SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Item 1.01 Entry into a Material Definitive Agreement.
On April 21, 2023, HCW Biologics Inc. (the “Company”) entered into a secured Development Line of Credit Agreement (the “Agreement”) with Prime Capital Ventures, LLC, as lender (the “Lender”), pursuant to which the Lender shall advance loans to the Company in an aggregate principal amount not to exceed $26.25 million (the “Maximum Amount”) with a scheduled maturity date of April 20, 2028 (the “Maturity Date”). The note issued pursuant to the Agreement bears interest at a fixed rate of seven (7) percent per annum, due monthly in arrears on the first day of each month, and the outstanding principal on the note shall be due and payable in full on the Maturity Date.
Under the Agreement, within ten (10) days of receipt of the executed Agreement by each of the Company and the Lender, the Company will be required to wire $5.25 million to Lender to serve as a reserve for the payment of interest under the Agreement. In addition, out of the initial advance, the Company shall pay to the Lender a non-refundable fee in the amount of $1.25 million. The Lender is required to make advances to the Company pursuant to the terms of the Agreement in an amount not to exceed the Maximum Amount. The initial advance from the Lender to the Company is contingent upon the Company’s (1) receipt of all necessary permits and approvals to conduct its business and (2) the compliance with all applicable laws, including zoning and environmental laws.
The Agreement contains customary representations, warranties, affirmative and negative covenants, including financial reporting covenants, events of default and indemnification provisions in favor of the Lender referred to in the Agreement. The covenants include restrictions governing the Company’s ability to amend its certificate of incorporation or bylaws in a manner adverse to the Lender, the Company’s incurrence of liens and indebtedness, the Company’s ability to make investments, and the Company’s entry into certain merger and acquisition transactions or dispositions and other matters, all subject to certain exceptions. In connection with the Agreement, the Lender has been granted a first priority lien and security interest in the Company’s new facility under construction at 3300 Corporate Way, Miramar Florida and various construction project-related bank accounts.
The foregoing description of the Agreement is not intended to be complete and is qualified in its entirety by reference to the Agreement, which is filed as Exhibit 10.1 to this Form 8-K and is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above is incorporated by reference into this Item 2.03.
Item 9.01 Financial Statements and Exhibits.
Cover Page Interactive Data File (embedded within the Inline XBRL document).
* Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of omitted exhibits and schedules upon request by the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HCW BIOLOGICS INC.
April 27, 2023
/s/ Hing C. Wong, Ph.D.
Founder and CEO
DEVELOPMENT LINE OF CREDIT AGREEMENT
PRIME CAPITAL VENTURES, LLC
HCW Biologics Inc.
dated as of
April 20, 2023
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS
Section 1.1. Certain Defined Terms 2
ARTICLE 2 THE CREDIT
Section 2.1. Line of Credit Amount 4
Section 2.2. Line of Credit Documents 4
ARTICLE 3 TERM, INTEREST AND PAYMENTS
Section 3.1. Initial Term 5
Section 3.2. Extended Term 5
Section 3.3. Applicable Interest Period 5
Section 3.4. Interest Rate Calculation 5
Section 3.5. Interest Payments 6
Section 3.6. Reserves 6
Section 3.7. Intentionally Omitted 6
Section 3.8. Prepayment 6
Section 3.9. Interest Credit Account 6
Section 3.10. LOC Fee 7
Section 3.11. Line of Credit Extension Fees 7
Section 3.12. Legal and Incidental Fees, Charges and Costs 7
Section 3.13. Taxes 8
ARTICLE 4 CONDITIONS TO CLOSING AND DISBURSEMENT
Section 4.1. Delivery of the LOC Documents 8
Section 4.2. Authority 8
Section 4.3. Liens 9
Section 4.4. Litigation 9
Section 4.5. Events of Default 9
Section 4.6. Purchase and Agreement Contracts 9
Section 4.7. Compliance with Certain Requirements 9
Section 4.8. Evidence of Insurance 9
Section 4.9. Financial Statements 10
Section 4.10. Business Pro Forma 10
Section 4.11. Management Plan 10
Section 4.12. Material Change 10
Section 4.13. Non-Subordination 10
Section 4.14. Borrower Governing Agreement(s) 10
Section 4.15. Securitization 11
ARTICLE 5 USE OF LINE OF CREDIT PROCEEDS
Section 5.1. Development Costs 11
ARTICLE 6 INSPECTIONS
Section 6.1. Project Inspection 11
Section 6.2. Books and Records 11
Section 6.3. Force Majeure Event Inspection Right 11
ARTICLE 7 ADVANCE OF FUNDS
Section 7.1. Timing and Advances to Payee 12
Section 7.2. Conditions Precedent to Advance of Funds 12
Section 7.3. Unpaid Lien Claims 12
Section 7.4. Mandatory Advances 12
ARTICLE 8 BORROWER’S AFFIRMATIVE COVENANTS
Section 8.1. Project 12
Section 8.2. Compliance with Laws 13
Section 8.3. Compliance with Documents 13
Section 8.4. Books and Records 13
Section 8.5. Payment of Obligations 13
Section 8.6. Financial Reports 13
Section 8.7. Notification to Lender 13
Section 8.8. Partnership/Corporate Existence 13
ARTICLE 9 BORROWER’S NEGATIVE COVENANTS
Section 9.1. Liquidation, Merger and Sale of Assets 14
Section 9.2. Liens 14
Section 9.3. Indebtedness 14
Section 9.4. Investments, Loans and Guaranties 14
Section 9.5. Acquisitions 14
Section 9.6. Organizational Documents 14
Section 9.7. Project and Project Documents 15
ARTICLE 10 REPRESENTATIONS AND WARRANTIES
Section 10.1. Validity of Agreement 15
Section 10.2. Existing Defaults 15
Section 10.3. No Default in Other Agreements 15
Section 10.4. No Consents 16
Section 10.5. Litigation 16
Section 10.6. Financial Statements 16
Section 10.7. Legal Requirements 16
Section 10.8. Taxes 16
Section 10.9. Organization and Good Standing 17
Section 10.10. Insurance 17
Section 10.11. Accurate and Complete Statements 17
Section 10.12. Lender’s Ability to Fund 17
ARTICLE 11 NATURE OF REPRESENTATIONS AND WARRANTIES
Section 11.1. Generally 17
ARTICLE 12 EVENTS OF DEFAULT
Section 12.1. Nonpayment 18
Section 12.2. Other Covenants and Agreements 18
Section 12.3. Representations and Warranties 18
Section 12.4. Security 18
Section 12.5. Validity of LOC Documents 18
Section 12.6. Petition for Bankruptcy, Insolvency 19
Section 12.7. Material Litigation 19
ARTICLE 13 REMEDIES
Section 13.1. General 19
Section 13.2. Right to Acquire 19
Section 13.3. Curing of Defaults by Advances 21
Section 13.4. Remedies Are Cumulative 21
Section 13.5. Offsets 21
Section 13.6. Collateral 21
Section 13.7. Default by Lender 22
Section 13.8. Binding Arbitration 23
ARTICLE 14 GENERAL PROVISIONS
Section 14.1. Disclaimer of Liability 24
Section 14.2. Publicity 24
Section 14.3. Confidentiality 24
Section 14.4. Responsibility for Application of Funds 25
Section 14.5. Notices 26
Section 14.6. Applicable Law 26
Section 14.7. Successors and Assigns 26
Section 14.8. Severability 26
Section 14.9. Amendments 26
Section 14.10. Headings; Attachments 26
Section 14.11. No Third-Party Rights 26
Section 14.12. Indemnification 27
Section 14.13. General Limitation of Liability 27
Section 14.14. Entire Agreement 27
Section 14.15. Execution in Counterparts 27
Section 14.16. Legal Representation of the Parties 27
Section 14.17. JURY TRIAL WAIVER 27
A PROMISSORY NOTE
B LOAN BUDGET
C THE PROJECT
D THE PROPERTY
E SECURITY AGREEMENT
F FORM TERMINATION LETTER
DEVELOPMENT LINE OF CREDIT AGREEMENT
This Development Line of Credit Agreement (as the same may from time to time be amended, restated or otherwise modified, this “Agreement”) is made and entered as of DATE April 20, 2023 between PRIME CAPITAL VENTURES, LLC, a Delaware limited liability company (“Lender”), and HCW Biologics Inc., a Delaware corporation (“Borrower”).
A. Borrower desires to obtain from Lender an asset-backed line of credit loan (the “LOC”) in an aggregate principal amount not to exceed the Maximum Amount, as hereinafter defined.
B. Borrower intends to use the proceeds of the LOC for the purpose of building a manufacturing facility in Miramar, FL, as more fully described on Exhibit C attached hereto (the “Project”), located on Borrower’s real property legally described on Exhibit D attached hereto (the “Property”).
