EXHIBIT 10.16
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Security Agreement") made as of February 27,
1997 by and between CYANOTECH CORPORATION, a Nevada corporation (hereinafter
called the "Debtor"), and FIRST HAWAIIAN BANK, a Hawaii corporation (hereinafter
called the "Secured Party"),
WITNESSETH THAT
To secure the repayment of a loan made by the Secured Party to the
Debtor in the principal sum of ONE MILLION AND NO/000 DOLLARS ($1,000,000.00),
which loan is evidenced by that certain promissory note of even date herewith in
that amount, executed by the Debtor, as maker, and made payable to the Secured
Party, the provisions of such note and any renewals, extensions or modifications
thereof being incorporated herein by reference, being secured hereby and being
hereinafter referred to as the "Note";
AND ALSO to secure the observance and performance by the Debtor of all
covenants, agreements, obligations and conditions required to be observed and
performed by the Debtor under this Security Agreement, including, but not
limited to, the payment by the Debtor to the Secured Party of all sums expended
or advanced by the Secured Party pursuant to the provisions of this Security
Agreement;
AND ALSO to secure the observance and performance by the Debtor of all
covenants, agreements, obligations and conditions required to be observed and
performed by the Debtor under that certain Credit Agreement executed by the
Debtor and the Secured Party concurrently herewith (the "Credit Agreement") and
under all of the "Loan Documents", as defined therein;
AND ALSO to 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, expended by the Secured Party for the account of the Debtor, or
otherwise owing by the Debtor to the Secured Party on any and every account
whatsoever;
THE DEBTOR DOES HEREBY grant, assign, convey, transfer, deliver, and
set over to the Secured Party, its successors and assigns, absolutely and
forever, all of the property set forth in Exhibit "1" attached hereto and made a
part hereof (hereinafter called the "Collateral"), TOGETHER WITH a security
interest, as that term is defined in the Uniform Commercial Code (Chapter 490,
Hawaii Revised Statutes, as amended), in such property, upon the terms and
conditions hereinafter set forth.
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, fees, charges and
premium, if any, according to its provisions and effect, and if the Debtor shall
discharge any and all obligations that now or hereafter may be or become owing,
directly or contingently, by the Debtor to the Secured Party on any and every
account, whether or not the same are mature, of which obligations the books of
the Secured Party shall be prima facie evidence, and if the Debtor shall observe
and perform all of the covenants, agreements, obligations and conditions to be
observed and performed by the Debtor under this Security Agreement and the other
Loan Documents, and if the Debtor shall pay the costs 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 covenants, agreements, obligations or conditions remain
unperformed shall constitute conclusive 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.
BUT, if any one or more of the following events, hereinafter called
"Events of Default" shall occur:
(a) Default shall be made by the Debtor in the payment of principal,
interest, fees or charges when due on the Note; or
(b) Default shall be made by the Debtor in the due and punctual
observance or performance of any other covenant, agreement, obligation or
condition required to be observed or performed by the Debtor under this Security
Agreement or any of the other Loan Documents and such default shall not be
remedied within twenty (20) days after the Secured Party notifies the Debtor of
such default; or
(c) The Debtor shall become voluntarily or involuntarily dissolved or
become insolvent, or the Debtor shall admit in writing the Debtor's inability to
meet the Debtor's 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 the
Debtor's properties, or file a petition, answer or other instrument seeking or
acquiescing to the arrangement of the Debtor's 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 thereof for the relief of debtors; or
(d) 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 the Debtor's properties, or (iii) directing the winding up or
liquidation of the Debtor's affairs; or
(e) Any representation or warranty made by the Debtor herein or in
connection with the Loan Documents shall be untrue in any material respect; or
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(f) All or a material part of the Collateral shall substantially
decrease in value and, after demand by the Secured Party, the Debtor shall fail
to furnish additional security satisfactory to the Secured Party; or
(g) There shall be any attachment, execution, forfeiture or other
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 thirty (30) days after its occurrence; or
(h) There shall be entered against the Debtor a final judgment which
alone or with other outstanding final judgments against the Debtor exceeds in
the aggregate $100,000.00, and within thirty (30) days after entry thereof such
judgment or judgments shall not have been discharged or execution thereof stayed
pending appeal, or within thirty (30) days after the expiration of any such stay
such judgment or judgments shall not have been discharged; or
(i) Any other "Event of Default", as defined in the Credit Agreement,
shall have occurred and such default shall not have been remedied within the
applicable grace period, if any, therefor.
