Guarantor Name: R&A SPENCER FAMILY LIMITED PARTNERSHIP
Amount of Pledged Collateral: $1,500,000
) is made as of June 1, 2007 (the Effective
), by and between BIOHEART, INC., a Florida corporation (the Company
), and R&A
SPENCER FAMILY LIMITED PARTNERSHIP, a Nevada family limited partnership (the Guarantor
the Company expects to obtain a term loan (the Loan
), in the principal
amount of $5,000,000, from Bank of America, N.A. (the Bank
) pursuant to a certain loan
between the Company and the Bank (the Loan Agreement
) and related promissory
note (the Note
WHEREAS, as a condition precedent to the Banks making the Loan and as security for the
Companys obligations relating thereto, the Guarantor will pledge and assign to the Bank (the
Pledge) and grant to the Bank a first-priority security interest in, a $1,500,000 (the
Collateral Amount) letter of credit with the Bank (the Pledged Letter of
, subject to the closing of the Loan and in accordance with the terms of this
, Guarantor has agreed to make payments to the Company equal to 27.27% (the
) of the interest and principal payable by the Company to the Bank
in connection with the Loan, which amounts shall be used by the Company solely to pay interest and
principal on the Loan;
, as consideration for the Guarantors agreement
to make the payments described above
and to grant, in favor of the Bank, the Pledge, the Company has agreed, upon the terms and
conditions set forth herein, to (i) issue the Guarantor a warrant or warrants to purchase shares of
the Companys common stock, par value $.001 per share (the Common Stock
), and (ii) pay
certain fees to the Guarantor.
NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto,
the Company and the Guarantor agree as follows:
1.1 PLEDGE DOCUMENTS AND PAYMENTS FOR THE BENEFIT OF THE COMPANY.
In consideration of the Companys issuance of the Warrant (as defined in Section 1.2 below)
and payment of the Guarantee Fee (as defined in Section 1.2 below), the Guarantor hereby agrees
that it shall:
(a) At Closing (as defined in Section 2.1 below), execute and deliver, in favor of the Bank,
the Pledged Letter of Credit and whatever documentation (such documentation, the Pledge
Documents) the Bank reasonably requires in connection with the Pledge.
(b) During the period commencing on the Effective Date and terminating on the date that the
Companys payment obligations under the Loan are satisfied and/or discharged in full, at least ten
(10) business days prior to the due date for any payment of interest (Interest Payment)
or payment of principal (Principal Payment) or other payment required to be made by the
Company to the Bank under the Loan, pay the Company an amount equal to the product obtained by
multiplying (x) the total amount of the payment then due and (y) the Guaranteed Percentage (each
such payment, a Guarantor Payment); provided that the aggregate amount of
Guarantor Payments shall not exceed the Collateral Amount. The Guarantor may, at its option, elect
to make Guarantor Payments by drawing, or authorizing the Bank to draw, on the Pledged Letter of
Credit, if approved by the Bank in its sole discretion.
(c) The Company shall apply the Guarantor Payment towards an Interest Payment, Principal
Payment or other payment due in connection with the Loan, and shall either notify the Guarantor in
writing of the due date for any such payment, or shall promptly forward to the Guarantor any
correspondence received by the Company from the Bank regarding the amount and due date of such
Interest Payment, Principal Payment or other payment (as applicable). All payments hereunder shall
be made to the Aggregation Account (as defined in the Loan Agreement
(d) The Guarantor hereby authorizes the Company to notify the Bank in the event that the
Guarantor fails to make a Guarantor Payment when due.
1.2 ISSUANCE OF WARRANTS AND PAYMENT OF MONTHLY FEES
In consideration of the Guarantors issuing the Pledge in favor of the Bank the Company hereby
agrees that it shall:
(a) At Closing (as defined in Section 2.1 below), issue to the Guarantor a warrant to purchase
an aggregate of 78,900 shares (the Subject Shares
) of the Common Stock, with an exercise
price of $4.75 per share, in the form attached hereto as Exhibit A
The Warrant will provide that the number of Subject Shares will increase to 90,000 shares of the
Common Stock in the event the Company has not satisfied and/or discharged all of its payment
obligations under the Loan (the Loan Satisfaction
) by September 30, 2007. The Warrant
will further provide that the number of Subject Shares will increase to 112,500, 150,000 and
225,000, respectively, in the event the Company has not satisfied and/or discharged all of its
material payment obligations under this Agreement
by the first anniversary, second anniversary and
third anniversary of the Effective Date, respectively.