C. Within ten (10) days after the fully executed Loan Documents are received by Lender and Borrower, Borrower has agreed to pay to Lender, pursuant to Section 3.6 hereof, the aggregate amount of Five Million Two Hundred Fifty Thousand and 00/100 Dollars ($5,250,000.00) (the “ICA Payment”), by bank wire to Lender. An account on the books and records of Lender shall be created to serve as an Interest Credit Account (the “ICA”). A credit equal to the ICA Payment shall be noted in the ICA for purposes of satisfying interest payments under the Loan.
D. Subject to the terms and provisions of this Agreement and the Promissory Note, Lender has agreed to make Advances from the LOC to Borrower in an aggregate amount not to exceed the Maximum Amount for the purposes set forth in these recitals and in the Promissory Note (as hereinafter defined) and upon the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Borrower and Lender agree as follows:
Section 1.1. Certain Defined Terms. Except as otherwise provided herein, accounting terms not specifically defined shall be construed, and all accounting procedures shall be performed in accordance with generally accepted accounting principles consistently applied. As used in this Agreement, the following terms have the following meanings, which apply to both the singular and plural forms:
“Advance(s)” means any loan advance made by Lender in accordance with the terms and conditions of this Agreement.
“Applicable Interest Rate” means the fixed interest rate specified in the Promissory Note.
“Borrower” means that term as defined in the first paragraph of this Agreement.
“Budget” means the schedule of Advances to Borrower from Lender, attached hereto as Exhibit B; provided that Borrower may request in writing to Lender adjustments to the Budget (so long as the aggregate amount of all Advances thereunder do not exceed the Maximum Amount), with any such adjustments subject to the approval of Lender in its sole but reasonable discretion.
“Closing Date” means the last date of signed execution of this Agreement by Lender and Borrower.
“Collateral” means any and all property with respect to the Project securing repayment of the obligations of Borrower under this Agreement, as such collateral is evidenced by a Security Document, including all additions thereto, replacements and proceeds, thereof.
“Event of Default” means any event or condition that shall constitute an event of default as described in Article 12 of this Agreement.
“ICA” or “Interest Credit Account” means the definition given in Recital C.
“ICA Payment” means the amount remitted pursuant to Recital C of this Agreement.
“Lender” means that term as defined in the introductory paragraph.
“LOC” means that term as defined in Recital A.
“LOC Disbursement Account” means that term as defined in Section 3.12 hereof.
“LOC Document(s)” means, collectively, this Agreement, the Promissory Note and each Security Document, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced, and any other document delivered pursuant thereto.
“Maximum Amount” means Twenty-Six Million Two Hundred Fifty Thousand and 00/100 Dollars ($26,250,000.00). The Maximum Amount is the Project LOC Amount plus all fees, costs and expenses which are Borrower’s responsibility to pay.
“Organizational Documents” means, with respect to any Person (other than an individual), such Person’s articles (or certificate) of incorporation or equivalent formation documents, and bylaws, operating agreement, partnership agreement or equivalent governing documents, and any amendments to any of the foregoing.
“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise, ad valorem or property taxes, goods and services taxes, harmonized sales taxes and other sales taxes, use taxes, value added taxes, transfer taxes, charges or similar taxes or levies arising from any payment made hereunder or under any other LOC Document, or from the
execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other LOC Document.
“Person” means any individual, sole proprietorship, partnership, joint venture, unincorporated organization, corporation, limited liability company, unlimited liability company, institution, trust, estate, governmental authority or any other entity.
“Project” means that term as defined in Recital B of this Agreement.
“Project Costs” means the amount of the LOC proceeds/all Advances not to exceed the Maximum Amount, to be utilized by Borrower for the purpose of implementation or execution of the Project (including but not limited to payment of taxes, insurance and all items reasonably necessary for the successful execution of the Project ), as more specifically set forth in the Project budget set forth on Exhibit B attached hereto.
“Project LOC Amount” means Twenty-Five Million and 00/100 Dollars ($25,000,000.00).
“Property” means that term as defined in Recital B of this Agreement.
“Promissory Note” means the Promissory Note, in the form attached hereto as
“Security Agreement” means that certain Security Agreement, dated as of the Closing Date, executed by Borrower in favor of Lender, in the form attached hereto as Exhibit F.
“Security Document” means each security agreement (including, without limitation, the Security Agreement) each pledge agreement, each intellectual property security agreement, each control agreement, each mortgage, each U.C.C. Financing Statement or similar filing filed in connection herewith or perfecting any interest created in any of the foregoing documents, and any other document pursuant to which any lien is granted by any Person to Lender, as security for the obligations under this Agreement or under the Promissory Note, or any part thereof, and each other agreement executed or provided to Lender in connection with any of the foregoing, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced.
“Scheduled Maturity Date” means the five (5) year anniversary of the Closing Date, as the same may be extended pursuant to Section 3.2 hereof.
“Taxes” means any and all present or future taxes of any kind, including, but not limited to, levies, imposts, duties, assessments, surtaxes, charges, fees, deductions or withholdings (including backup withholding), or other charges now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority (together with any interest, penalties, fines, additions to taxes or similar liabilities with respect thereto); provided that “Taxes” shall not include, with respect to those imposed on Lender, income, capital gain, sales, use, franchise, excise, taxes or withholding on account of foreign investment in the United States or other taxes on Lender or the revenues derived by Lender with respect to the LOC.
Section 2.1. Line of Credit Amount. Subject to the terms and conditions of this Agreement, Lender agrees to make Advances to Borrower under the LOC in an aggregate amount not to exceed the Maximum Amount. The obligation of Borrower to repay such Advances, with interest thereon, shall be evidenced by the Promissory Note.
Section 2.2. Line of Credit Documents. The obligation of Borrower to repay the Advances under the LOC shall be evidenced by the Promissory Note. The LOC shall be secured by the Security Document covering the Property, all easements appurtenant to or benefitting the Property, all of which shall be in form and substance satisfactory to Lender and its counsel. The Line of Credit Documents consist of the following:
a. Promissory Note;
b. this Agreement;
c. Governing Agreement/an Amended and Restated Governing Agreement; and
d. each Security Document.
TERM, INTEREST AND PAYMENTS
Section 3.1. Initial Term. The initial term of the LOC shall commence on the Closing Date and expire on the Scheduled Maturity Date. The aggregate outstanding principal amount of all Advances, any accrued but unpaid interest thereon, and all other amounts due and owing hereunder and under the Promissory Note shall be repaid by Borrower in full on the Scheduled Maturity Date.
Section 3.2. Extended Term. At the end of the initial term set forth in Section 3.1 hereof, and at the end of each Extended Term (if any), provided the LOC is not then and has not been in default beyond any applicable notice and cure period, and Borrower has been in full compliance with the terms and conditions of the LOC Documents, and Lender has not provided Borrower notice that an event then exists which, through the passage of time, the giving of notice and the expiration of any cure period would become an Event of Default, and further provided that all conditions to extension set forth below are fully satisfied, Borrower may request to extend the term of the LOC and this Agreement for an additional twelve (12) month period, up to a total of one (1) such additional consecutive periods (separately, “Extended Term”; collectively, the “Extended Terms”). In connection with Lender’s granting of each Extended Term, (a) Borrower shall execute all documents which Lender, in its reasonable discretion, deems necessary to implement
such extension, and (b) Borrower will pay all reasonable costs and expenses incurred by Lender in connection with such extension, including but not limited to Lender’s attorneys’ fees.
Section 3.3. Applicable Interest Period. The interest period with respect to each Advance under the LOC shall be the period commencing on the date such Advance was made to Borrower by Lender, which shall commence the date such funds were withdrawn by Borrower from the LOC Disbursement Account and continuing until such Advance is repaid in full.
Section 3.4. Interest Rate Calculation. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed in a 365-day year and at the rate set forth in the Promissory Note (the “Applicable Interest Rate”).
Section 3.5. Interest Payments. Interest on the outstanding principal balance of Advances under the LOC shall be paid from the Interest Credit Account at the rate and at the times set forth in the Promissory Note.
Section 3.6. Reserves. Following the signing of this Agreement, Borrower shall remit the ICA Payment in accordance with the terms and time period set forth in Recital D. Upon the funding of the first Advance, the ICA Payment shall remain part of the Interest Credit Account and subject to the provisions of this Agreement, and not refundable to Borrower unless otherwise specifically provided for in this Agreement. All credits to the Interest Credit Account shall be used, absent the occurrence of an Event of Default, for purposes of payment on interest payable on the Advances as and when such interest payments are due and payable. Upon Borrower’s exit and payoff of the LOC, absent the occurrence of an Event of Default, if there is a remaining balance in the ICA, the excess amount shall be applied to the unpaid principal balance outstanding under the Promissory Note or, if it exceeds such unpaid principal, refunded to Borrower.
