hereof; next, to the payment of the unpaid
principal of and interest on the Note, and any other obligations of the Debtor
under the Loan Documents; and the remainder, if any, shall be paid over to the
Debtor. If such proceeds shall be insufficient to discharge the entire
indebtedness owing by the Debtor under the Security Agreement, the Loan
Documents, and any other instrument or obligation secured hereunder, the Secured
Party may have any other legal recourse against the Debtor for the deficiency.
d. Nothing in this Security Agreement or the Note shall impair the
right, which is unconditional and absolute, of the holder of the Note to enforce
payment of the principal of, and interest on, the Note and all fees, charges and
other sums due under the Loan documents at or after the date therein expressed
as the date when the same shall become due, or the obligation of the Debtor
secured hereunder, which is likewise unconditional and absolute, to pay such
amounts at the respective times and places therein expressed.
E. THE DEBTOR'S WARRANTIES. The Debtor warrants and represents to the
Secured Party as follows:
1. Warranties Regarding the Collateral. The Debtor warrants and represents
to the Secured Party as follows:
a. The Debtor is the lawful owner of the Collateral and has
the right to the use and possession of the Collateral and has good
right to grant or convey the same as security under this Security
Agreement.
b. The Collateral is free and clear of any lien or right prior
to or on a parity with the lien of this Security Agreement, and except
for any prior existing liens, including without limitation, liens in
favor of Spirulina International B.V.
c. The Debtor will, on behalf of the Secured Party, defend
forever against any claims or demands thereon made by all persons.
d. There exist no offsets, counterclaims or defenses to the
Debtor's rights therein or thereto.
F. THE DEBTOR'S COVENANTS. The Debtor hereby covenants and agrees with the
Secured Party as follows:
1. Payment of Taxes, Assessments, etc. The Debtor will punctually pay and
discharge, or cause to be paid and discharged from time to time as the same
shall become due, all taxes, rates, assessments, impositions, duties and other
charges of every description to which the Collateral, or any part thereof, may
during the term of this Security Agreement become liable by authority of law,
the payment of which shall be secured by this Security Agreement. The Debtor
will, upon request, deposit copies of the receipts therefor with the Secured
Party at least
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twenty (20) days prior to the final date such taxes, rates, assessments,
impositions, duties and other charges may be paid without penalty.
2. Indemnification. The Debtor will indemnify and hold and save the Secured
Party harmless and against any and all liability, loss, damage or expense of
whatever kind or nature, including reasonable attorneys' fees, which the Secured
Party may at any time sustain or incur hereunder, including, but not limited to,
any claims or demands whatsoever which may be asserted against the Secured Party
as a result of any failure on the part of the Debtor to perform, observe or
discharge its obligations involving any of the Collateral. Prior to actual entry
and taking possession of any property by the Secured Party, this Security
Agreement shall not operate to place responsibility upon the Secured Party for
the control, care, management or repair of any property constituting security
hereunder.
3. Duplicate Originals. At the request of the Secured Party, the Debtor
will furnish to the Secured Party a duplicate original of each material Contract
now existing or hereafter executed by the Debtor.
4. Litigation. The Debtor will appear in and defend any action or
proceeding at law or in equity affecting in any manner all or part of the
Collateral; and in such event (except where the purported defect affecting the
security hereof arises or results from any act or omission of the Secured
Party), the Debtor will pay all costs, charges and expense, including cost of
evidence of title and reasonable attorneys' fees incurred, and will fully
indemnify the Secured Party from and against any loss, damage, or expense,
including reasonable attorneys' fees, sustained or incurred by the Secured Party
as a result of any failure on the part of the Debtor to comply with its
obligations under this paragraph.
5. Liens. The Debtor will maintain the valid security interest of the
Secured Party in the Collateral and the sums due thereunder, free and clear of
all liens, claims, and encumbrances that may be, or are threatened to be, made
prior to or on a parity with the security interest of the Secured Party herein,
except liens for taxes or assessments not yet payable or payable without penalty
so long as payable. The Debtor will not claim any credit on interest payable on
the Note or on any other payment secured hereby for any portion of the taxes
assessed against the Collateral, and the provisions of any law entitling the
Debtor to such credit are hereby expressly waived by the Debtor to the extent
they may be lawfully waived.
6. Further Assurances. The Debtor will assist in the preparation of and
execute and acknowledge from time to time, alone or with the Secured Party, and
deliver, file or record any further instruments, including security agreements,
financing or continuation statements, mortgages or other instruments, and do
such further acts as the Secured Party may request to confirm, establish,
continue, maintain and perfect the security interest of the Security Party
created by this Security Agreement and to subject the Collateral to the lien
hereof, including all renewals, additions, substitutions, replacements or
betterments thereto and all proceeds therefrom, and otherwise to protect the
same against the rights and interests of third parties, the Debtor agreeing to
pay the cost of preparing, filing and recording the same.
