March 30, 1998
HAND DELIVERY
E. Xxxxxxxx Xxx, Esq.
Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxxx
0000 Xxxx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Re: Workout/Suspension Agreement - Kiewit Pacific Co.
and Cyanotech Corporation
Dear Mr. Gay:
I am writing to memorialize the key terms and conditions of
the Workout/Suspension Agreement negotiated by and between Kiewit Pacific Co.
"Kiewit" and Cyanotech Corporation "Cyanotech" (collectively referred to as the
"Parties") on Friday, March 13, 1998.
A. The Parties agree that the amount presently due and owing
on the Construction Contract dated April 10, 1997 between Kiewit and Cyanotech
is $975,000.
B. Cyanotech agrees to execute a promissory note in the
principal amount of $975,000 in favor of Kiewit. The Note shall bear Interest at
the rate of Prime plus 2% as set forth in article 7.2 of the Construction
Contract (AIA A-101). The Note shall contain customary terms and conditions for
financing of this nature including but not limited to providing: for costs of
collection including attorney fees, that upon default the entire amount is due
and owing, and for late fees. Interest under the Note shall begin to run from
January 1, 1998.
C. Payments under the Note shall be as follows:
1. First payment shall be made no later than April 1,
1998 and shall be a principal and interest payment
in the amount of $150,000.
E. Xxxxxxxx Xxx, Esq.
March 30, 1998
Page 2
2. Second payment shall be made no later than June 1,
1998 and shall be a principal and interest payment
in the amount of $100,000.
3. The third through eight payments shall each be
made on the first business day of the month
starting July 1, 1998 and running through
December 1, 1998. These payments shall be
principal and interest payments in the amount of
$100,000.
4. The final payment shall be made on December 31,
1998 and shall be a principal and interest
payment in such amount as to completely pay off
all remaining amounts due under the Note.
D. There is no penalty for early repayment of the Note.
E. In the event Cyanotech obtains new funding by way of debt,
equity or any other form of financing, the Note shall be immediately prepaid to
the extent of such funding or paid off in its entirety, if the funding exceeds
the balance on the Note.
F. No later than April 1, 1998, Cyanotech shall execute a
security agreement and UCC 1 granting to Kiewit a security interest in
Cyanotech's inventory, equipment, accounts receivable, furniture and fixtures,
stockpiled construction material (including but not limited to any stockpiled
rock), and any proceeds thereof and after acquired good.
X. Xxxxxx agrees to suspend work on the Construction Contract
until December 31,1998. If Kiewit is not authorized to re-start work under the
Construction Contract to begin in or before January 1, 1999 in a reasonable and
customary manner in accordance with the terms of the contract and at a minimum
billable rate of $150,000/mo, then the contract shall be considered to have been
terminated by Cyanotech and each party shall retain all rights with respect to
the termination of the contract.
H. The Parties agree to meet on or before November 30, 1998
to discuss the possibility of an additional period of suspension of the
Construction Contract. However, there is no obligation to extend the period of
suspension.
E. Xxxxxxxx Xxx, Esq.
March 30, 1998
Page 3
I. Cyanotech shall provide such financial information as
reasonably requested by Kiewit, including quarterly financial statements, and a
copy of the State of Hawaii Facilities Lease. In the event any payment is not
made as required under this agreement and the promissory note referenced herein,
Cyanotech shall immediately provide to Kiewit a copy of its customer list and
its equipment vendor lists. Kiewit shall keep this information confidential.
J. The Parties to execute a suspension agreement.
K. Unless otherwise specifically modified herein, all other
terms of the Construction Contract shall remain in full force and effect.
It is my understanding from our phone conversations that this
is agreeable to your client. Please have your client execute where indicated
below to bind Cyanotech to the terms and conditions of this agreement. I will
forward the drafts of the note, security agreement, UCC 1 and suspension
agreement to you for your review shortly. Tomorrow morning I will also provide
you with the information necessary to transfer the funds to Kiewit by Wire.
Very truly yours,
/s/XXXXXXX X. XXXX
-------------------------
XXXXXXX X. XXXX
for
KOBAYASHI, SUGITA & GODA
cc: Xxxxx Xxxxxxx
Xxxx Xxxxxxxx, Esq.
Execution binds Cyanotech, Inc.
to the Terms and Conditions
Set Forth Herein Above
Cyanotech, Inc.
by /s/Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx
Executive Vice President & CFO