Section 3.7. Intentionally Omitted.
Section 3.8 Prepayment. Borrower may, without penalty, prepay all or any portion of the outstanding principal balance of the LOC upon no less than thirty (30) days’ prior written notice to Lender.
Section 3.9. Interest Credit Account. If, at any time, no balance remains in the Interest Credit Account (having been applied as provided in this Agreement), upon notice from Lender to Borrower, which notice shall be delivered to Borrower no less than thirty (30) days prior to the date of the next interest payment date, Borrower shall remit into the ICA the funds necessary to make such interest payment prior to the date such interest payment is due and payable.
Section 3.10. LOC Fee. Out of the initial Advance, Borrower shall pay Lender a nonrefundable fee for the LOC in an aggregate amount equal to five percent (5%) multiplied by the Project LOC Amount, which is equal to One Million Two Hundred Fifty Thousand and 00/100 Dollars ($1,250,000.00) (the “LOC Fee”). The LOC Fee will be fully earned by Lender and is due and payable in full to Lender commensurate with the funding of the first Advance, without condition.
Section 3.11. Line of Credit Extension Fees. Concurrently with the commencement of each Extended Term, if any, Borrower shall pay to Lender, on the first date of each such Extended Term, a nonrefundable LOC extension fee for each extension in an aggregate amount equal to one percent (1%) multiplied by the Maximum Amount.
Section 3.12. Legal and Incidental Fees, Charges and Costs. Borrower shall pay all reasonable and actual out of pocket legal fees, recording and filing fees, documentary stamps, taxes, service charges, credit reports, U.C.C. search costs, title company and escrow fees and costs, third party paymaster fees and administrative expenses, and all other charges or expenses incurred by Lender including administrative fees and expenses (a) in connection with the LOC, (b) in connection with efforts to collect any amount due under the LOC, or (c) in any action or proceeding to enforce the provisions of any of the LOC Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial proceeding. Lender shall not be required to pay any premium or other charge or any brokerage fee or commission or similar compensation in connection with the LOC or with satisfying the conditions of any commitment for standby or permanent financing. Borrower shall indemnify and hold harmless Lender against and from any and all claims for such fees, commissions, and compensation in connection with the LOC; provided that Lender shall not have the right to be indemnified under this Section 3.11 for its own negligence or intentional misconduct.
Section 3.13. Taxes.
(a) All payments made by Borrower under any LOC Document shall be made free and clear of, and without deduction or withholding for or on account of, any Taxes or Other Taxes. If any Taxes or Other Taxes are required to be deducted or withheld from any amounts payable to Lender hereunder, the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after deducting, withholding and payment of all Taxes and Other Taxes, including such deductions, withholdings and payments of Taxes and Other Taxes applicable to other sums payable under this Section 3.13) interest or any such other amounts payable hereunder at the rates or in the amounts specified in the LOC Documents.
(b) Whenever any Taxes or Other Taxes are required to be withheld and paid by Borrower, Borrower shall timely withhold and pay such taxes to the relevant governmental authorities. As promptly as possible thereafter, Borrower shall send to Lender a certified copy of an original official receipt received by Borrower showing payment thereof or other evidence of payment reasonably acceptable to Lender. If Borrower fails to pay any Taxes or Other Taxes when due to the appropriate governmental authority or fails to remit to Lender the required receipts or other required documentary evidence, Borrower shall indemnify Lender on demand for any incremental Taxes or Other Taxes paid or payable by Lender as a result of any such failure.
(c) Borrower’s obligations under Section 3.13 shall survive the termination of the LOC Documents and Borrower’s repayment of the Advances and payment all other amounts payable under the LOC Documents.
CONDITIONS TO CLOSING AND DISBURSEMENT
The obligation of Lender to provide the LOC and make any Advance hereunder will be subject to the satisfaction, at Borrower’s cost and expense, of each of the following conditions, unless waived by Lender in writing:
Section 4.1. Delivery of the LOC Documents.
(a) On or before the Closing Date, Borrower shall execute and deliver to Lender, in a manner satisfactory to Lender, all of the LOC Documents.
(b) Prior to the First Advance, Borrower shall have delivered to Lender an executed Control Agreement (as defined in the Security Agreement), for each of the Interest Credit Account and the LOC Disbursement Account.
(c) Contemporaneously with Borrower’s acquisition of the Property, Borrower shall have delivered an executed and notarized mortgage or deed of trust required by Lender granting Lender a first priority lien and security interest in and to the Property (the “Security Instrument”), and such Security Instrument shall be promptly recorded in the real property records of the county in which such real property is located. If required by Lender, (i) the closing of such Advance and recording of the Security Instrument shall be completed through the escrow services of a title company chosen by Lender, and (ii) such title company shall issue, at Borrower’s expense and for the benefit of Lender, a loan policy of title insurance with respect to the Property. For the avoidance of doubt, this Section 4.1(c) shall not operate to preclude any Advances to Borrower to fund pre-acquisition costs.
Section 4.2. Authority. On or before the Closing Date, Borrower shall deliver to Lender an officer’s certificate (or comparable document) certifying the names of the officers, members or managers of Borrower authorized to sign the LOC Documents, together with the true signatures of such Persons and certified copies of (a) the resolutions of the board of directors (or comparable document) of Borrower evidencing approval of the execution, delivery and performance of the LOC Documents and the consummation of the transactions contemplated thereby, (b) the Organizational Documents of Borrower (including, if applicable, copies of the partnership and corporate documentation of each of the general partners of Borrower and copies of all equity participation agreements), and (c) a certificate of good standing or subsistence with regard to Borrower.
Section 4.3. Liens. As of the First Advance, the Project is free from any prior liens, other than liens permitted by Lender that will be satisfied from loan proceeds at First Advance. All taxes and assessments affecting the Property or any part thereof due and payable (including without limitation any taxes) have been paid. The Property is not impaired by any existing undisclosed covenants, conditions, or restrictions. At the request of Lender, Borrower shall (i) deliver to Lender the results of Uniform Commercial Code lien searches, satisfactory to Lender, (ii) the results of federal and state tax lien and judicial lien searches and pending litigation and bankruptcy searches, in each case satisfactory to Lender, and (iii) Uniform Commercial Code or other lien termination
statements reflecting termination of all liens previously filed by any Person and not expressly permitted pursuant to the LOC Documents.
Section 4.4. Litigation. As of the Closing Date and as of the date of each Advance, there shall be no material Litigation pending against the Property or the Project, which in Lender’s reasonable business judgment, materially affects Borrower’s ability to perform all of the terms and provisions of this Agreement.
Section 4.5. Events of Default. As of the Closing Date and as of the date of each Advance, no Event of Default shall have occurred and be continuing, and Borrower shall otherwise be in full compliance with the terms and provisions of this Agreement.
Section 4.6. Project Contracts. Borrower shall deliver to Lender copies of all material contracts entered in connection with the Property and the Project, and all other contracts material to Borrower’s operations and/or properties.
Section 4.7. Compliance with Certain Requirements. If and when requested by Lender, Borrower shall deliver evidence reasonably satisfactory to Lender that the Property and Borrower’s ownership thereof is in material compliance with all applicable laws, regulations, ordinances, conditions, reservations, and restrictions imposed on the Property and Borrower’s ownership thereof under local, state, federal and international laws, procedures, statutes, regulations and ordinances applicable to the Project.
Section 4.8. Evidence of Insurance. For the period beginning with the Closing Date and continuing throughout the term of the LOC, Borrower shall take out, pay for and keep in full force, property and liability insurance on the Property against such risks, in such amounts, and with such lenders ‘loss payable and additional insured clauses and endorsements as shall be satisfactory to Lender and otherwise customarily carried on property of the type and having an approximate fair market value as that of the Property, and shall furnish Lender with the reasonably satisfactory evidence of such insurance and promptly notify Lender of any changes to such insurance. Borrower shall include Lender as an additional insured under all insurance policies applicable to the Property.
Section 4.9. Financial Statements. Borrower shall deliver to Lender all financial reports required by Section 8.6. Documents required to be delivered pursuant to this Section 4.9 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address “www.hcwbiologics.com” (or any successor page notified to the Lender).
Section 4.11. Management Plan. Borrower shall deliver to Lender a copy of Borrower’s Q3 board package promptly after such board package is delivered to Borrower’s board of directors (which shall occur on or prior to October 31st of each year), which board package shall include a detailed management plan, consisting of the business operation and budget for all expenses of Borrower.
