EX-10.16 Warrant to purchase 57,860 shares



 





EXHIBIT 10.16




Warrant Agreement No. ________




NEITHER THIS WARRANT NOR THE COMMON STOCK WHICH MAY BE ACQUIRED UPON EXERCISE HEREOF HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.



June 1, 2007




BIOHEART, INC.




(Incorporated under the laws of the State of Florida)




Warrant for the Purchase of Shares of Common Stock




     FOR VALUE RECEIVED, BIOHEART, INC., a Florida corporation (the “Company”), hereby
certifies that Mr. Howard J. Leonhardt and Mrs. Brenda Leonhardt (the “Initial Holder”), or
his/her/its assigns (the “Holder”) is entitled, subject to the provisions of this Warrant,
to purchase from the Company, up to 57,860 (the “Subject Shares”) fully paid and
non-assessable shares of Common Stock at a price of $4.75 per share (the “Exercise
Price”) . This Warrant is being issued in connection with that certain Loan
Guarantee, Payment and Security Agreement by and between the Company and the Initial Holder, dated
as of June 1, 2007 (the “Guarantee Agreement”).



     In the event that, as of September 30, 2007, the Company has not satisfied and/or discharged
all of its payment obligations (a “Loan Satisfaction”) under that certain $5,000,000 Loan
borrowed by the Company from Bank of America, N.A. (the “Bank of America Loan”), the number
of Subject Shares shall be automatically increased to 66,000 shares without any action required on
the part of the Company or the Holder.



     In the event that, as of the first year anniversary of the closing of the Bank of America Loan
(the “Closing Date”), the Company has not satisfied and/or discharged all of its material
payment obligations to the Initial Holder under the Guarantee Agreement (a “Guarantee
Satisfaction”), the number of Subject Shares shall be automatically increased to 82,500 shares
without any action required on the part of the Company or the Holder.



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     In the event that, as of the second year anniversary of the Closing Date, the Company has
not effectuated a Guarantee Satisfaction, the number of Subject Shares shall be automatically
increased to 110,000 shares without any action required on the part of the Company or the Holder.



     In the event that, as of the third year anniversary of Closing Date, the Company has not
effectuated a Guarantee Satisfaction, the number of Subject Shares shall be automatically increased
to 165,000 shares without any action required on the part of the Company or the Holder.



     The term “Common Stock” means the Common Stock, par value $.001 per share, of the
Company as constituted on June 1, 2007 (the “Base Date”). The number of shares of Common
Stock to be received upon the exercise of this Warrant may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted
from time to time, are hereinafter referred to as “Warrant Stock.” The term “Other
Securities” means any other equity or debt securities that may be issued by the Company in
addition thereto or in substitution for the Warrant Stock. The term “Company” means and
includes the corporation named above as well as (i) any immediate or more remote successor
corporation resulting from the merger or consolidation of such corporation (or any immediate or
more remote successor corporation of such corporation) with another corporation, or (ii) any
corporation to which such corporation (or any immediate or more remote successor corporation of
such corporation) has transferred its all or substantially all of its property or assets.



     Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnification satisfactory to the Company, and upon surrender and cancellation of this Warrant,
if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date. Any such
new Warrant executed and delivered shall constitute an additional contractual obligation on the
part of the Company, whether or not this Warrant so lost, stolen, destroyed or mutilated shall be
at any time enforceable by anyone.



     The Holder agrees with the Company that this Warrant is issued, and all the rights hereunder
shall be held subject to, all of the conditions, limitations and provisions set forth herein.



     1. Exercise of Warrant.



          (a) Subject to Section 1(b) below and in accordance with the procedures set forth in Section
1(c) below, this Warrant may be exercised, in whole or in part, at any time, or from time to time
during the period commencing on the date that is three hundred and sixty-six (366) days following
the date of the closing (the “Closing Date”) of the Bank of America Loan (the “One Year
Exercise Date”) and expiring at 5:00 p.m. Eastern Time on the date that is ten years following
the Closing Date (the “Expiration Date”).