(b) Subject to Section 8(e), pay the Guarantor a cash fee (the Guarantee Fee) in the
amount determined by multiplying the Collateral Amount by 5.0% and multiplying the resulting amount
by a fraction, the numerator of which is the number of days elapsed between the date hereof and the
earlier of (i) the date of the Loan Satisfaction and (ii) the date that is eight months following
the Effective Date (or such later date to which the maturity date of the Note may be extended), and
the denominator of which is 365. The Company shall pay the Guarantee Fee within five (5) business
days of the Trigger Date (as defined below). For purposes of this Agreement, the Trigger
Date shall mean the earlier to occur of: (x) the closing date of an initial public offering of
the Companys Common Stock generating at least $30 million of net proceeds to the Company occurring
on or before January 31, 2008 (a Qualified Offering); and (y) the date the Company
satisfies and/or discharges all of its payment obligations (a BlueCrest Loan
Satisfaction) under that certain Loan and Security Agreement, dated as of May 31, 2007 by and
between the Company and BlueCrest Capital Finance, L.P. (the BlueCrest Loan).
(c) If on or before the first business day of the 36th first full calendar month
after the date of the BlueCrest Loan (the Outside Payment Date) as of such date, the
Company has not effectuated a BlueCrest Loan Satisfaction or a Qualified Offering:
(A) the Company shall use its best efforts to effectuate a BlueCrest Loan Satisfaction as soon
as possible following the Outside Payment Date; and
(B) the Company shall pay the Guarantee Fee no later than five (5) business days following a
BlueCrest Loan Satisfaction.
(d) At Closing, the Guarantor may enter into agreements (the SubGuarantee
Agreements) with one or more persons (each, a Sub-Guarantor) willing to (i)
contribute to the Guarantor a percentage (the Sub-Guarantor Percentage) of the total
amount of each Guarantor Payment to be paid by the Guarantor under this Agreement (the
Sub-Guarantor Cash Payments), (ii) indemnify the Guarantor for up to the Sub-Guarantor
Percentage of certain of the Expenses (as defined below). As consideration for entering into the
SubGuarantee Agreements, the Guarantor may assign to the Sub-Guarantors a portion of the Warrant
(such assigned portion, the Sub-Guarantor Warrants). The Guarantor shall provide notice
to the Company of the name and contact information of each Sub-Guarantor at Closing and shall
provide the Company a copy of each fully executed SubGuarantee Agreement.
2.1. CLOSING DATE. The parties agree to effect the transactions contemplated hereby (the
Closing) contemporaneously with the execution of this Agreement, which Closing shall be
contemporaneous with the closing of the Loan.
2.2 CLOSING DELIVERABLES.
(a) At the Closing, the Company shall deliver or cause to be delivered to the Guarantor:
(i) an executed copy of this Agreement; and
(ii) an executed copy of the Warrant.
(b) At the Closing, the Guarantor shall deliver or cause to be delivered to the Company an
executed copy of this Agreement.
(c) At the Closing, the Guarantor shall deliver to the Bank the Pledged Letter of Credit and
duly executed copies of the Pledge Documents.
||RESTRICTIONS ON TRANSFER OF THE WARRANT
No transfer of all or any portion of the Warrant shall be made except in accordance with
Section 1.2(d) of this Agreement and the applicable provisions of the Warrant.
||REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The Company hereby represents, warrants and covenants to the Guarantor and agrees as follows;
provided, however, that the Guarantor shall not be able to rely on any representation and/or
warranty made by the Company if the Guarantor has actual knowledge as of the Effective Date that
such representation is inaccurate:
4.1. CORPORATE POWER. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Florida and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the Companys business, properties, or financial condition
(a Material Adverse Effect). The Company has all requisite corporate power and authority
to execute and deliver this Agreement, the Warrant and the agreements related to the Loan and to
carry out and perform its obligations hereunder and thereunder. The Company has all requisite
corporate power and authority to issue and deliver the shares of Common Stock issuable upon valid
exercise of the Warrant.