THEN, AND IN ANY SUCH EVENT, 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 interest thereon accrued and unpaid,
and all fees, charges, and other sums due under the Loan Documents, to be
immediately due and payable, whereupon such principal amount and interest and
all such fees, charges and other sums, shall become and be immediately due and
payable, and shall thereafter bear interest until fully paid at the rate
specified in the Note to be paid in the event of default, and 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, and shall have all rights and remedies available to the Secured Party
under the Uniform Commercial Code or other applicable laws.
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, (i) demand, ▇▇▇
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 to the accounts and contract rights described in
paragraph (a) of Exhibit "1" (the "Contracts") or liable to the Debtor in
connection with the Collateral to make all payments then due or which may
thereafter become due thereunder or thereby directly to the Secured Party, and
the Debtor further
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agreeing that the receipt by the Secured Party of any such payments shall be a
complete release and discharge of the obligor or obligors thereof to the extent
of the payment or payments so made; (ii) do all things requisite, convenient,
or necessary to enforce the performance and observance of any and all other
covenants, agreements, conditions, terms and provisions of the Contracts, and to
exercise all the rights, remedies and privileges of the Debtor contained in the
Contracts or arising from the Collateral, or any part thereof, including, but
not limited to, the making, modifying, amending, enforcing, canceling,
surrendering or accepting the surrender of, terminating or extending any of the
Contracts now or hereafter in effect, and also including the compromising,
waiving, excusing, or in any manner releasing or discharging of any obligation
of any party to or arising from the Collateral; (iii) take possession of the
books, papers, and accounts of the Debtor, wherever located, relating to the
Collateral; (iv) 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) make, enforce, modify and
accept the surrender of any Contracts, 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 the Contracts described in Exhibit "1"; (v) ▇▇▇ or otherwise
collect and receive moneys; and (vi) do all other things requisite, convenient
or necessary to require the other parties to the Contracts to perform the same,
or which the Secured Party deems proper to protect the security given hereunder.
(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 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 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, apply
as a credit against the purchase price, in lieu of cash, all amounts owing by
the Debtor under the Note and the other Loan Documents, to the extent required.
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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 thereof; and the Debtor
in the Debtor's own right and for all who may claim under the 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 in such order as the
Secured Party shall choose, (i) to the costs and expenses of such sale and all
proceedings in connection therewith, including counsel fees; (ii) to the payment
of any unreimbursed disbursements made by the Secured Party for taxes or
assessments or other charges affecting the Collateral; (iii) to the repayment of
all other unreimbursed disbursements and expenses and unpaid charges and fees
due and owing to the Secured Party under the provisions of this Security
Agreement or any of the other Loan Documents; and (iv) to the payment of the
unpaid principal of and interest on the Note, and all 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 under the Loan Documents, the Secured Party may have any other
legal recourse against the Debtor for the deficiency.
Nothing in this Security Agreement, the Note or any of the other Loan
Documents shall affect or impair the right, which is unconditional and absolute,
of the holder of the Note to enforce payment of the principal of, and interest
and other charges on, the Note at or after the date therein expressed as the
date when the same shall become due, or the obligation of the Debtor, which is
likewise unconditional and absolute, to pay such amounts at the respective times
and places therein expressed.
A. DEBTOR'S WARRANTIES. The Debtor warrants and represents to the
Secured Party as follows:
1. The Debtor is a party to each of the Contracts and is the
absolute and sole owner of the interest in and to the Contracts subject to this
Security Agreement, with full right and title to assign the same to the Secured
Party and to grant the Secured Party a security interest in the same and the
sums due or to become due thereunder; the Debtor has to date fully and
faithfully observed and performed all of the terms, obligations, covenants,
conditions, and warranties to be observed and performed by the Debtor
thereunder, and no event has occurred and is continuing which constitutes, or
with notice or the passage of time would constitute, a default thereunder; the
Contracts are genuine, valid, subsisting and enforceable upon all parties
thereto according to their terms; the Debtor has not alienated, assigned,
pledged, transferred, mortgaged or otherwise encumbered any of the rights or
interests of the Debtor therein or thereto, including the sums due or to become
due thereunder; there have been no amendments or modifications to any of the
Contracts; no financing statement or any other lien or encumbrance covering
any of the Collateral is on file
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in the Bureau of Conveyances of the State of Hawaii, or is otherwise outstanding
(other than in favor of Secured Party); nothing in any of the Contracts would
prevent the Secured Party from enforcing any of the rights and remedies that the
Debtor might have if this Security Agreement had not been executed; and, other
than in the ordinary course of business, (i) the other parties to the Contracts
have no offsets, counterclaims or defenses against the Debtor, whether arising
out of the Contracts or otherwise; (ii) no payments of any kind required
thereunder have been anticipated, discounted, waived, released, or set-off;
(iii) no parties thereto have been discharged, excused, or released; (iv) no
claims under the Contracts have been compromised; (v) the Debtor has not
accepted any payments under any of the Contracts, except as permitted by the
terms thereof; and (vi) all payments thereunder are current.