          (b) Notwithstanding Section 1(a) above, in no event shall the Holder be entitled to exercise
this Warrant until such time that the Company effectuates a Loan
Satisfaction; provided, however, that if, as of the eight month anniversary of the Closing
Date, the Company has not effectuated a Loan Satisfaction but the Initial Holder has complied in
full with all of its material obligations under the Guarantee Agreement, this Section 1(b) shall
have no further force and effect.



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          (c) During the period that this Warrant is exercisable in accordance with Sections 1(a) and
1(b) above, the Holder may exercise this Warrant by presentation and surrender of this Warrant to
the Company at its principal office, or at the office of its stock transfer agent, if any, together
with the Warrant Exercise Form, attached hereto as Exhibit A, duly executed, accompanied by
payment (either in cash or by certified or official bank check, payable to the order of the
Company) of the Exercise Price for the number of shares specified in such form and instruments of
transfer, if appropriate, duly executed by the Holder or his, her or its duly authorized attorney.
If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant
for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder. Upon receipt by the Company of this
Warrant, together with a duly executed Warrant Exercise Form , a duly executed Shareholders
Agreement and the Exercise Price, at its office, or by the stock transfer agent of the Company at
its office, in proper form for exercise, the Holder shall, subject to compliance with any
applicable securities laws, be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder.



          (d) In the event the Initial Holder commits a Key Default (as defined in the Guarantee
Agreement), this Warrant shall be automatically cancelled, without any action required on the part
of the Company or the Holder, and shall have no further force and effect.



          (e) During the period that this Warrant is exercisable in accordance with Sections 1(a) and
1(b) above and provided that (i) the Company’s Common Stock is publicly traded and (ii) the average
reported weekly trading volume during the four weeks preceding the date of exercise is equal to or
greater than 2,500,000, in lieu of exercising this Warrant by tendering cash pursuant to Section
3(c) above, the Holder of this Warrant may elect to receive, without the payment by the Holder of
any additional consideration, shares equal to the value of this Warrant (or the portion thereof
being canceled) by surrender of this Warrant at the principal office of the Company together with
notice of such election, in which event the Company shall issue to the holder hereof a number of
Shares computed using the following formula:



	 	 	 	 	 
	 

	 	 	 	Y (A - B)
	X

	 	=
	 	 

A






     Where:



     X = The number of shares to be issued to the Holder pursuant to this net exercise;



     Y = The number of shares in respect of which the net issue election is made;



     A = The fair market value of one share at the time the net issue election is made; and



     B = The Exercise Price (as adjusted to the date of the net issuance).



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     For purposes of this paragraph 3(e), the “fair market value” of one share of Common Stock as
of a particular date shall mean the closing price (or average of the closing “bid” and “asked”
prices, as the case may be) on the applicable date (i.e. the date of exercise of Warrant) of the
Common Stock as reported by Bloomberg L.P. on the applicable market upon which the Common Stock is
traded.



     2. Reservation of Shares. The Company covenants that during the term this Warrant is
exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant and,
from time to time, if necessary, will use its reasonable best efforts to amend its Articles of
Incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of
the Warrant.



     3. Fractional Shares. No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant, but the Company shall issue one additional share
of its Common Stock or Other Securities (as applicable) in lieu of each fraction of a share
otherwise called for upon exercise of this Warrant.



     4. Transfer of Warrant.



     (a) Subject to compliance with any applicable federal and state securities laws, the
conditions set forth in Sections 4(b) below and the provisions of Section 7 of this Warrant, this
Warrant may be transferred by the Holder with respect to any or all of the shares purchasable
hereunder. Upon surrender of this Warrant to the Company or at the office of its stock transfer
agent, if any, together with the Assignment Form, attached hereto as Exhibit C duly
executed, the Transferor Representation Letter (as defined
below) duly executed, the Transferee Representation Letter (as
defined below), attached  hereto as Exhibit C1 duly executed and funds sufficient to pay any transfer
tax, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination or denominations specified in the Assignment Form and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not so assigned. Thereafter,
this Warrant shall promptly be cancelled. This Warrant may be divided or combined with other
Warrants that carry the same rights upon presentation hereof at the office of the Company or at the
office of its stock transfer agent, if any, together with a written notice
specifying the names and denominations in which new Warrants are to be issued and signed by
the Holder hereof. Notwithstanding the foregoing, the Company shall not be required to issue a
Warrant covering less than 1,000 shares of Common Stock.