4.2 AUTHORIZATION. This Agreement has been duly authorized, executed and delivered by the
Company. All corporate action on the part of the Company and its shareholders, directors and
officers necessary for the authorization, execution and delivery of this Agreement, the execution
of the agreements related to the Loan, the issuance of the Warrant and the shares of Common Stock
issuable upon conversion of the Warrant, the consummation of the other transactions contemplated
hereby and the performance of all the Companys obligations hereunder has been taken. This
Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies, and (iii) the limitations imposed by applicable
federal or state securities laws on the indemnification provisions contained in this Agreement. The
shares of Common Stock issuable upon exercise of the Warrant have been duly authorized (the
Warrant Shares). When the Warrant Shares have been delivered against payment in
accordance with the terms of the Warrant, such Conversion Shares will have been, validly issued,
fully paid and nonassessable.
4.3. GOVERNMENTAL CONSENTS. All consents, approvals, orders, or authorizations of, or
registrations, qualifications, designations, declarations, or filings with, any governmental
authority, required on the part of the Company in connection with the valid execution and delivery
of this Agreement, the offer, sale and issuance of the Warrant have been obtained and will be
effective at the Closing, except for notices required or permitted to be filed thereafter with
certain state and federal securities commissions, which notices shall be filed on a timely basis.
4.4. OFFERING. Assuming the accuracy of the representations and warranties of the Guarantor
contained in Section 5 below, the offer, sale and issuance of the Warrant is exempt from the
registration and prospectus delivery requirements of the Securities Act and has been registered or
qualified (or is exempt from registration and qualification) under the registration, permit, or
qualification requirements of all applicable state securities laws.
4.5. CAPITALIZATION. The authorized capital of the Company consists of 40,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock. As of March 31, 2007, 20,948,994
shares of Common Stock and no shares of Preferred Stock were issued and outstanding.
4.5 USE OF PROCEEDS FROM GUARANTOR PAYMENTS. The Company shall use the proceeds of any
Guarantor Payment solely to pay amounts due or payable under the Loan.
4.6 LITIGATION. Except as referenced on Exhibit 3(d) to the Loan Agreement, there is no
proceeding involving Company pending or, to the knowledge of Company, threatened before any court
or governmental authority, agency or arbitration authority.
4.7 NO CONFLICTING AGREEMENTS. There is no charter, bylaw, stock provision, partnership
agreement or other document pertaining to the organization, power or authority of Company and no
provision of any existing agreement (including, without limitation, the Loan Agreement or the
Senior Loan Agreement (as defined in the Loan Agreement)), mortgage, indenture or contract binding
on Company or affecting its property, which would conflict with or in any way prevent the
execution, delivery or carrying out of the terms of this Agreement.
4.8 OWNERSHIP OF ASSETS. The Company has good title to its assets, and its assets are free
and clear of liens, except for the security interest of BlueCrest (as defined in the Loan
Agreement). For purposes of this Section 4.8, a sublicense of any of the Companys intellectual
property is not deemed to be a lien.
4.9 TAXES. All taxes and assessments due and payable by Company have been paid or are being
contested in good faith by appropriate proceedings and the Company has filed all tax returns which
it is required to file.
4.10 FINANCIAL STATEMENTS. The financial statements of Company heretofore delivered to
Guarantor have been prepared in accordance with GAAP applied on a consistent basis throughout the
period involved and fairly present Companys financial condition as of the date or dates thereof,
and there has been no material adverse change in Companys financial condition or operations since
the date of the financial statements. All factual information furnished by Company to Guarantor in
connection with this Agreement is and will be accurate on the date as of which such information is
delivered to Guarantor.
4.11 ENVIRONMENTAL. The conduct of Companys business operations and the condition of
Companys property does not and will not violate any federal laws, rules or ordinances for
environmental protection, regulations of the Environmental Protection Agency, any applicable local
or state law, rule, regulation or rule of common law or any judicial interpretation thereof
relating primarily to the environment or Hazardous Materials (as defined in the Loan Agreement).
4.12 AFFIRMATIVE COVENANTS. Until full payment and performance of all obligations of the
Company to Guarantor hereunder, the Company will, unless Guarantor consents otherwise in writing:
(a) Existence and Compliance. Maintain its existence, good standing and qualification to do
business, where required, and comply with all laws, regulations and governmental requirements
including, without limitation, environmental laws applicable to it or to any of its property,
business operations and transactions.