Section 4.12. Material Change. Throughout the term of the LOC, Borrower shall advise Lender of any material change in conditions affecting Borrower or the Project that would materially alter the documentation and information submitted by Borrower with respect to the Project to satisfy the above conditions precedent and will submit amended documentation and information reflecting these changed conditions for the reasonable approval of Lender.
Section 4.13. Non-Subordination. Under this Agreement, the payment and performance obligations of Borrower and/or its subsidiaries shall never put Lender in a position subordinate to any indebtedness owing to any other creditor of Borrower with respect to the Project (excepting interim obligations for labor and materials incurred in the normal course of development and construction of the Project, which obligations will be timely satisfied in the normal and reasonable management of the Project).
Section 4.14. Borrower Governing Agreements. On or before the date of the funding of the first Advance, Borrower shall deliver to Lender all Borrower’s fully executed Organizational Documents, in form and substance satisfactory to Lender, together with any such other agreements or documentation, in form and substance satisfactory to Lender, necessary or desirable to complete the transactions contemplated thereby. Borrower’s failure to timely provide the executed Organizational Documents may delay disbursement of the first Advance, and any such delay shall not constitute a breach by Lender of this Agreement or the LOC Documents or the transactions contemplated hereunder.
Section 4.15. Securitization. Lender may in its sole discretion securitize the LOC funding through an insurer of its choosing. Should Lender decide to securitize this transaction, Borrower agrees to cooperate with any preliminary determination or due diligence required by the insurer.
USE OF LINE OF CREDIT PROCEEDS
Section 5.1. Development Costs.
(a) Proceeds of Advances shall be utilized by Borrower solely for the purpose of financing the Project Costs, as more fully described on the attached Exhibit B, updated yearly by Borrower.
(b) The proceeds of the LOC shall be used exclusively for the purposes set forth in this Agreement. Borrower warrants and represents that the use of the LOC proceeds as set forth herein is for business and commercial purposes only and that the LOC proceeds will not be used for personal, family or household purposes. Borrower will not, directly or indirectly, use the proceeds of the Advances under the LOC, or lend, contribute or otherwise make available such proceeds to
any joint venture partner or other Person, (i) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (ii) in any other manner that would result in a violation of Sanctions by any Person.
Section 6.1. Project Inspection. Lender, through its officers, agents, contractors, affiliates, or employees, shall have the right, at all reasonable times during business hours upon five (5) days’ prior written notice to Borrower to enter on-site offices of the Project construction site and to inspect the operations in connection with the Project; provided that the foregoing inspections shall be limited to once per quarter absent the occurrence of an Event of Default.
Section 6.2. Books and Records. Lender shall have the right, at all reasonable times, to examine the books, records, accounting data, and other documents of Borrower pertaining to the Project and to make extracts therefrom or copies thereof.
Section 6.3. Force Majeure Event Inspection Right. In the event of a Force Majeure Event which interrupts, stops, or otherwise impedes Borrower’s ability to continue with the Project, upon notice by Borrower to Lender in writing of such Force Majeure Event occurrence, Lender shall have the right upon five (5) business days’ notice to periodically inspect the Project, surrounding conditions, and interview employees, contractors, vendors involved in the development of the Project until such time as Lender is satisfied of Borrower’s ability to resume operations to develop the Project. Following a Force Majeure Event, Lender has the right to modify the terms upon which future Advances may be made as a result of a change in circumstances as determined by Lender in Lender’s sole discretion, that Borrower has ability to perform or continue to perform the Project scope of work. Borrower shall execute any additional documents, amendments or other agreement of terms required by Lender before Lender’s obligation to continue to make Advances shall resume.
ADVANCE OF FUNDS
Section 7.1. Timing and Advances to Payee. So long as all conditions precedent to an Advance have been met pursuant to the terms of this Agreement, Lender agrees that the first Advance will be funded no later than ninety (90) banking business days following the opening of the ICA.
Section 7.2. Conditions Precedent to Advance of Funds. As conditions precedent to the disbursement of any Advance, Lender, unless otherwise expressly waived in writing by Lender, shall have received and approved the following, all of which shall be complete, true, accurate and in form satisfactory to Lender in its sole reasonable discretion:
Section 7.3. Unpaid Lien Claims. If Lender receives notice of nonpayment from a potential lien claimant or a lien is filed that is not insured over, or if contested then offset with a segregated loss reserve account, or until the potential lien claimant acknowledges payment or otherwise rescinds its notice in such form and with such other acknowledgments as Lender may require, in accordance with applicable law, Lender, at its option may (a) refuse to make any further Advances to Borrower; or (b) withhold one hundred percent (100%) of the lien amount claimed from future Advances .
Section 7.4. Mandatory Advances. Notwithstanding any other term or provision of this Agreement, it is understood that interest on all outstanding Advances under the LOC shall be paid from the ICA and that such method of interest payment is mandatory and not optional. If Lender permits Borrower may pay the interest directly, Lender shall have the right to advance the LOC proceeds to pay such interest if not otherwise paid when due. If the LOC funds allocated for these purposes are depleted, Borrower is not relieved from paying directly when due these or any other expenses or amounts required under the terms of this Agreement or any other LOC Document.
BORROWER’S AFFIRMATIVE COVENANTS
As a material inducement to Lender to make the LOC to Borrower, and until repayment in full of the Advances and other amounts outstanding under the LOC and performance of all other obligations of Borrower under the LOC Documents, Borrower agrees to do all of the following unless Lender shall otherwise consent in writing:
Section 8.1. Project. (a) Complete, on an ongoing basis, all due diligence required or necessary in connection with the Project, and (b) be the entity that is counterparty to each material primary contract and agreement related to (i) the Project and (ii) the development, construction, operation and management of the Project.
Section 8.2. Compliance with Laws. Comply with and provide to Lender upon Lender’s reasonable request evidence of material compliance with, all applicable state, local, federal, and international laws, procedures, acts, ordinances and regulations applicable to the Project.
Section 8.3. Compliance with Documents. Perform and comply with all the terms and conditions of this Agreement and the other LOC Documents.
Section 8.4. Books and Records. Keep and maintain complete and accurate books of account, in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Project.
Section 8.5. Payment of Obligations. Pay and discharge before the same shall become delinquent all material obligations, claims, indebtedness, taxes, and other obligations with respect to the Project (except only those so long as and to the extent that the same shall be contested in good faith by appropriate and timely proceedings and for which adequate provisions have been established in accordance with generally accepted accounting principles).
Section 8.6. Financial Reports. Deliver to Lender, with respect to Borrower as soon as available and in any event (a) within forty-five (45) days after the end of each calendar quarter during the term of the LOC, financial statements of Borrower for such quarter and (b) within ninety (90) days after the end of each fiscal year of Borrower, annual financial statements of Borrower, in each case of the foregoing, certified as true and correct (which reports shall be prepared in accordance with generally accepted accounting principles consistently applied) and operating statements in form reasonably satisfactory to Lender. Borrower shall also deliver to Lender, promptly upon request therefor, (i) such other financial information of Borrower (and its subsidiaries, if any) as may reasonably be requested by Lender and (ii) within thirty (30) days after the end of each calendar quarter during the term of the LOC, a reconciliation of surplus report with respect to the Project. Documents required to be delivered pursuant to this Section 8.6 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address “www.hcwbiologics.com” (or any successor page notified to the Lender).
Section 8.7. Notification to Lender. Promptly after learning thereof, notify Lender of: (a) the details of any material action, proceeding, investigation or claim against or affecting the Property or the Project instituted before any court, arbitrator or governmental authority or to Borrower’s knowledge threatened in writing to be instituted; (b) any material dispute between Borrower and any governmental authority involving or related to the Property or the Project; (c) any labor controversy which has resulted in or, to Borrower’s knowledge, threatens to result in a strike or disruption which would reasonably be expected to have a material adverse effect on the Property or the Project; (d) the occurrence of any Event of Default; (e) any written agreement to purchase any part of the Property or the Project or any application for any refinancing of the LOC; and (f) receipt by Borrower of all permits necessary to construct the Project.
Section 8.8. Partnership/Corporate Existence. Preserve and maintain its existence, rights, franchises, and privileges in the jurisdiction of Borrower’s formation.
