Coast Schedule to the Loan and Security Agreement Borrower: Cyanotech Corporation Nutrex, Inc.
Coast
Schedule to the Loan and Security Agreement
Borrower: Cyanotech Corporation Nutrex, Inc.
Address: 00-0000 Xxxxx Xxxxxxxxx Xxx. 00-0000 Xxxxx Xxxxxx
#000 #0
Xxxxxx-Xxxx, XX 00000 Xxxxxx-Xxxx, XX 00000
Date: July 28, 1998
This Schedule forms an integral part of the Loan and Security Agreement
between Coast Business Credit(R), a division of Southern Pacific Bank, and the
above-borrower of even date.
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SECTION 2 - CREDIT FACILITIES
Section 2.1 - Credit Limit: Loans in a total amount at any time
outstanding not to exceed the lesser of a
total of Three Million Dollars ($3,000,000)
at any one time outstanding (the "Maximum
Dollar Amount"), or the sum of (a), (b), (c)
and (d) below:
(a) Receivable Loans in an amount not to
exceed 80% of the amount of Borrower's
Eligible Receivables (as defined in
Section 1 of the Agreement) and if
Dilution is less than 5%, the advance
rate will be increased to 85% with a
Sublimit of Seven Hundred Fifty Thousand
Dollars ($750,000) for Foreign
Receivables(excluding receivables backed
by Letters of Credit acceptable to
Coast), plus
(b) Inventory Loans in an amount not to
exceed the lesser of:
(1) up to 60% of cost of eligible
First Grade Spirulina finished
goods inventory, 60% of cost of
eligible Drum Dry Spirulina
finished goods inventory, 60% of
the cost of eligible Bulk Spirulina
Tablets finished goods inventory,
60% of the cost of eligible
Packaged Spirulina finished goods
inventory, 50% of the cost of
eligible Spirulina Feed Grade
finished goods inventory, and 30%
of the cost of eligible Astaxanthin
finished goods inventory,calculated
at cost on a first-in, first-out
basis, or
(2) Seven Hundred Fifty Thousand
Dollars ($750,000), plus
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(c) A Term Loan in the original
principal amount of Seven Hundred Fifty
Thousand Dollars ($750,000) (an amount
equal to 80% of the orderly liquidation
value of Borrower's existing Machinery
and Equipment) (the "Equipment Loan"),
repayable in sixty (60) equal monthly
principal installments.
(d) Equipment Acquisition Loans, to be
drawn within Twenty-four (24) months
from the date hereof, in minimum
advances of One Hundred Thousand Dollars
($100,000) with principal payments
amortized over sixty months in a total
amount not to exceed the lesser of:
(1) Eighty percent (80%) of the
cost of new Equipment (after sub-
tracting taxes and installation
charges); up to eighty (80%) of the
appraised forced liquidation value
of used Equipment acquired by Xxx-
xxxxx (after subtracting taxes and
installation charges); or
(2) Two Million Dollars
($2,000,000).
Availability for Equipment Acquisition
Loans shall be subject to maintenance of
a Debt Service Coverage Ratio of at
least 1.25:1 for the prior two full
consecutive quarters on a combined
basis.
SECTION 3 - INTEREST AND FEES
Section 3.1 - Interest Rate: For all Loans, an interest rate equal to the
Prime Rate plus 2.50% per annum, calculated
on the basis of a 360-day year for the actual
number of days elapsed. In the event the
Borrower reports net income of at least 80%
of projected net income (as set forth in
Exhibit "A" attached to this Schedule) for
the two quarters ending December 31, 1998,
the interest rate will decrease to the Prime
Rate plus 1.25% per annum. Thereafter,
the Borrower must continue to maintain 80% of
cumulative projected quarterly net income
to continue to receive the interest rate of
Prime Rate plus 1.25% annum. Otherwise, the
interest rate will revert to Prime Rate plus
2.50% per annum (Cumulative is defined as the
quarter beginning July 1, 1998 through the
most recent quarter). The interest rate
applicable to all Loans shall be adjusted
monthly as of the
first day of each month, and the interest to
be charged for each month shall be based on
the highest Prime Rate in effect during said
month, but in no event shall the rate of
interest charged on any Loans in any month be
less than 8.5% per annum.
Projections for fiscal year end 2000 and
fiscal year end 2001 may be
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revised 30 days prior to the beginning of a
fiscal year end. However, projected net
income during fiscal year end 2000 and fiscal
year end 2001 cannot be less than $270,000
for each quarter.
Section 3.1 - Minimum Monthly
Interest: Based on daily outstandings equal to Thirty-
three percent (33%) of the Maximum Dollar
Amount.