(b) Adverse Conditions or Events. Promptly advise Guarantor in writing of (i) any condition,
event or act which comes to its attention that would or might materially adversely affect the
Guarantors rights under this Agreement or the Warrant, (ii) any litigation in excess of $500,000
is filed by or against Company or (iii) any event that has occurred that would constitute an event
of default under the Loan Agreement.
(c) Taxes and Other Obligations. Pay all of its taxes, assessments and other obligations,
including, but not limited to, taxes, costs or other expenses arising out of this transaction, as
the same become due and payable, except to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
4.13 NEGATIVE COVENANTS. Until full payment and performance of all obligations of the Company
to Guarantor hereunder, the Company will not, unless Guarantor consents otherwise in writing:
(a) Transfer of Assets. Sell, lease, assign or otherwise dispose of or transfer any assets
for less than reasonably equivalent value, except in the normal course of its business.
(b) Character of Business. Change the general character of business as conducted at the date
hereof, or engage in any type of business not reasonably related to its business as presently
(c) Incur Obligations. Incur any obligations or take any action that could reasonably be
expected to, or have the effect of, causing the Company not to satisfy its obligations under
Section 8 of this Agreement.
||REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.
The Guarantor hereby represents and warrants to the Company and agrees as follows:
5.1 RELIANCE. The Guarantor understands that the Company has relied on the information and
representations with respect to the Guarantor set forth in this Section 5 in determining, among
other things, whether an investment in the Warrant is suitable for the Guarantor, and the Guarantor
represents and warrants that all such information is true and correct as of the date hereof.
5.2 POWER AND AUTHORITY. The Guarantor has all requisite power and authority to execute and
deliver this Agreement and the Pledge Documents and to carry out and perform its obligations
hereunder and thereunder.
5.3 EXPERIENCE. The Guarantor is an accredited investor within the meaning of Regulation D
under the Securities Act (an Accredited Investor) and such Guarantor has no ability to
acquire the Warrant Shares until a date that is at least one year after the date the Warrants are
5.4. INFORMATION AND SOPHISTICATION. The Guarantor has received all the information it has
requested from the Company that it considers necessary or appropriate for deciding whether to
acquire the Warrant. The Guarantor has had an opportunity to ask questions and receive answers from
the Company regarding the terms and conditions of the Warrant and to obtain any additional
information necessary to verify the accuracy of the information given to the Guarantor. The
Guarantor further represents that it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risk of the investment in the Warrant and
the Warrant Shares (collectively, the Securities).
5.5 DUE DILIGENCE. The Guarantor has consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisers in connection with its determination to enter into
this Agreement. The Guarantor has made its own decisions based upon its own judgment, due
diligence and advice from such advisers as it has deemed necessary and, except for the
representations and warranties expressly set forth herein, is not relying upon any information,
representation or warranty by the Company or any agent of the Company in determining to enter into
5.6. ABILITY TO BEAR ECONOMIC RISK. The Guarantor acknowledges that investment in the
Securities involves a high degree of risk. The Guarantor is able, without materially impairing its
financial condition, to hold the Securities for an indefinite period of time and to suffer a
complete loss of its investment. Neither the Securities and Exchange Commission nor any state
securities commission has approved any of the Securities or passed upon or endorsed the merits of
the offering of the Securities by the Company.
5.7 The Guarantor hereby acknowledges that:
IN THE EVENT THAT SALES OF THE SECURITIES OFFERED HEREBY ARE MADE TO FIVE (5) OR
MORE PERSONS IN FLORIDA, ALL PURCHASERS IN FLORIDA HAVE THE RIGHT TO VOID THE SALE
OF THE SECURITIES OFFERED HEREBY WITHIN THREE (3) DAYS AFTER THE PAYMENT OF THE
PURCHASE PRICE IS MADE TO THE COMPANY, AN AGENT OF THE COMPANY, OR AN ESCROW
AGENT, OR WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS
COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. PAYMENTS FOR TERMINATED
SUBSCRIPTIONS VOIDED BY PURCHASERS AS PROVIDED FOR IN THIS PARAGRAPH WILL BE
PROMPTLY REFUNDED WITHOUT INTEREST.