BORROWER’S NEGATIVE COVENANTS
Until repayment in full of the Advances under the LOC and the performance of all other obligations of Borrower under the LOC, and in addition to all other covenants and agreement of Borrower contained herein or in any other LOC Documents, Borrower agrees that unless Lender shall otherwise consent in writing Borrower shall not:
Section 9.1. Liquidation, Merger and Sale of Assets. Liquidate, merge, or consolidate with any other Person in which Borrower is not the surviving entity, or sell, lease or transfer or otherwise dispose of any assets to any Person (collectively, “Transfers”) other than in Transfers (a) of assets in the ordinary course of business; (b) of worn-out, surplus, or obsolete equipment that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the ordinary course of business of Borrower; (c) consisting of the sale or issuance of any stock, partnership, membership, or other ownership interest or other equity securities of Borrower; (d) consisting of Borrower’s or its subsidiaries’ use or transfer of money or cash equivalents in a manner that is not prohibited by the terms of this Agreement or the other LOC Documents; (e) of non-exclusive licenses for the use of the property of Borrower or its subsidiaries in the ordinary course of business; (f) of other assets with an aggregate fair market value of Five Hundred Thousand Dollars ($500,000) per twelve (12)-month period.
Section 9.2. Liens. Create or incur any mortgage, security interest, lien, or other encumbrance of any kind upon all or any portion of the Project other than (a) any lien securing indebtedness owing to Lender, (b) liens for taxes not yet due or that are being actively contested in good faith by appropriate proceedings and for which adequate reserves shall have been established in accordance with generally accepted accounting principles, (c) other statutory liens, including, without limitation, statutory liens of landlords, carriers, warehousers, utilities, mechanics, repairmen, workers and material-men, incidental to the ownership and/or development of the Project that (i) were not incurred in connection with the incurring of indebtedness or the obtaining of advances or credit, and (ii) do not in the aggregate materially detract from the value of Borrower’s property or assets or the Project, (d) easements or other minor defects or irregularities in title of the Property not interfering in any material respect with the use of such
property in the development of the Project, and (e) liens existing on the Closing Date and previously disclosed to and approved by Lender (but only to the extent that the amount of debt secured thereby, and the amount and description of property subject to such Liens, shall not be increased).
Section 9.3. Indebtedness. Create, incur or have outstanding any indebtedness of any kind, other than (a) indebtedness owing to Lender under this Agreement and the other LOC Documents, (b) indebtedness of Borrower existing as of the Closing Date as disclosed to and approved by Lender (and any extension, renewal or refinancing thereof but only to the extent that the principal amount thereof does not increase after the Closing Date), and (c) trade debt incurred in the normal course of business.
Section 9.4. Investments, Loans and Guaranties. (a) Create, acquire or hold any subsidiary, (b) make or hold any investment in any stocks, bonds or securities of any kind other than U.S. government securities, (c) be or become a party to any joint venture or other partnership, (d) make or keep outstanding any advance or loan to any Person, or (e) be or become a guarantor of any kind.
Section 9.5. Acquisitions. Enter into any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of any Person, or any business or division of any Person, (b) the acquisition of any of the outstanding capital stock (or other equity interest) of any Person, or (c) the acquisition of another Person by a merger, amalgamation or consolidation or any other combination with such Person.
Section 9.6. Organizational Documents. (a) Amend its Organizational Documents in any manner adverse to Lender, or (b) amend its Organizational Documents to change its name or state, province or other jurisdiction of organization, or its form of organization.
Section 9.7. Project and Project Documents.
(a) Willfully or voluntarily abandon the Project or its activities to develop, construct, operate or maintain the Project, if the same would (i) be a major decision under the Organizational Documents of Borrower, or (ii) have a material adverse effect on Lender and is not necessary or desirable for continued development of the Project.
(b) Terminate or cancel or consent to or accept any cancellation or termination of; amend, modify or supplement any provision in any material respect; or grant consent under or waive any material default under, or material breach of, or material provision of or the performance of a material obligation by any other Person under, any contracts or agreements (i) related to the Property (ii) between Borrower and contractors for the Project or (iii) otherwise related the development, construction, operation and maintenance of the Project, in each case that would have an adverse effect on Lender; or
(c) Sell, assign (other than to Lender) or otherwise dispose of any of its rights or interest under, any contracts or agreements (i) related to the Property (ii) between Borrower and
contractors for the Project or (iii) otherwise related the development, construction, operation and maintenance of the Project.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section 10.1. Validity of Agreement. Borrower has the right and power and is duly authorized and empowered to enter, execute and deliver the LOC Documents to which it is a party and to perform and observe the provisions of the LOC Documents. The LOC and the execution, delivery and performance of the LOC Documents have been duly authorized by all necessary action, and when executed and delivered by Borrower will constitute the valid and binding agreements of Borrower, enforceable in accordance with their terms. The execution, delivery and performance of the LOC Documents do not conflict with, result in a breach in any of the provisions of, constitute a default under, or result in the creation of a lien (other than the liens permitted under Section 9.2) upon any assets or property of Borrower under the provisions of, Borrower’s Organizational Documents or any material agreement to which Borrower is a party.
Section 10.2. Existing Defaults. As of the date of execution of the LOC Documents, Borrower is not in material default in the performance or observance of any material obligation, agreement, covenant, or condition contained in any bond, debenture, note, or other evidence of indebtedness or in any contract, indenture, mortgage, agreement, lease, or other agreement or instrument to which Borrower is a party or by which it, or any of its properties, may be bound.
Section 10.3. No Default in Other Agreements. The execution and delivery and performance of this Agreement and all other LOC Documents, the incurrence of the obligations herein set forth, and the consummation of the transactions herein contemplated, will not result in the creation of a lien on the Property (except the liens created by the LOC Documents), and will not conflict with, result in a breach of any bond, debenture, note, contract, indenture, mortgage, lease, or any other evidence of indebtedness, agreement or instrument to which it is a party or by which it or any of its properties may be bound, or result in the violation by it of any law, order, rule, or regulation of any court or governmental agency or body having jurisdiction over it or any of its properties.
Section 10.4. No Consents. No consent, approval, authorization, or other acknowledgment of any court or governmental agency or body, other than those specifically referenced herein, is required for the consummation by Borrower of any of the transactions contemplated by this Agreement, except those permits and licenses required in the ordinary course of construction of the Project.
Section 10.5. Litigation. There is no material litigation at law or in equity and no proceedings before any commission or other administrative authority (“Litigation”) pending or to Borrower’s knowledge threatened against or affecting the Property or the Project, except as disclosed to and approved in writing by Lender. There is no material Litigation currently contemplated, threatened, or pending by Borrower against any entity or person which would have
a material effect on Lender, this Agreement, the LOC, or the transactions contemplated hereunder. Borrower’s failure to timely disclose to Lender any Litigation that is pending, threatened or contemplated by Borrower as of the date of Borrower’s execution of the LOC Documents shall constitute a material breach of this Agreement and shall justify Lender’s excuse from performance of any terms hereof, including funding of any Advance, until Lender is satisfied that such Litigation has been resolved in Lender’s sole but reasonable discretion.
Section 10.6. Financial Statements. Any and all balance sheets, statements of income or loss, reconciliation of surplus with respect to the Project, and financial data of any other kind furnished to Lender by or on behalf of Borrower are true and correct in all material respects, have been prepared in accordance with generally accepted accounting principles consistently applied (except for with respect to unaudited financial statements for the absence of footnotes and subject to year-end audit adjustments), and fully and accurately present the financial condition of the subjects thereof as of the dates thereof and no material adverse change has occurred in the financial condition reflected therein since the dates of the most recent thereof.
Section 10.7. Legal Requirements. With respect to the Project, on or prior to the date of the initial Advance, Borrower (a) shall hold all permits, certificates, licenses, orders, registrations, franchises, authorizations, and other approvals from any governmental authority necessary for the conduct of its business and is in compliance in all material respects with all applicable laws relating thereto, and (b) shall be in compliance with all federal, state, local, or international applicable statutes, rules, regulations, ordinances and orders including, without limitation, those relating to environmental protection, occupational safety and health, zoning, and equal employment practices.
Section 10.8. Taxes. Borrower has filed all tax returns and reports required of it, has paid all taxes which are due and payable, and has provided adequate reserves for payment of any tax whose payment is being contested; the charges, accruals and reserves on the books of Borrower in respect of taxes for all fiscal periods to date are accurate; and there are no questions or disputes between Borrower and any governmental authority with respect to any taxes except as otherwise previously disclosed to Lender in writing.
Section 10.9. Organization and Good Standing. Borrower is duly formed or organized, validly existing and in good standing under the laws of the State of its formation or organization as set forth in the first paragraph of this Agreement and is qualified as a foreign entity and in good standing in each jurisdiction where the Property and the Project are located.
Section 10.10. Insurance. Borrower maintains with financially sound and reputable insurers insurance for the Project with coverage (including, if applicable, flood insurance on all mortgaged property that is in a Special Flood Hazard Zone, from such providers, on such terms and in such amounts as required by the Flood Disaster Protection Act as amended from time to time or as otherwise required by Lender) and limits as required by law and as is customary with Persons engaged in the same businesses as Borrower.
Section 10.11. Accurate and Complete Statements. Neither the LOC Documents nor any written statement made by Borrower in connection with any of the LOC Documents contains any
untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein or in the LOC Documents not misleading.