2. 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; the Collateral is
free and clear of any lien or right prior to or on a parity with the lien of
this Security Agreement, except as noted above; the Debtor will, on behalf of
the Secured Party, defend forever against any claims or demands thereon made by
all persons; and there exist no offsets, counterclaims or defenses to the
Debtor's rights therein or thereto.
3. The Debtor is a corporation duly organized and validly existing and
in good standing under the laws of the State of Nevada, is authorized to do
business and is in good standing in the State of Hawaii, and has all requisite
corporate power and authority to carry on the business and own the property that
it now carries on and owns.
4. The Debtor have all requisite power and authority to execute this
Security Agreement, to secure the payment of the Note by the execution of this
Security Agreement and to carry out the provisions of this Security Agreement.
The execution and delivery of this Security Agreement have been duly authorized
by the Board of Directors of the Debtor and, to the extent required by law, by
the stockholders of the Debtor, and no other corporate action of the Debtor is
requisite to the execution and delivery of this Security Agreement.
5. All tax returns and reports of the Debtor required by law to be
filed have been duly filed, and all taxes, assessments, contributions, fees and
other governmental charges (other than those currently payable without penalty
or interest and those currently being contested in good faith) upon the Debtor
or upon the Debtor's properties, assets or income which are due and payable have
been paid.
6. There are no actions, suits or proceedings pending or, to the
knowledge of the Debtor, threatened against or affecting the Debtor or the
Collateral in any court at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality, an adverse
decision in which might materially affect the Debtor's ability to perform the
Debtor's obligations under this Security Agreement.
7. The Debtor is not in violation of or in default with respect to any
provision of its articles of incorporation or bylaws or any mortgage, indenture,
contract,
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agreement or instrument applicable to the Debtor, or by which the Debtor is
bound, and the execution, delivery, performance of and compliance with this
Security Agreement will not result in any such violation or be in conflict with
or constitute a default under any such provision, or result in the creation of
any mortgage, lien, security interest or charge on any of the properties or
assets of the Debtor not contemplated by this Security Agreement; and there is
no provision of its articles of incorporation or bylaws or any mortgage,
indenture, contract, agreement or instrument applicable to the Debtor or by
which the Debtor is bound which materially adversely affects, or in the future
(so far as the Debtor can now foresee) will materially adversely affect, the
business or prospects or condition (financial or other) of the Debtor or of any
of its properties or assets.
8. Any financial statements heretofore delivered to the Secured Party
by the Debtor are true and correct in all respects, have been prepared in
accordance with generally accepted accounting principles, and fairly represent
the respective financial conditions of the subjects thereof as of the respective
dates thereof; no materially adverse change has occurred in the financial
conditions reflected therein since the respective dates thereof; and no
additional borrowings have been made by the Debtor since the date thereof.
B. 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, other than those which the Debtor is then contesting in
good faith and which are not in excess of five hundred thousand dollars
($500,000.00) or for which reserves have been established by the Debtor, 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 no later
than five (5) days prior to the final date such taxes, rates, assessments,
impositions, duties and other charges may be paid without penalty.
2. Preservation of Contracts. Except with the prior written consent
of the Secured Party, or in the ordinary course of business, the Debtor will
not: (a) modify, change, alter, extend, terminate, cancel, tender or accept
surrender of any of the Contracts; (b) reduce, discount, compromise, settle,
waive, release, or set-off the amount of any sums payable thereunder, vary the
terms of payment or otherwise change, alter or modify the same, or consent
to the subordination of interest of any part thereto, or waive, excuse, condone,
or in any manner release or discharge any party thereunder of or from their
respective obligations, covenants, conditions, and agreements required to be
performed; (c) execute any agreement which would prevent the Secured Party from
acting as the Debtor, as provided herein; nor (d) alienate, assign, pledge,
transfer, or encumber any of the rights or interests of the Debtor therein or
thereto, including the sums due or to become due thereunder.