5.8 Except as provided in Section 8 below, the Guarantor shall, at all times from the date
hereof until there is a Loan Satisfaction, maintain, as security for the Loan, the Pledged Letter
of Credit with the Bank.
||REIMBURSEMENT OF PAYMENTS IN CONNECTION WITH PLEDGE DOCUMENTS AND THIS AGREEMENT.
(a) The Company hereby agrees to pay to the Guarantor (i) all reasonable and documented costs
and expenses (including court costs and reasonable legal expenses) incurred or expended by the
Guarantor in connection with (x) the Guarantors negotiation, drafting and execution of this
Agreement, the Guarantee Documents and any agreements with any of the Other Guarantors (as defined
below), the Guarantors review of all documents in connection with the Loan and the Guarantors
provision of the Pledged Letter of Credit (the Initial Expenses) and (y) the Banks
taking any action against the Guarantor to enforce the Banks rights under the Guarantee Documents
(together with the Initial Expenses, the Expenses) and (ii) to repay to Guarantor the
Guarantor Payments. Notwithstanding the foregoing or anything else to the contrary in this
Agreement, the Company shall not be required to reimburse the Guarantor for Expenses that the
Guarantor would not have incurred but for the Guarantors failure to satisfy the terms and
conditions of this Agreement or the Guarantee Documents.
(b) Each payment to be made by the Company hereunder shall be due within thirty (30) days of
the receipt by the Company of a request for reimbursement from Guarantor; provided,
however, that if the date of any reimbursement request occurs prior to the Trigger Date, such
payment shall be made within thirty (30) days after the Trigger Date or on the same date the
Company is required to pay the Guarantee Fee in accordance with Section 1.2(c) hereof, whichever
occurs first. Notwithstanding the foregoing, the Company shall reimburse the Guarantor for the
Initial Expenses within ten (10) business days of the Closing.
(c) All payments payable by the Company hereunder shall be made in immediately available funds
to an account that the Guarantor shall designate from time to time in writing to the Company.
Payments due shall be made with interest thereon from the due date (or, in the case of the
Guarantor Payments, from the date that the Guarantor made such payment) until payment thereof by
the Company, at the Prime Rate offered by the Bank, plus 5%, and in effect as such due date. For
the avoidance of doubt, the due date for any reimbursement request shall be thirty (30) days after
the date of a written
reimbursement request made by the Guarantor.
(d) The Company shall make the payments specified above even if there is a dispute about
whether the Bank is or was entitled to take any action to enforce its rights under the Guarantee
Documents. In no event shall the Company be liable to Guarantor for any special, indirect or
consequential damages incurred by Guarantor.
7.1 GUARANTOR DEFAULT.
(a) The failure by the Guarantor to: (x) pay any Guarantor Payment (whether in cash or by the
Bank drawing on the Pledged Letter of Credit) which failure is not cured within two (2) business
days of the Guarantors receipt of written notice from the Company of such failure or (y) comply
with the covenant set forth in Section 5.8 hereto shall constitute a Key Default hereunder.
(b) Upon any Key Default by the Guarantor, the following shall occur immediately and
automatically, provided that the Company shall provide Guarantor with written notice promptly upon
learning of any such default: (a) the Warrant shall be cancelled; (b) the Companys obligations to
make payments to the Guarantor under Section 1.2(b) of this Agreement shall be terminated; and (c)
the Companys obligations under Section 6 to reimburse the Guarantor for Expenses shall be
(c) Notwithstanding anything to the contrary in this Agreement, the Guarantor shall indemnify,
defend and hold the Company harmless from and against all losses (including, without limitation,
reasonable attorneys fees and court costs) incurred by the Company as a result of the Guarantors
breach of any of its material obligations under this Agreement, including, but not limited to, a
breach that results in a Key Default; provided, however, (z) in no event shall the
Guarantor be liable to the Company for (A) any special, indirect or consequential damages; or (B)
an amount in excess of $1,800,000 (the Damages Cap); provided, however, that if the Bank
draws upon the Pledged CD, the amount liquidated by the Bank shall reduce the Damages Cap on a
dollar for dollar basis.
7.2 COMPANY DEFAULT. The failure by the Company to pay or perform any material obligation
hereunder (including, without limitation, a breach of its obligations under Section 8 below) which
failure is not cured within two (2) business days of the Companys receipt of written notice from
the Guarantor of such failure shall constitute a default hereunder. Upon any such default by the
Company, the Guarantors obligations to pay the Guarantor Payments shall be terminated.