7. Acknowledgment of Debt. The Debtor, within five (5) days after request
by the Secured Party in writing, will furnish to the Secured Party, or to any
proposed assignee of this Security Agreement, a written statement duly
acknowledged of the amount due under this Security Agreement and the Note, and
whether any offsets, counterclaims or defenses exist against the secured debt.
8. Personal Property. The Debtor agrees: (a) to keep all Personal Property
intact and in good condition, order and repair reasonable wear and tear
excepted; (b) at the Debtor's own expense to replace any
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portion thereof which may be broken or become obsolete or worn out or unfit for
use; (c) to comply with all laws, rules and regulations made by governmental
authority and applicable thereto; (d) not to commit or suffer any strip or waste
of the Personal Property; and (e) not to alienate, assign, pledge, transfer, or
encumber any of the rights or interests of the Debtor therein and thereto.
9. Insurance. The Debtor will, during the terms of this Security Agreement,
keep all of the Personal Property insured against hazards of such type or types
and in such amount or amounts and form of policy as the Secured Party may from
time to time reasonably require and will provide copies of the premiums and
costs of all insurance required hereunder and, upon demand of the Secured Party,
will furnish evidence of payment of such premiums. The debtor, not less than
twenty (20) days prior to the expiration date of each policy, shall deliver to
the Secured Party a copy of renewal policy or policies, accompanied by evidence
of payment satisfactory to the Secured Party. All insurance required hereunder
shall be effected under valid and enforceable policies issued by insurance
companies authorized to do business in the State of Hawaii, the Debtor hereby
acknowledging receipt of written notice from the Secured Party that the Debtor
is free to procure any such insurance from any insurance company so authorized.
The Secured Party shall not be responsible for such insurance or for the
collection of any insurance moneys, or for the insolvency of any insurer or
insurance underwriter. The amount collected from any fire or other insurance
policy may be applied by the Secured Party upon any indebtedness secured hereby
and in such order as the Secured Party may determine, or, at the option of the
Secured Party, the entire amount so collected, or any part thereof, may be
applied to the restoration of the Personal Property, or released to the Debtor,
without being deemed a payment on any of the indebtedness secured hereby. Such
application or release shall not cure or waive any default or notice of default
hereunder or invalidate any act done pursuant to such notice. No lien upon any
of such policies of insurance, or upon any refund or return premium which may be
payable on the cancellation or termination thereof, shall be given to anyone
other than the Secured Party, except by proper endorsement affixed to such
policy and approved by the Secured Party. In the event of loss or physical
damage to the Personal Property, the Debtor shall give immediate notice thereof
by mail to the Secured Party, and the Secured Party may make proof of loss if
the same is not made promptly by the Debtor. In the event of foreclosure of this
Security Agreement, or other transfer of title to the Collateral in the
extinguishment of the indebtedness secured hereby, all right, title and interest
of the Debtor in and to any insurance policies then in force shall pass to the
purchaser or the grantee. All such policies or other contracts for such
insurance issued by the respective insurers shall, to the extent obtainable, be
without contribution and contain an agreement by the insurer that the policy or
other contract shall not be cancelled or materially changed without at least
thirty (30) days', prior written notice to the Secured Party.
10. No Violation of Forfeiture Laws. The Debtor warrants and covenants as
follows:
a. The Debtor will not violate any federal, state, or other
governmental law, including but not limited to 18 U.S.C. ss.1956(a)(3), that may
in any way affect or impair the value of the Collateral or the properties
covered by the security instruments which are part of the Loan Documents or the
Secured Party's priority therein;
b. To the best of the Debtor's knowledge, there has been no violation
of any federal, state, or other law affecting or impairing the value of the
Collateral or the properties covered by the security instruments which are part
of the Loan Documents; and
c. The Debtor shall make every good faith effort to prevent any
violation of any federal, state, or other governmental law, including but not
limited to 18 U.S.C. ss.1956(a)(3), that may in any way affect or impair the
value of the Collateral or the properties covered by the security instruments
which are part of the Loan Documents or the Secured Party's priority therein.
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In the event that the Secured Party has reasonable cause to believe
that any portion of the Collateral or any other property or collateral securing
the Loan might be or become subject to forfeiture under the foregoing laws, the
Debtor agrees that the Secured Party may, in its sole discretion, and addition
to its other remedies under this Agreement and at law or in equity, refuse to
make any further disbursements of Loan proceeds, of any kind whatsoever, until
the Secured Party no longer has any reasonable belief that any portion of the
Collateral or any other property or collateral securing the Loan is subject to
or may become subject to forfeiture under any of the foregoing laws.