Section 3.2 - Loan Fee: Thirty Thousand Dollars ($30,000), such
amount being fully earned on the Closing
Date, and payable Fifteen Thousand Dollars
($15,000) on the Closing Date and Fifteen
Thousand Dollars ($15,000) on the first
anniversary of the Closing Date.
Section 3.2 - Facility Fee: Twenty Five Hundred Dollars ($2,500) per
calendar quarter, payable on the Closing Date
(prorated for any partial quarter at the
beginning of the term of this Agreement) and
continuing each quarter thereafter during the
term of this Agreement.
Section 9.1 Renewal Fee: One half of one percent (1/2%) of the Maximum
Dollar Amount at the end of the initial Term
of this Agreement and thereafter.
Section 9.2 - Early Termination
Fee: An amount equal to three percent (3%) of the
Maximum Dollar Amount (as defined in the
Schedule), if termination occurs on or before
the first anniversary of the Closing Date of
this Agreement; two percent (2%) of the
Maximum Dollar Amount, if termination occurs
after the first anniversary and on or before
the second anniversary of the Closing Date of
this Agreement; and one percent (1%) of the
Maximum Dollar Amount, if termination occurs
after the second anniversary of the Closing
Date of this Agreement.
SECTION 5 - CONDITIONS PRECEDENT
Section 5.2 Minimum Availability: Five Hundred Thousand Dollars ($500,000).
Section 5.14 - Other Documents
and Agreements:
1. Joint and Several Borrower Rider.
2. First Deed of Trust on the property
located at 00-0000 Xxxxx Xxxxxx, #0,
Xxxxxx-Xxxx, XX.
3. UCC-1 financing statements, fixture
filings and termination statements.
4. Security Agreements (including those
covering copyrights, patents and
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trademarks).
5. Receipt of Certified Public Accountant
audited financial statement for fiscal
year ended March 31, 1998 that are not
materially different from draft of
fiscal year ended March 31, 1998
financial statement.
6. No accounts payable over 120 days past
invoice date at date of funding.
7. All taxes to be current at funding and
ongoing, except where Borrower in good
faith contests its obligation to pay the
taxes as provided for in Section 6.8 of
this Agreement.
8. Perfected first security interest on all
assets, including all tangible and
intangible assets, including accounts
receivable, inventory, machinery and
equipment (except equipment financed by
Spirulina International, Xxxxxx Leasing,
KeyCorp Leasing, GE Capital and First
Hawaiian Leasing), real estate and
patents.
9. Collections to be submitted to Coast via
lockbox.
10. Minimum ongoing Consolidated Net Worth
of Twenty Million Dollars ($20,000,000)
as determined at the end of each month.
11. Warehouse waivers for all locations
where Borrower maintains inventory,
except at Accord Packaging and Olympex
International (Nutrex inventory located
at these sites will be considered
ineligible).
12. Borrower shall increase insurance
coverage for inventory located at
00-0000 Xxxxxxxx Xx., Xxx 0, 0, & 0,
Xxxxxx-Xxxx, XX 00000 to $750,000.
13. Receivables of Nutrex shall be
considered ineligible for calculation of
availability until Coast re-audits
Nutrex's books and records within One
Hundred Twenty (120) day from funding.
14. Registration Certificates showing Coast
as a lender shall be required on all
vehicles financed by Coast.
15. Borrower shall insure inventory located
at Allied Cold Storage, 00-0000 Xxxxx
Xx., Xxxxxx-Xxxx, XX.
16. Review of equipment liens and validation
that said equipment is not included in
the appraisal to be completed prior to
funding.
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17. Coast shall maintain a rent reserve of
$80,000 until such time a Landlord's
Waiver and Agreement with the State of
Hawaii is executed by all parties.
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SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.2 - Prior Names of
Borrower: None
Section 6.2 - Prior Trade Names
of Borrower: None
Section 6.2 - Existing Trade Names
of Borrower: Cyanotech Asia (Unaffiliated)
Cyanotech International FSC, Ltd.
(Affiliate)
Section 6.3 - Other Locations and
Addresses: 00-0000 Xxxxxxxx Xxxxxx, Xxx 0, 0 & 0
Xxxxxx-Xxxx, XX 00000
(Cyanotech Corporation & Nutrex Inc.);
Allied Cold Storage
Div. of J.F.B. Enterprises
74-0000 Xxxxx Xxxxxx
Xxxxxx-Xxxx, XX 00000
(Cyanotech Corporation);
Olympex International
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
(Nutrex, Inc.);
Accord Packaging
000 X. Xxxxx Xxx Xx.
Xxxxxxx, XX 00000
(Nutrex, Inc.);
Buyers and Shippers
Current Address:
00000 X. Xxxxxxx Xxxxxx, Xxxx X0
Xxxxx Xx Xxxxxxx, XX 00000
Future Address:
00000 X. Xxxxx Xx Xxxxxx
Xxxxxx Xxxxxxxxx, XX 00000
(Cyanotech Corporation).