Notwithstanding anything to the contrary in this Agreement, the Company shall indemnify, defend and
hold the Guarantor harmless from and against all losses (including, without limitation, reasonable
attorneys fees and court costs) incurred by the Guarantor as a result of the Companys failure to
comply with its obligations hereunder; provided that Companys maximum liability to the Guarantor
under this Agreement shall not exceed $1,800,000.
(a) Subject to this Section 8, in the event the Company does not close an initial public
offering of the Companys Common Stock generating at least $30 million of net proceeds to the
Company by August 13, 2007, the Guarantor, by providing written notice to the Company (the
Repayment Election Notice) at any time between August 13, 2007 and October 15, 2007, may
compel the Company to effectuate (i) a BlueCrest Loan Satisfaction or (ii) a BlueCrest Loan
Satisfaction and a Loan Satisfaction. Within two (2) days of the Companys receipt of the
Repayment Election Notice, the Company shall (x) provide notice (the Other Guarantor
Notice) to Mr. Bruce Carson, Dr. William Murphy, Mr. and Mrs. Howard J. Leonhardt and Magellan
Group Investments, LLC (collectively, the Other Guarantors) of the Companys receipt of
the Repayment Election Notice and (y) (A) enter into
the Requisite Substitution Agreements (as defined below) or (B) effectuate a BlueCrest Loan
Satisfaction or a BlueCrest Loan Satisfaction and Loan Satisfaction (as specified in the Repayment
(b) In anticipation of its receipt of a Repayment Election Notice, the Company may seek to,
but is not required to, locate Eligible Substitute Guarantors (as defined below) desiring to
provide collateral to secure the Loan in substitution of the Pledged Letter of Credit. For
purposes of this Agreement, an Eligible Substitute Guarantor is a natural person or
(i) is an Accredited Investor;
(ii) is acceptable to the Bank, in the Banks sole discretion;
(iii) agrees to provide collateral to secure the Loan, which collateral is acceptable to the
Bank in the Banks sole discretion (Substitute Collateral);
(iv) agrees to enter into a subordination agreement with BlueCrest Capital Finance, L.P.,
which subordination agreement is acceptable to BlueCrest Capital Finance, L.P. in its sole
(vi) agrees to be bound by that certain Indemnification Agreement, dated as of the date
hereof, by and among the Guarantor and the Other Guarantors.
(c) In the event that, within two (2) days of the date of the Companys receipt of the
Repayment Election Notice (the Substitution Period), (i) the Company enters into fully
executed Substitute Loan Guarantee Agreements with one or more Eligible Substitute Guarantors
agreeing to provide Substitute Collateral in the amount equal to the amount of the Pledged Letter
of Credit (the Requisite Substitution Agreements) and (ii) the Bank returns the Pledged
Letter of Credit to the Guarantor, then the Company shall have no obligation to effectuate a
BlueCrest Loan Satisfaction or a BlueCrest Loan Satisfaction and Loan Satisfaction, as applicable,
in accordance with Section 8(a).
(d) In the event that the Company does not, within the Substitution Period, enter into the
Requisite Substitution Agreements and the Bank has not returned the Pledged Letter of Credit to the
Guarantor, the Company shall effectuate a BlueCrest Loan Satisfaction or a BlueCrest Loan
Satisfaction and Loan Satisfaction (as specified in the Repayment Election Notice) by the end of
the Substitution Period.
(e) In the event that, in accordance with the Repayment Election Notice, (i) the Company
effectuates a BlueCrest Loan Satisfaction but not a Loan Satisfaction, (ii) the Company enters into
the Requisite Substitution Agreements and (iii) the Bank returns the Pledged Letter of Credit to
(i) the amount of the Guarantee Fee payable by the Company under this Agreement shall be
determined by multiplying the Collateral Amount by 5.0% and multiplying the resulting amount by a
fraction, the numerator of which is the number of days elapsed between the date hereof and the date
of the Pledged Letter of Credit is returned to the Guarantor, and the denominator of which is 365;
(ii) the Guarantor shall have no obligation to make any Guarantor Payments due after
the end of the Substitution Period.