G. MUTUAL COVENANTS. The Debtor and the Secured Party mutually covenant and
agree each with the other as follows:
1. The Secured Party Not Obligated to Perform. Neither the acceptance of
this Security Agreement by the Secured Party, nor the exercise of any rights
hereunder by the Secured Party, shall be construed in any way as an assumption
by the Secured Party of any obligations, responsibilities or duties of the
Debtor arising from the collateral assigned hereunder or otherwise bind the
Secured Party to the performance of any of the terms and provisions contained in
any obligations respecting the Personal Property, it being expressly understood
that the Secured Party shall not be obligated to perform, observe or discharge
any obligation, responsibility, duty, or liability of the Debtor under any of
the Collateral, including, but not limited to, appearing in or defending any
action, expending any money or incurring any expenses in connection herewith.
2. Right of the Secured Party to Defend Action Affecting Security. The
Secured Party may, at the Debtor's expense, appear in and defend any action or
proceeding at law or in equity purporting to affect the Secured Party's security
interest under this Security Agreement.
3. Right of the Secured Party to Prevent or Remedy Default. If the Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by the Debtor under the Loan Documents, including
this Security Agreement, or any other instruments secured hereby, or in respect
of the Personal Property, the Secured Party (a) may but shall not be obligated
to take action the Secured Party deems necessary or desirable to prevent or
remedy any such default by the Debtor or otherwise to protect the security
interest of the Secured Party under this Security Agreement, and (b) shall have
the absolute and immediate right to enter in and upon or take possession of the
Property, Collateral or any part thereof to such extent and as often as the
Secured Party, in its sole discretion, deems necessary or desirable in order to
prevent or to cure any such default by the Debtor, or otherwise to protect the
security of this Security Agreement. The Secured Party may advance or expend
such sums of money for the account of the Debtor, as the Secured Party in its
sole discretion deems necessary for any such purpose.
4. The Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which the Secured Party may make, pay or incur under
any provision of this Security Agreement for the protection of its security or
for the enforcement of any of its rights hereunder, or in foreclosure
proceedings commenced and subsequently abandoned, or in any dispute or
litigation in which the Secured Party or the holder of the Note may become
involved by reason of or arising out of the Loan Documents, including this
Security Agreement, or any other instrument secured hereby, or the Collateral or
the care and management of the Collateral, shall be paid by the Debtor to the
Secured Party, upon demand, and shall bear interest until paid at the rate
specified by the Note to be paid in the event of default thereunder, all of
which obligations shall be additional charges upon the Collateral and be equally
secured hereby.
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5. The Secured Party's Right of Set-Off. Upon the happening of any event
entitling the Secured Party to pursue any remedy provided herein, or if the
Secured Party shall be served with garnishee process in which the Debtor shall
be named as defendant, whether or not the Debtor shall be in default hereunder
at the time, the Secured Party may, but shall not be required to, set off any
indebtedness owing by the Secured Party to the Debtor against any indebtedness
secured hereby, without first resorting to the security hereunder and without
prejudice to any other rights or remedies of the Secured Party or its security
interest herein.
6. No Waiver. In case the Secured Party shall have proceeded to enforce any
right or remedy hereunder and such proceedings shall have been discontinued or
abandoned for any reason, then in every such case, the Debtor and the Secured
Party shall be restored to their former positions and rights hereunder with
respect to the Collateral, and all rights, remedies and powers of the Secured
Party shall continue as if no such proceeding had been taken. No failure or
delay on the part of the Secured Party in exercising any right, remedy or power
under this Security Agreement or in giving or insisting upon strict performance
by the Debtor hereunder or in giving notice hereunder shall operate as a waiver
of the same or any other power or right, and no single or partial exercise of
any such power or right shall preclude another or further exercise thereof or
the exercise of any other such power or right. The Secured Party,
notwithstanding any such failure, shall have the right thereafter to insist upon
the strict performance by the Debtor of any and all of the terms and provisions
of this Security Agreement to be performed by the Debtor. The collection and
application of proceeds, the entering and taking possession of the Collateral,
and the exercise of the rights of the Secured Party contained in the Loan
Documents, including this Security Agreement, shall not cure or waive any
default, or affect any notice of default, or invalidate any acts done pursuant
to such notice. No waiver by the Secured Party of any breach or default of or by
any party hereunder, shall be deemed to alter or affect the Secured Party's
rights hereunder with respect to any prior or subsequent defaults.
7. Remedies. No right or remedy herein reserved to the Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative and is not in lieu of but shall be in addition to any
other rights or remedies given under this Security Agreement. Any and all of the
Secured Party's rights and remedies may be exercised from time to time and as
often as such exercise is deemed necessary or desirable by the Secured Party.