Section 6.10 - Material Adverse
Litigation: Xx Xxxxxxx X'Xxxxx O'Hoona, et al. vs.
Cyanotech Corporation,
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State of Hawaii, Case No.3CC98-0076K
filed April 8, 1998; Cyanotech Corpo-
ration vs. Aquasearch, Inc., State of
Hawaii, Case No. CU98-00600 filed July
13, 1998.
Section 6.10 - Future Claims and
Litigation: Borrower will promptly inform Coast in
writing of any claim, proceeding,
litigation or investigation in the
future threatened or instituted by or
against Borrower involving any single
claim of Fifty Thousand Dollars
($50,000) or more, or involving One
Hundred Thousand Dollars ($100,000) or
more in the aggregate.
================================================================================
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
Section 8.1 - Other Provisions: 1. Borrower is prohibited from
upstreaming and sidestreaming of
funds. Borrower will not, during
the term of this Agreement, make
any payments or transfers of money,
property, rights or assets of any
kind or nature (including without
limitation sales, repayment of
loans, capital contributions, pur-
chases, compensation arrangements,
consulting fees, management fees,
license, or any other transactions
of any kind or nature) to Cyanotech
International FSC, Ltd. or any
other Affiliate of Borrower without
the prior written consent of Coast.
2. Review of Certificate of Inspection
Requirements.
3. Borrower shall immediately notify
Coast in the event royalty payments
under the Stanford Licensing Agree-
ment increase above ten percent
(10%) for all non-licensed
customers.
4. Only the President and Executive
Vice President of Cyanotech
Corporation shall be authorized to
borrow under this credit facility.
Section 8.2 - Insurance: Subject to the limitations set forth in
Section 8.2 of the Agreement, Coast
shall release to Borrower insurance
proceeds with respect to Equipment
totaling less than One Hundred Thousand
Dollars ($100,000)
Section 8.3 - Reporting: Borrower shall provide Coast with the
following:
1. Monthly Receivable agings, aged by
invoice date, within ten (10) days
after the end of each month,
reconciled to the
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general xxxxxx and rolled forward
from the prior month together with
the calculated month end Ineligible
Receivables.
2. Monthly accounts payable agings,
aged by invoice date, and
outstanding or held check registers
within ten (10) days after the end
of each month.
3. Monthly inventory report detailing
monthly sales by product type,
inventory on hand, and sell-through
with values by category and
location reconciled to the general
ledger, within ten (10) days after
the end of each month.
4. Weekly inventory reports for the
Inventory broken down by category,
location, lot number and expiration
date, valued on a first-in, first-
out basis at the lower of cost (in
accordance with GAAP) or such other
inventory reports as are reasonably
requested by Coast, due by Tuesday
of the following week.
5. Monthly internally prepared
financial statements, as soon as
available, and in any event within
thirty (30) days after the end of
each month.
6. Quarterly internally prepared
financial statements, as soon as
available, and in any event within
forty-five (45) days after the end
of each fiscal quarter of Borrower.
7. Quarterly customer lists, including
customer name, address, and phone
number.
8. Annual financial statements, as
soon as available, and in any
event within ninety (90) days
following the end of Borrower's
fiscal year, containing the
unqualified opinion of, and
certified by, an independent
certified public accountant
acceptable to Coast.
9. Monthly accrued warranty and
advertising allowances by customer
within ten (10) days after the end
of each month.
10. Month end reconciled bank state-
ments within ten (10) days after
the end of each month.
11. Monthly Certification of Financial
Documents and Covenants within ten
(10) days after the end of each
month.
12. Borrower shall maintain shipping
records that include purchase order
number, and invoice number on a
dated and signed bill of lading.
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Section 8.5 - Negative Covenants
(Acquired Assets): One Hundred Thousand Dollars ($100,000)
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SECTION 9 - TERM
Section 9.1 - Maturity Date: July 31, 2001, subject to automatic renewal as
provided in Section 9.1 of the Agreement, and
early termination as provided in Section 9.2
of the Agreement.
BORROWER: COAST:
COAST BUSINESS CREDIT(R), a division of
CYANOTECH CORPORATION Southern Pacific Bank
By /s/Xxxxxx X. Xxxxxxxx By /s/Xxxxxx X. Xxxxxx
------------------------ -------------------------
Xxxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxx
Title: Chairman & President Title: Vice President
By /s/Xxxxxx X. Xxxxx
------------------------
Xxxxxx X. Xxxxx
Title: Executive Vice President
NUTREX, INC.
By /s/Xxxxx X. Line
------------------------
Xxxxx X. Line
Title: President
By /s/Xxxxxx X. Xxxxx
------------------------
Xxxxxx X. Xxxxx
Title: Executive Vice President
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