(f) Notwithstanding anything contained in this Agreement to the contrary, the
Company acknowledges and agrees that (i) the Companys obligations under this Section 8 are a
material inducement for Guarantor to enter into this Agreement and provide the Bank with the
Pledged Letter of Credit and but for the Companys agreements under this Section 8, Guarantor would
not have entered into this Agreement or provided the Bank with the Pledged Letter of Credit; and
(ii) that irreparable damage would occur to Guarantors in the event the provisions of this Section
8 are not performed in accordance with their specific terms by the Company or are otherwise
breached by the Company. Accordingly, it is agreed that Guarantor shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Section 8 and to enforce
specifically the terms and provisions hereof in any court of competent jurisdiction in the United
States or any state thereof, in addition to any other remedy to which they may be entitled at law
(g) In the event that, during the period commencing on the Effective Date and ending on August
13, 2007, the Company closes an initial public offering of the Companys Common Stock generating at
least $30 million of net proceeds to the Company, the Company shall effectuate a Loan Satisfaction
within five (5) business days of the closing of such offering.
9.1. BINDING AGREEMENT; NON-ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors. This Agreement is not assignable
without the express written consent of both parties, which consent may be withheld for any reason.
Nothing in this Agreement, express or implied, is intended to confer upon any third party any
rights, remedies, obligations, or liabilities under or by reason of this Agreement except as
expressly otherwise provided in this Agreement. If the Guarantor secures the consent of a third
party to indemnify it for certain costs and expenses it may incur hereunder or in connection with
the Pledge Documents, the Guarantor agrees that is shall provide the Company notice of such
agreement, including the contact information of the subject third party.
9.2. TERMINOLOGY. The parties agree and acknowledge that the term Guarantor is used in this
Agreement for convenience only and that the Guarantors obligations to the Company in respect of
the Loan arise under this Agreement and under the Pledge Documents.
9.3 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the
State of Florida, irrespective of any contrary result otherwise required under the conflict or
choice of law rules of Florida.
9.4 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and the same instrument.
9.5 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement.
9.6 NOTICES. Any notice required or permitted under this Agreement must be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit with the United States
Post Office, postage prepaid, if to the Company, addressed to William H. Kline, Chief Financial
Officer, Bioheart, Inc. 13794 NW 4th Street, Suite 212, Sunrise, Florida 33325, with a
copy to David E. Wells, Esq., Hunton & Williams, LLP, 1111 Brickell Avenue, Suite 2500, Miami,
Florida 33131, or to the Guarantor at Attn: Richard Spencer, III, Managing General Partner, 3641
North 47th Avenue,
Hollywood, Florida 33021, with a copy to Tobin & Reyes, P. A., Attn: David S. Tobin, The Plaza,
5355 Town Center Road, Suite 204, Boca Raton, FL 33486 or at such other address as a party may
designate by ten days advance written notice to the other party.
9.7 MODIFICATION; WAIVER. No modification or waiver of any provision of this Agreement or
consent to departure therefrom shall be effective unless in writing and approved by the Company and
9.8 FURTHER ASSURANCES. The parties shall take such further actions, and execute, deliver and
file such documents, as may be necessary or appropriate to effectuate the intent of this Agreement.
9.9 CONSTRUCTION. The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict construction shall be
applied against any party. Any references to any federal, state, local or foreign statute or law
shall also refer to all rules and regulations promulgated thereunder, unless the context otherwise
requires. Unless the context otherwise requires: (a) a term has the meaning assigned to it by this
Agreement; (b) forms of the word include mean that the inclusion is not limited to the items
listed; (c) or is disjunctive but not exclusive; (d) words in the singular include the plural,
and in the plural include the singular; (e) provisions apply to successive events and transactions;
(f) hereof, hereunder, herein and hereto refer to the entire Agreement and not any section
or subsection; and (g) $ means the currency of the United States.
9.10. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects hereof and no party
will be liable or bound to the other in any manner by any representations, warranties, covenants
and agreements other than those specifically set forth herein.
9.11 VENUE. The parties irrevocably submit to the exclusive jurisdiction of the courts of
State of Florida located in Broward County and federal courts of the United States for the Southern
District of Florida in respect of the interpretation and of the provisions of this Agreement and in
respect of the transactions contemplated hereby.
9.12 SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly, it is agreed that
they shall be entitled to an injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction in the United States or any state thereof, in addition to any other remedy
to which they may be entitled at law or equity.