3. Performance. The Debtor will fully and faithfully abide by,
observe, discharge, perform and enforce the performance of the terms,
obligations, covenants,
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conditions, agreements and warranties required to be observed and performed
under each of the Contracts, and under the Loan Documents, including this
Security Agreement, and any other instrument secured hereunder, and will give
prompt notice to the Secured Party of any default thereunder, whether by the
Debtor or by any party thereto, together with an accurate and complete copy of
any notice either received or sent by the Debtor. Other than in the ordinary
course of business, the Debtor will not anticipate, discount, compromise,
settle, waive, release, or set off any sums due under the Contracts or in
respect of the rights and property described in paragraphs (b) through (d) of
Exhibit "1" (the "Personal Property") or receive any sums in any manner
inconsistent with the provisions of the Contracts or this Security Agreement.
4. Indemnification. The Debtor will indemnify and hold and save the
Secured Party harmless from and against any and all liability, loss, damage or
expense of whatever kind or nature, including 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 under any of the Contracts or 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.
5. Enforcement and Collection. The Debtor will, at no cost to the
Secured Party, diligently enforce and secure the performance and observance of
each and every obligation, covenant, condition and agreement of the other
parties under all of the Contracts.
6. Duplicate Originals. At the request of the Secured Party, the
Debtor will furnish to the Secured Party a duplicate original of each Contract
now existing or hereafter executed by the Debtor.
7. 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 expenses, including cost of
evidence of title and attorneys' fees incurred, and will fully indemnify the
Secured Party from and against any loss, damage, or expense, including
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.
8. 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
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the Debtor to such creditare hereby expressly waived by the Debtor to the extent
they may be lawfully waived.
9. 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
Secured 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, and to
execute all documents and perform all acts necessary to enforce the Contracts
and to make the same binding, the Debtor agreeing to pay the cost of preparing,
filing and recording the same.
10. 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 off-sets, counterclaims or defenses exist against the secured debt.
11. Personal Property. The Debtor agrees: (a) to keep all Personal
Property reasonably intact and in good condition, order and repair; (b) at the
Debtor's own expense to replace any 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.
12. Insurance. The Debtor will, in the name and for the benefit of the
Secured Party, during the term 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 deposit the policies with the Secured Party. The
Debtor further agrees to keep paid in advance all 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 ten (10) days
prior to the expiration date of each policy, shall deliver to the Secured Party
a 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 Secured Party may not make the
granting of the loan evidenced by the Note contingent upon the Debtor procuring
any required insurance with an insurance company designated by the Secured
Party. 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
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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 canceled or materially changed without at least thirty (30) days' prior
written notice to the Secured Party.
C. MUTUAL COVENANTS. The Debtor and the Secured Party mutually covenant
and agree each with the other as follows:
1. 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 of the Contracts or of 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 therewith.
2. Right of 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 Secured Party to Prevent or Remedy Default. If the
Debtor shall fail to perform any of the covenants, conditions or agreements
required to be performed and observed by the Debtor under the Loan Documents,
including this Security Agreement, the Contracts, 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 the Property in order to take possession of the Collateral or any part
thereof to such extent and as often as
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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. Secured Party's Expenses. All advances, costs, expenses, charges
and reasonable 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.
5. 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 any other 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 onto the Property 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.
11
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 not in lieu of but 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 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, r 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 and 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 additional security
therefor of any kind, including (but not limited to) deeds of trust or
mortgages, (d) alter, ubstitute or release from any security interest or lien
held by the Secured Party any property securing the indebtedness, (e) resort for
the payment of the indebtedness secured hereby to its several securities
therefor in such order and manner as it may deem fit, (f) join in granting any
easement or creating any restriction thereon, or (g) join in any extension,
subordination or other agreement affecting this Security Agreement or the lien
or charge thereof.
D. 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, 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 or 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 of any provision of this Security Agreement shall be
valid unless consented to in writing by the Secured Party.