Lender represents to Borrower as follows:
Section. 10.12 Lender’s Ability to Fund. Lender hereby represents and warrants to Borrower that it has the financial ability and wherewithal to fund the LOC in the full amount of the Maximum Amount.
NATURE OF REPRESENTATIONS AND WARRANTIES
Section 11.1. Generally. The representations and warranties made by Borrower herein and otherwise in connection with the LOC are and shall remain true and correct in all material respects as of the Closing Date and as of the date of each Advance, omit no materials facts, and shall survive so long as any of Borrower’s obligations under the LOC Documents have not been satisfied and/or the LOC or any part thereof shall remain outstanding. Each request by Borrower for an Advance shall constitute an affirmation that the representations and warranties remain true and correct in all material respects (or, as to any representations and warranties which are subject to a materiality qualifier, true and correct in all respects) as of the date thereof, except for any representations and warranties that are made as of a specific date. All representations and warranties made in any document delivered to Lender by or on behalf of Borrower pursuant to or in connection with the LOC shall be deemed to have been relied upon by Lender.
EVENTS OF DEFAULT
Any of the following specified events shall constitute an Event of Default (each an “Event of Default”):
Section 12.1. Nonpayment. Failure to make any payment required by the Promissory Note, this Agreement or any other LOC Documents, and such failure continues for a period of fifteen (15) days after written notice of such default is sent by Lender to Borrower.
Section 12.2. Other Covenants and Agreements. Failure by Borrower to perform or comply with any of the other covenants or agreements contained in this Agreement (other than those referred to in Section 12.6 hereof), or any of the LOC Documents and such failure shall not have been fully corrected within thirty (30) days after written notice of such default is sent by Lender to Borrower.
Section 12.3. Representations and Warranties. If any representation, warranty or statement made in or pursuant to this Agreement or any other LOC Document or any other material information furnished by Borrower to Lender, shall be false or erroneous in any material respect when made or when deemed made.
Section 12.4. Security. If any lien granted in this Agreement or any other LOC Document in favor of Lender, shall be determined to be (other than as a result of the action or inaction of Lender) (a) void, voidable or invalid, or is subordinated or not otherwise given the priority contemplated by this Agreement and Borrower has failed to promptly execute within ten (10) calendar days from the date such change in the lien status occurs, appropriate documents to correct such matters, or (b) unperfected as to any material amount of Collateral (as determined by Lender, in its reasonable discretion) and Borrower has failed to promptly execute within ten (10) calendar days from the date such change in the lien status occurs, appropriate documents to correct such matters.
Section 12.5. Validity of LOC Documents. If (a) any material provision, in the sole but reasonable opinion of Lender, of any LOC Document shall at any time cease to be valid, binding and enforceable against Borrower, and Borrower has failed to promptly execute appropriate documents to correct such matters after written notice thereof; (b) the validity, binding effect or enforceability of any LOC Document against Borrower shall be contested by Borrower; (c) Borrower shall deny that it has any or further liability or obligation under any LOC Document; or (d) any LOC Document shall be terminated, invalidated or set aside, or be declared ineffective or inoperative or in any way cease to give or provide to Lender the benefits purported to be created thereby, and Borrower has failed to promptly execute appropriate documents to correct such matters.
Section 12.6. Petition for Bankruptcy, Insolvency. The insolvency of Borrower; the filing by Borrower in any jurisdiction of a petition for bankruptcy, liquidation or reorganization, seeking, consenting to or appointment of any trustee, receiver, liquidator, or custodian of it or of all or substantially all of its property; or any such proceedings shall have been voluntarily or involuntarily instituted against Borrower; the failure of Borrower to generally pay its debts as they come due or any admission in writing in that regard; the making by Borrower of a general assignment for the benefit of creditors; the entry against Borrower, voluntarily or involuntarily, of any order for relief in any bankruptcy reorganization or liquidation, or similar proceeding or the declaration of or action taken by any governmental authority which operates as a moratorium on the payment of debts of Borrower, which such order or declaration or action shall have remained in place and undischarged or unstayed for a period of ninety (90) days; or the taking of action by Borrower to authorize any of the actions set forth in this Section 12.6.
Section 12.7. Material Litigation. Any action, suit, proceeding or investigation of any kind involving, or threatened in writing against, Borrower with respect to the Project, before any court or arbitrator or any other authority which (a) would reasonably be expected to have a material adverse effect on the Property, or Project, or (b) calls into question the validity or enforceability of, or otherwise seeks to invalidate, any LOC Documents. Promptly after the commencement thereof, Borrower shall deliver to Lender notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting Borrower or any of its subsidiaries, or the Project, and promptly after the occurrence thereof, notice of any adverse change in the status or the financial effect on Borrower or any of its subsidiaries or the Project of the disclosed litigation.
Section 13.1. General. Following the occurrence of one or more Events of Default, Lender at its option, may (a) declare all outstanding indebtedness evidenced by the Promissory Note, including principal and interest, immediately due and payable; (b) terminate all obligations to make further Advances under the LOC; and (c) pursue and enforce, either successively or concurrently, all rights and remedies set forth in the Promissory Note, in the LOC Documents, or in any other Collateral instrument held by Lender or accruing to Lender by law, and such other rights and remedies as Lender may have in law or equity, including such rights as are provided in this Article 13. If an Event of Default referred to in Section 12.6 hereof occurs, (i) all obligations of Lender to make further Advances under the LOC shall automatically and immediately terminate, if not previously terminated, and Lender thereafter shall not be under any obligation to make any further Advance, and (ii) the principal of and interest then outstanding on the LOC, and all of the other obligations owing under the LOC Documents, shall thereupon become and thereafter be immediately due and payable in full (if not already due and payable), all without any presentment, demand or notice of any kind, which are hereby waived by Borrower.
Section 13.2. Right to Acquire.
(a) Upon the occurrence of an Event of Default hereunder, Lender shall have the right, in person or by agent, in addition to all other rights and remedies available to Lender hereunder or under the LOC Documents, to enter into possession of the Project and perform or cause to be performed any and all work and labor necessary to complete the Project, to operate and maintain the Project and/or to otherwise run the business of Borrower. All sums expended by Lender in so doing, together with interest on such total amount at the Default Rate (as defined in the Promissory Note), shall be repaid by Borrower to Lender upon demand and shall be secured by the LOC Documents, notwithstanding that such expenditures may, together with amounts advanced under this Agreement, exceed the Maximum Amount.
(b) For the purpose of allowing Lender to exercise its rights and remedies provided hereunder following the occurrence of an Event of Default, Borrower hereby constitutes and appoints Lender as its true and lawful attorney-in-fact, with full power of substitution, in the name of Borrower to complete the Project, to operate and maintain the Project, and/or to otherwise run the business of Borrower, and hereby empowers such attorney or attorneys as follows:
(i) to enter and endorse all agreements, instruments, and documents in connection therewith.
(ii) to use any unadvanced proceeds of the LOC for the purpose of completing, operating, or maintaining the Project.
(iii) to make such changes and corrections in the applicable plans and specifications of the Project as reasonably shall be necessary or desirable to complete the work on the Project.
(iv) to employ such managers, contractors, subcontractors, agents, architects, and inspectors as reasonably shall be required for the foregoing purposes.
(v) to pay, settle or compromise all bills and claims which may be or become liens against the Project or the Collateral or any part thereof, unless a bond or other security satisfactory to Lender has been provided.
(vi) to execute applications and certificates in the name of Borrower which reasonably may be required by the LOC Documents, or any other agreement or instrument executed by or on behalf of Borrower in connection with the Project.
(vii) to prosecute and defend all actions or proceedings in connection with the Project or the Collateral or any part thereof, and to take such action and require such performance as such attorney reasonably deems necessary under any performance and payment bond and the LOC Documents; and
(viii) to do any and every act which Borrower might do on its behalf with respect to the Collateral or any part thereof, or the Project and to exercise any or all of Borrower’s rights and remedies under any or all of the agreements and documents for the Project.
This power of attorney shall be deemed to be a power coupled with an interest and shall be (A) irrevocable, (B) exercisable by Lender at any time and without any request upon Borrower by Lender, and (C) exercisable in the name of Lender or Borrower. Lender shall not be bound or obligated to take any action to preserve any rights therein against prior parties thereto.
Section 13.3. Curing of Defaults by Advances. Upon the occurrence of an Event of Default under Section 12.2 through 12.4 hereof which may be cured by the payment of money, Lender, without waiving any right of acceleration or foreclosure under the LOC Documents which Lender may have by reason of such Event of Default or any other right Lender may have against Borrower because of said Event of Default, shall have the right to make such payment from the LOC, thereby curing the Event of Default. Any cash so remitted, and interest thereon will be disbursed by Lender in accordance with the terms hereof before any additional proceeds of the LOC are disbursed.