9.13 ATTORNEYS FEES. In the event of any litigation, including appeals, with regard to this
Agreement, the prevailing party shall be entitled to recover from the non-prevailing party all
reasonable fees, costs, and expenses of counsel (at pre-trial, trial and appellate levels).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
||R&A SPENCER FAMILY LIMITED PARTNERSHIP
||Richard Spencer, III
||Managing General Partner
Litigation / Threatened Proceeding
On March 9, 2007, Peter K. Law, Ph.D. and Cell Transplants Asia, Limited, or the Plaintiffs,
filed a complaint against Bioheart, Inc. (referred to herein as us or we) and Howard J.
Leonhardt, individually, in the United States District Court, Western District of Tennessee. On
February 7, 2000, we entered a license agreement, or the Original Law License Agreement, with Dr.
Law and Cell Transplants International pursuant to which Dr. Law and Cell Transplants International
granted us a license to certain patents, including the Primary MyoCell Patent, or the Law IP. The
parties executed an addendum to the Original Law License Agreement, or the License Addendum, in
July 2000, the provisions of which amended a number of terms of the Original License Agreement.
More specifically, the Original License Agreement provided, among other things:
||The parties agreed that we would issue, and we did issue, to Cell Transplants
International a five-year warrant exercisable for 1.2 million shares of our common stock at
an exercise price of $8.00 per share instead of, as originally contemplated under the
Original Law License Agreement, issuing to Cell Transplants International or Dr. Law
600,000 shares of our common stock and options to purchase 600,000 shares of our common
stock at an exercise price of $1.80.
||The parties agreed that our obligation to pay Cell Transplants International a $3
million milestone payment would be triggered upon our commencement of a bona fide U.S.
Phase II human clinical trial that utilizes technology claimed under the Law IP instead of,
as originally contemplated under the Original Law License Agreement, upon initiation of a
FDA approved human clinical trial study of such technology in the United States.
The Plaintiffs are not challenging the validity of our license of the Law IP, but rather are
alleging and seeking, among other things, a declaratory judgment that the License Addendum fails
for lack of consideration. Based upon this argument, the Plaintiffs allege that we are in breach
of the terms of the Original Law License Agreement for failure to, among other things, (i) issue to
Cell Transplants International or Peter Law the 600,000 shares of our common stock and options to
purchase 600,000 shares of our common stock contemplated by the Original Law License Agreement and
(ii) pay Cell Transplants International the $3 million milestone payment upon our commencement of a
FDA approved human clinical study of MyoCell in the United States.
The Plaintiffs have alleged, among other things, certain other breaches of the Original Law
License Agreement not modified by the License Addendum including a purported breach of our
obligation to pay Plaintiffs royalties on gross sales of products that directly read upon the
claims of the Primary MyoCell Patent and a purported breach of the contractual restriction on
sublicensing the Primary MyoCell Patent to third parties. The Plaintiffs are also alleging that we
and Mr. Leonhardt engaged in a civil conspiracy against the Plaintiffs and that the court should
toll any periods of limitation running against the Plaintiffs to bring any causes of action arising
from or which could arise from the alleged breaches.
In addition to seeking a declaratory judgment that the License Addendum is not enforceable,
the Plaintiffs are also seeking an accounting of all revenues, remunerations or benefits derived by
us or Mr. Leonhardt from sales, provision and/or distribution of products and services that read
directly on the Law IP, compensatory and punitive monetary damages and preliminary and permanent
injunctive relief to prohibit us from sublicensing our rights to third parties.
We believe this lawsuit is without merit and intend to defend the action vigorously. While
the complaint does not appear to challenge our rights to license this patent and we believe this
lawsuit is without merit, this litigation, if not resolved to the satisfaction of both parties, may
adversely impact our relationship with Dr. Law and could, if resolved unfavorably to us, adversely
affect our MyoCell commercialization efforts.
We received notice of a potential claim by an existing shareholder, Steve May. Mr. May claims
that he filed a complaint with the Securities and Exchange Commission on May 15, 2007 apparently in
connection with a request that the Company transfer to his name certain shares that were previously
issued in the name of another shareholder. Our counsel is currently attempting to contact Mr. May
to discuss the details of the transfers Mr. May is seeking to make. As best as we can tell, the
issue involves no more than 12,500 shares, but we are still seeking to understand Mr. Mays