12
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. Parties in Interest. As and when used herein, the term "Debtor"
shall mean and include the Debtor and the Debtor's heirs, personal
representatives, successors, successors in trust and permitted assigns, and the
term "Secured Party" shall mean and include the Secured Party herein named and
its successors and assigns, and all covenants and agreements herein shall be
binding upon and inure to the benefit of the Debtor, the Secured Party, and
their respective successors and permitted assigns.
7. 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.
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 as follows:
To DEBTOR at: Hawaiian Ocean Science and Technology Park
▇▇-▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., #▇▇▇
▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Executive Vice President,
Finance and Administration
To SECURED PARTY at: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Banking Division
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 second day after
the date of mailing if mailed in Hawaii.
9. 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.
10. Terms and Conditions of this Security Agreement Supplement Other
Loan Documents. The terms and conditions of this Security Agreement 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,
13
and do not supplant or supersede provisions of similar effect or subject matter
in the other Loan Documents.
IN WITNESS WHEREOF, the Debtor and the Secured Party have executed
these presents on the day and year first above written.
FIRST HAWAIIAN BANK
------------------------------
By /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Its Vice President
Lender
CYANOTECH CORPORATION
------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Exec. V.P./CFO
Borrower
14
STATE OF HAWAII )
) SS:
CITY AND COUNTY OF HONOLULU )
On this 27th day of February, 1997, personally appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, to
me personally known, who, being by me duly sworn or affirmed did say that such
person(s) executed the foregoing instrument as the free act and deed of such
person(s), and if applicable, in the capacity shown, having been duly authorized
to execute such instrument in such capacity.
/s/▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Notary Public, State of Hawaii
My commission Expires: 7/03/99
STATE OF HAWAII )
) SS:
COUNTY OF HAWAII )
On this 27th day of February, 1997, personally appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, to
me personally known, who, being by me duly sworn or affirmed did say that such
person(s) executed the foregoing instrument as the free act and deed of such
person(s), and if applicable, in the capacity shown, having been duly authorized
to execute such instrument in such capacity.
/s/▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Notary Public, State of Hawaii
My commission Expires: 7/03/99
STATE OF HAWAII )
) SS:
COUNTY OF HAWAII )
On this 27th day of February, 1997, personally appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, to
me personally known, who, being by me duly sworn or affirmed did say that such
person(s) executed the foregoing instrument as the free act and deed of such
person(s), and if applicable, in the capacity shown, having been duly authorized
to execute such instrument in such capacity.
/s/▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Notary Public, State of Hawaii
My commission Expires: 7/03/99
EXHIBIT "1"
(a) Accounts. 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 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 and services, including, but
not limited to, the rights to stoppage in transit, replevin, reclamation, and
resale; and all of the foregoing whether now owned or existing or hereafter
created or acquired. The word "Accounts" as used herein also includes
"documents," "instruments" and "chattel paper" as such terms are defined in the
Uniform Commercial Code.
(b) Equipment. All of Debtor's now owned or hereafter acquired
machinery, equipment, furniture, furnishings and fixtures, together with tools,
aircraft and motor vehicles of every kind and description, all parts therefor,
all other tangible personal property of the Debtor which is not Inventory or
Farm Products or used by the Debtor as consumer household goods, and all
improvements, accessions or appurtenances thereto.
(c) General Intangibles. All choses in action and causes of
action and all other intangible personal property of Debtor of every kind and
nature (other than Accounts) now owned or hereafter acquired by Debtor,
including, without limitation, corporate or other business records, inventions,
designs, blueprints, plans, specifications, patents, patent applications,
trademarks, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, beneficial interests in trusts, partnership interests, tax
refund claims, insurance proceeds thereof, including without limitation,
insurance covering the lives of key employees on which the Debtor is beneficiary
and any letter of credit, guarantee, claim, security interest or other security
held by or granted to Debtor to secure payment by an account debtor of any of
the Accounts.
(d) Inventory. Any and all now owned or hereafter acquired
goods, merchandise, or other personal 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 Debtor,
including insurance proceeds from insurance on any of the above, any returns
upon any Accounts and other proceeds, resulting from the sale or disposition of
any of the foregoing, including without limitation, raw materials,
work-in-process, and finished goods.
(e) Farm Products. All of Debtor's crops, livestock, supplies
used or produced in farming operations, unmanufactured products of crops,
livestock or aquaculture.
EXHIBIT "1"