Section 13.4. Remedies Are Cumulative. No remedy conferred upon or reserved to Lender in the LOC Documents shall be exclusive of any other remedy provided in the LOC Documents or by law or in equity, but each shall be cumulative and shall be in addition to every other remedy given Lender, under any of the LOC Documents or now or hereafter existing at law or in equity or by statute. Lender, at its sole option and without limiting or affecting any rights and remedies hereunder, may exercise any of the rights and remedies to which it may be entitled under the LOC Documents concurrently or in such order as it may determine. The exercise of any rights of Lender shall not in any way constitute a cure or waiver of Event of Default or invalidate any act done pursuant to any notice of default, or prejudice Lender in the exercise of any of its other rights or elsewhere unless, in the exercise of said rights, Lender realizes all amounts owed to it hereunder and under the Promissory Note, and any other LOC Documents.
Section 13.5. Offsets. If there shall occur or exist any Event of Default referred to in Section 12.6 hereof or if the maturity of the obligations owing under the Note or the other LOC Documents is accelerated pursuant to Section 13.1, Lender shall have the right at any time to set off against, and to appropriate and apply toward the payment of, any and all of such obligations then owing by Borrower, whether or not the same shall then have matured, any and all deposit (general or special) balances, and any and all balances in the Interest Credit Account and all other indebtedness then held or owing by Lender to or for the credit or account of Borrower, all without notice to or demand upon Borrower or any other Person or entities, all such notices and demands being hereby expressly waived by Borrower.
Section 13.6. Collateral. Lender shall at all times have the rights and remedies of a secured party under the Uniform Commercial Code, in addition to the rights and remedies of a secured party provided elsewhere within this Agreement, in any other LOC Documents executed by Borrower or otherwise provided in law or equity. Upon the occurrence of an Event of Default and at all times thereafter, Lender may require Borrower to assemble the Collateral securing the obligations under the LOC Documents, which Borrower agrees to do, and make it available to Lender at a reasonably convenient place to be designated by Lender. Lender may, with or without notice to or demand upon Borrower and with or without the aid of legal process, make use of such reasonable force as may be necessary to enter any premises where such Collateral, or any thereof, may be found and to take possession thereof (including anything found in or on such Collateral that is not specifically described in this Agreement or any other LOC Documents, each of which findings shall be considered to be an accession to and a part of such Collateral) and for that purpose may pursue such Collateral wherever the same may be found, without liability for trespass or damage caused thereby to Borrower. After any delivery or taking of possession of the Collateral securing the obligations under the LOC Documents, or any portion thereof, pursuant to this Agreement, then, with or without resort to Borrower personally or any other Person or property, all of which Borrower hereby waives, and upon such terms and in such manner as Lender may deem advisable, Lender, in its discretion, may sell, assign, transfer and deliver any of such Collateral at any time, or from time to time. No prior notice need be given to Borrower or to any other Person in the case of any sale of such Collateral that Lender determines to be perishable or to be declining speedily in value or that is customarily sold in any recognized market, but in any other case Lender shall give Borrower not fewer than ten (10) days prior notice of either the time and place of any public sale of such Collateral or of the time after which any private sale or other intended disposition thereof is to be made. Borrower waives advertisement of any such sale and (except to the extent specifically required by the preceding sentence) waives notice of any kind in respect of any such sale. At any such public sale, Lender may purchase such Collateral, including by credit bid, or any part thereof, free from any right of redemption, all of which rights Borrower hereby waives and releases. After deducting all costs and expenses, and after paying all claims, if any, secured by liens having precedence over this Agreement, Lender may apply the net proceeds of each such sale to or toward the payment of the obligations under the LOC Documents, whether or not then due, in such order and by such division as Lender, in its sole discretion, may deem advisable. Any excess, to the extent permitted by law, shall be paid to Borrower, and Borrower shall remain liable for any deficiency. In addition, after the occurrence of an Event of Default, Lender shall at all times have the right to obtain new appraisals of Borrower or any Collateral securing the obligations under the LOC Documents, the cost of which shall be paid by Borrower.
Section 13.7. Default by Lender and Borrower’s Sole Remedy.
Section 13.8 Binding Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement, or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration in Albany County, New York, before one arbitrator. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures or by ADR Services pursuant to its Arbitration Rules, at the election of the party initiating the arbitration. The Party initiating a demand for arbitration shall serve notice of such demand pursuant to the notice requirements set forth in Section 14.5 herein. Within three (3) banking-business days of service of any demand for arbitration, the Parties to the dispute shall work cooperatively to mutually select an agreeable arbitrator. If the Parties to the dispute are unable to reach agreement on an arbitrator, then the arbitration shall be selected pursuant to the JAMS or ADR Services arbitration selection protocol. Each side shall be entitled to propound one (1) set of requests for production of documents. The requests in each set shall not number more than twenty-five (25) and shall be limited to documents relevant to the issues to be arbitrated. Each side shall further be entitled to notice and take no more than three (3) depositions, which shall last no more than three (3) hours per deponent, including reasonable breaks and objections. No other discovery shall be permitted, except upon a showing of good cause to the arbitrator. Any disputes regarding discovery shall be submitted to and decided by the arbitrator. The prevailing party shall be entitled to an award of its reasonable costs and expenses, including but not limited to, attorneys’ fees, in addition to any other available remedies. Any award rendered therein shall be final and binding on each and all of the parties thereto and their personal representatives, and judgment may be entered thereon in any court of competent jurisdiction. This clause shall not preclude Parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction. Any action or proceeding brought to interpret or enforce this agreement to arbitrate shall be governed by the laws of the State of New York. This agreement to arbitrate is intended by the Parties to constitute a waiver of any right to trial by jury, or the right to proceed in any state or federal court for resolution of any dispute arising in relation to the enforcement or interpretation of this Agreement, this agreement to arbitrate, or any of the LOC Documents.
Section 14.1. Disclaimer of Liability. Lender has no liability or obligation in connection with the Project except to make Advances under the LOC as agreed under the terms of the LOC Documents and makes no warranties or representations in connection therewith.
Section 14.2. Publicity. Lender and Borrower shall have the right to issue periodic news releases concerning the Project and its financing in such form as mutually approved in advance of any such publication and in writing by each of them, such approval not to be unreasonably withheld (it being acknowledged and agreed to by Lender that Borrower may withhold its approval if Borrower determines in good faith that any such publicity shall violate any U.S. securities laws). Lender shall have the right indicating that it has provided the financing for the Project.
Section 14.3. Confidentiality. Borrower and Lender each agrees that the specific terms of this Agreement, the LOC, and the related terms regarding Lender’s agreement to fund the Project, including Lender’s related entities, partners, subsidiaries, and vendors are proprietary in nature, and Borrower and Lender hereby each agrees to maintain confidential this Agreement, the LOC Documents, and any information disclosed by Lender related to the terms upon which funding of the LOC is to take place. Borrower’s disclosure of a confidential terms shall constitute a material breach of this Agreement, and will subject Borrower to injunctive relief, pecuniary damages, or other remedies available to Lender in law or at equity. All such remedies are cumulative in nature. Notwithstanding the foregoing, Lender acknowledges that Borrower is a public company and may be required to name Lender and this Agreement as a material agreement and may make other disclosures as required to comply with applicable Laws, including regulations promulgated by applicable security exchange.
Section 14.4. Responsibility for Application of Funds. Lender shall have no obligation to see that funds advanced under the LOC are used for the purpose set forth in this Agreement. Borrower shall be fully responsible for the proper application according to the terms of this Agreement of funds advanced pursuant to this Agreement. Lender may rely solely upon Borrower’s requests for Advances, affidavits, statements and reports in making said Advances and Borrower does hereby release and indemnify Lender and hold Lender harmless from any and all losses, claims, demands, or expenses which may arise or result from misapplication or misuse of the LOC proceeds by Borrower or its agents. Borrower’s indemnification of Lender shall not extend to losses arising from Lender’s material breach of this Agreement or Lender’s gross negligence or willful misconduct (in each case as determined by binding arbitration pursuant to Section 13.8).
Section 14.5. Notices. All notices given under this Agreement, unless otherwise specified herein, must be in writing and will be effectively served upon delivery or, if sent certified mail, upon the first to occur of receipt by the addressee or the expiration of forty eight (48) hours after deposit in first class certified United States mail, postage prepaid, receipt requested, or the next business day if sent by pre-paid nationally recognized overnight courier service, sent to the party at its address set forth below, or such other address as a party may designate from time to time by written notice given pursuant to this paragraph:
HCW Biologics Inc.