8. Right of the Secured Party to Extend Time of Payment, Substitute,
Release Security, etc. Without affecting the liability of any person, including
the Debtor, for the payment of any indebtedness secured hereby, or the lien of
this Security Agreement on the Collateral, or the remainder thereof, for the
full amount of any indebtedness unpaid, the Secured Party may from time to time,
without notice or without affecting or impairing any of the Secured Party's
rights under this Security Agreement:
(a) release any person liable for the payment of any of the
indebtedness,
(b) extend the time or otherwise alter the terms of payment of any of
the indebtedness or accept a renewal Note or Notes to evidence such an extension
or alteration,
(c) accept payments or prepayments of principal without reducing the
aggregate amount secured by this Agreement, and make subsequent advances to the
Debtor up to the amount described herein;
(d) accept additional security therefor of any kind, including (but not
limited to) deeds of trust or mortgages,
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(e) alter, substitute or release from any security interest or lien
held by the Secured Party any property securing the indebtedness,
(f) resort for the payment of the indebtedness secured hereby to its
several securities therefor in such order and manner as it may deem fit,
(g) join in granting any easement or creating any restriction thereon,
or
(h) join in any extension, subordination or other agreement affecting
this Security Agreement or the lien or charge thereof.
H. MISCELLANEOUS
1. Terms Commercially Reasonable. The terms of this Security Agreement
shall be deemed commercially reasonable within the meaning of the Uniform
Commercial Code.
2. Definitions. The terms "advances", "costs", and "expenses" shall
include, but shall not be limited to reasonable attorneys' fees whenever
incurred. The terms "indebtedness" and "obligations" shall mean and include, but
shall not be limited to, all claims, demands, obligations and liabilities
whatsoever, however arising, whether owing by the Debtor individually or as a
joint venturer, or jointly or in common with any other party, and whether
absolute or contingent, and whether owing by the Debtor as principal debtor or
as accommodation maker or as endorser, liquidated or unliquidated, and whenever
contracted, accrued or payable. In this Security Agreement, whenever the context
so requires, the neuter gender includes the masculine and feminine, and singular
number includes the plural and vice versa.
3. Paragraph Headings. The headings of paragraphs herein are inserted only
for convenience and shall in no way define, describe or limit the scope or
intent of any provisions of this Security Agreement.
4. Change, Amendment, etc. No change, amendment, modification, cancellation
or discharge or any provision of this Security Agreement shall be valid unless
consented to in writing by the Secured Party.
5. Assignment of Secured Party's Interest. The Secured Party shall have the
right to assign its interest in this Security Agreement to any subsequent holder
of the Note.
6. Applicable Laws; Severability. This Security Agreement shall be governed
by and shall be construed and interpreted under and pursuant to the laws of the
State of Hawaii. If any provision of this Security Agreement is held to be
invalid or unenforceable, the validity or enforceability of the other provisions
of this Security Agreement shall remain unaffected.
7. Terms and Conditions of this Security Agreement Supplement Other Loan
Documents. The terms and conditions of this Security Agreement applicable to the
Debtor and the covenants, representations and warranties of the Debtor under
this Security Agreement shall not be deemed to supersede, amend or modify the
obligations and duties of the Debtor or other parties under the Loan Documents.
The terms and conditions of this Security Agreement and the covenants,
representations and warranties of the Debtor hereunder merely supplement, and do
not supplant or supersede provisions of similar effect or subject matter in the
other Loan Documents.
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8. Notices. All notices, demands or documents which are required or
permitted to be given or served hereunder shall be in writing and personally
delivered, or sent by registered or certified mail addressed to the parties at
their respective addresses set forth on page 1 hereof. Such addresses may be
changed from time to time by the addressee by serving notice as provided above.
Service of such notice or demand shall be deemed complete upon the earlier of
the date of actual delivery or the third day after the date of mailing if mailed
in Hawaii.
9. Parties in Interest. As and when used herein, the terms "Debtor" and
"Secured Party" shall mean and include the Debtor and the Secured Party
above-named and their respective heirs, personal representatives, successors,
successors-in-trust, and assigns, and all covenants and agreements herein shall
be binding upon and inure to the benefit of the Debtor and the Secured Party,
and their respective heirs, personal representatives, successors,
successors-in-trust, and assigns.
10. Counterparts. This Security Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument, and in making proof of this
Security Agreement, it shall not be necessary to produce or account for more
than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed these presents on
the day and year first above written.
CYANOTECH CORPORATION
By /s/Gerald Cysewski
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Gerald Cysewski
President and CEO
By /s/Ronald P. Scott
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Ronald P. Scott
Executive Vice President & CFO
"Debtor"
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