2929 N Commerce Parkway
Miramar, FL 33025
With a copy of all legal-related notices to:
HCW Biologics Inc.
Nicole Valdivieso, Esq.
2929 N Commerce Parkway
Miramar, FL 33025
Orrick, Herrington & Sutcliffe LLP
Bill Hughes, Esq.
405 Howard Street
San Francisco, CA 94115
PRIME CAPITAL VENTURES
KRIS D. ROGLIERI
66 SOUTH PEARL STREET, 10TH FLOOR
ALBANY, NY 12207
Section 14.6. Applicable Law. This Agreement and, unless otherwise specifically provided for therein, each other LOC Document, shall be governed by and construed in accordance with the laws of the State of New York and the United States.
Section 14.7. Successors and Assigns. The terms of this Agreement will bind and benefit the successors and assigns of the Parties, provided that except as permitted under the LOC Documents, Borrower may not assign this Agreement or any proceeds from the LOC or assign or delegate any of its rights or obligations hereunder without the prior written consent of Lender, which may be withheld in Lender’s sole discretion.
Section 14.8. Severability. The invalidity or unenforceability of any one or more of the provisions of this Agreement will in no way affect any other provision, except that if a condition to an Advance is held to be illegal or invalid, Lender will not be required to make the Advance which was the subject of that condition.
Section 14.9. Amendments. This Agreement may not be modified or amended except by written agreement signed by Borrower and Lender.
Section 14.10. Headings; Attachments. The several headings to articles, sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof.
Section 14.11. No Third-Party Rights. This Agreement is made entirely for the benefit of Borrower, Lender, and their successors in interest (including any participants). No third Person shall have any rights hereunder.
Section 14.12. Indemnification. Borrower agrees to defend, indemnify and hold harmless Lender (and its affiliates, officers, directors, attorneys, agents and employees) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys’ fees), or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Lender in connection with any investigative, administrative or judicial proceeding (whether or not Lender shall be designated a party thereto) or any other claim by any Person relating to or arising out of the Project, the LOC Documents or any actual or proposed use of proceeds of the Advances, or any activities of Borrower or its affiliates; provided that Lender shall not have the right to be indemnified under this Section 14.12 for its own gross negligence or willful misconduct, as determined by a final and non-appealable decision in Arbitration as for any disputes between the Parties, or by judgment of a court of competent jurisdiction when such dispute involves another third Person. All obligations provided for in this Section 14.12 shall survive any termination of this Agreement. Borrower hereby agrees to indemnify, defend and hold harmless Lender, the Manager of Lender, and all of their members, managers, affiliates and advisors, from any and all damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and costs) that they may incur by reason of Borrower’s failure to fulfill all of the terms and conditions of this Agreement or by reason of the untruth or inaccuracy of any of the representations, warranties or agreements contained herein or in any other documents Borrower has furnished to any of the foregoing in connection with this transaction. This indemnification includes, but is not limited to, any damages, losses, liabilities, costs and expenses (including attorneys’ fees and costs) incurred by Lender, the managing member of Lender, or any of its members, managers, affiliates or advisors, defending against any alleged violation of federal or state securities laws which is based upon or related to any untruth or inaccuracy of any of the representations, warranties or agreements contained herein or in any other documents Borrower has furnished in connection with this transaction.
Section 14.13. General Limitation of Liability. No claim may be made by Borrower or any other Person against Lender or the affiliates, directors, officers, employees, attorneys or agents of Lender for any damages other than actual compensatory damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any of the LOC Documents, or any act, omission or event occurring in connection therewith; and Borrower and Lender hereby, to the fullest extent permitted under applicable law, waive, release and agree not to sue or counterclaim upon any such claim for any special, indirect, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in their favor and regardless of whether Lender has been advised of the likelihood of such loss of damage.
Section 14.14. Entire Agreement. This Agreement, the Promissory Note and any other LOC Document or other agreement, document or instrument attached hereto or executed on or as of the Closing Date integrate all of the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof.
Section 14.15. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, and by facsimile or other electronic signature, each of which when so executed together shall constitute one and the same Agreement.
Section 14.16. Legal Representation of the Parties. The LOC Documents were negotiated by the Parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement or any other LOC Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof.
Section 14.17. JURY TRIAL WAIVER. BORROWER AND LENDER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN BORROWER AND LENDER, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first written above.
Prime Capital Ventures, LLC,
a Delaware Limited Liability Company
By: /s/ Kris D. Roglieri
Name: Kris D. Roglieri
HCW Biologics Inc.
a Delaware corporation
By: /s/ Rebecca Byam
Name: Rebecca Byam
$26,250,000.00 – Maximum Principal Amount April 20, 2023
FOR VALUE RECEIVED, HCW Biologics Inc. , a Delaware corporation (the “Maker”), hereby promises to pay to Prime Capital Ventures LLC, a Delaware limited liability company, or any subsequent holder of this Master Promissory Note (the “Payee”), at such place as Payee may designate, the principal sum of Twenty-Six Million Two Hundred Fifty Thousand and 00/100 Dollars ( $26,250,000.00 ) or the aggregate unpaid principal amount of all Advances, as defined in the LOC Agreement (as hereinafter defined), made by Payee to Maker pursuant to the LOC Agreement, whichever is less, plus interest on the principal sum and all unpaid balances and all other amounts owed by Maker to Payee at the interest rate set forth below, payment of principal and interest to be made in lawful money of the United States in immediately available funds, as set forth below. Capitalized terms used herein and defined in the LOC Agreement, but not otherwise defined herein, shall have the meaning given such term in the LOC Agreement; and
In addition, the following provisions shall govern this Note:
Should there be a material misappropriation of the proceeds of the Advances which causes an Event of Default, Borrower shall immediately surrender controlling management interest in HCW Biologics Inc. and the Project to PRIME CAPITAL VENTURES, LLC.
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IN WITNESS WHEREOF, the Maker has duly executed and delivered this Master Promissory Note as of the date first set forth above.
HCW Biologics Inc.
a Delaware corporation
By: /s/ Rebecca Byam
Name: Rebecca Byam
Address: 2929 N Commerce Parkway
Miramar, FL 33025
Attn: Rebecca Byam
This SECURITY AGREEMENT, dated as of April 20, 2023 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this “Agreement”), is made by HCW Biologics Inc. , a Delaware corporation (the “Grantor”), in favor of Prime capital ventures, LLC, a Delaware limited liability company (the “Secured Party” or “Lender”).
WHEREAS, Grantor and the Secured Party are entering into that certain Development Line of Credit Agreement, dated as of even date herewith (as amended, supplemented, or otherwise modified from time to time, the “LOC Agreement”);
WHEREAS, this Agreement is given by the Grantor in favor of the Secured Party to secure the payment and performance of all the Secured Obligations (as hereinafter defined); and
WHEREAS, it is a condition to the obligation of Lender to make the LOC under the LOC Agreement that the Grantor execute and deliver this Agreement, and this Agreement is being executed and delivered in consideration of the Secured Party entering into the LOC Agreement and each financial accommodation granted to the Secured Party by Lender;
NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
“Collateral” has the meaning set forth in Section 2 hereof.
“Control Agreement” means with respect to the Interest Credit Account and the LOC Disbursement Account, each deposit account control agreement (or similar agreement) among the Grantor, Lender and a depository institution, to be in form and substance reasonably satisfactory to Lender; as any of the foregoing may from time to time be amended, restated or otherwise modified.
“Event of Default” has the meaning set forth in the LOC Agreement.
“First Priority” means, with respect to any lien and security interest purported to be created in any Collateral pursuant to this Agreement, such lien and security interest is the most senior lien to which such Collateral is subject (subject only to liens permitted under the LOC Agreement).
“LOC Documents” means the LOC Agreement, the Note, this Agreement, and all other agreements, instruments, and documents entered into in connection with the LOC Agreement.
“Note” means that certain Master Promissory Note dated as of even date herewith and made by Grantor, as maker, to Secured Party, as payee.
“Proceeds” means “proceeds” as such term is defined in section 9-102 of the UCC and, in any event, shall include, without limitation, all dividends or other income from the Collateral, collections thereon or distributions with respect thereto.
“Secured Obligations” has the meaning set forth in Section 3 hereof.
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or, when the laws of any other state govern the method or manner of the perfection or enforcement of any security interest in any of the Collateral, the Uniform Commercial Code as in effect from time to time in such state.
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IN WITNESS WHEREOF, the Parties hereto have executed this Security Agreement as of the date first set forth above.
HCW Biologics Inc. ,
a Delaware corporation
By: /s/ Rebecca Byam
Name: Rebecca Byam
Address: 2929 N Commerce Parkway
Miramar, FL 33025
Attn: Rebecca Byam