     (b) Notwithstanding anything to the contrary set forth herein, no transfer of all or any
portion of this Warrant shall be made except for transfers to the Company, unless:



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          (x) if such transfer is made at any time prior to the One Year Exercise Date, the Holder and
the proposed transferee each truthfully certify and provide to the Company a written representation
letter (the “Transferor Representation Letter” and the “Transferee Representation
Letter”, respectively) that such transfer is to either:



               (A) a “Qualified Institutional Buyer” as such term is defined under Rule 144A of the
Securities Act, attached hereto as Exhibit D;



               (B) a “large institutional accredited investor” as such term is used in the Securities and
Exchange Commission staff’s No-Action Letter dated February 28, 1992 to Squadron, Ellenoff,
Pleasant & Lehrer, attached hereto as Exhibit E; or



               (C) a person that is (1) an “accredited investor” within the meaning of Regulation D under the
Securities Act (an “Accredited Investor”), (2) as of the Effective Date (as defined in the
Guarantee Agreement) and the date of such transfer, is an executive officer of the Company or a
member of the Company’s management; and (3) participated in assisting the Company structure
the issuance of this Warrant to the (x) Guarantor (as defined in the Guarantee Agreement) and (y)
any other persons receiving warrants in connection with their provision of a guaranty or letter of
credit to secure the Bank of America Loan.



          (y) if such transfer is made at any time following the One Year Exercise Date, the
Holder and the proposed transferee each truthfully certify and provide to the Company the
Transferor Representation Letter and the Transferee Representation Letter, respectively that such
transfer is to an Accredited Investor.



     5. Anti-Dilution Provisions.



          5.1 Adjustment for Dividends in Other Securities, Property, Etc. In case at any time
or from time to time after the Base Date the shareholders of the Company shall have received, or on
or after the record date fixed for the determination of eligible shareholders, shall have become
entitled to receive without payment therefor: (a) other or additional securities or property (other
than cash) by way of dividend, (b) any cash paid or payable or (c) other or additional (or less)
securities or property (including cash) by way of stock-split, spin-off, split-up,
reclassification, combination of shares or similar corporate rearrangement, then, and in each such
case, the Holder of this Warrant, upon the exercise thereof as provided in Section 1, shall
be entitled to receive the amount of securities and property (including cash in the cases referred
to in clauses (b) and (c) above) which such Holder would hold on the date of such exercise if on
the
Base Date it had been the holder of record of the number of shares of Common Stock or Other
Securities (as applicable) as constituted on the Base Date) subscribed for upon such exercise as
provided in Section 1 and had thereafter, during the period from the Base Date to and
including the date of such exercise, retained such shares and/or all other additional (or less)
securities and property (including cash in the cases referred to in clauses (b) and (c) above)
receivable by it as aforesaid during such period, giving effect to all adjustments called for
during such period by Sections 5.2 and 5.3.



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          5.2 Adjustment for Recapitalization. If the Company shall at any time subdivide its
outstanding shares of Common Stock (or Other Securities at the time receivable upon the exercise of
the Warrant), or if the Company shall declare a stock dividend or distribute shares of Common Stock
to its shareholders, the number of shares of Common Stock subject to this Warrant immediately prior
to such subdivision shall be proportionately increased and the Exercise Price shall be
proportionately decreased, and if the Company shall at any time combine the outstanding shares of
Common Stock, the number of shares of Common Stock or Other Securities subject to this Warrant
immediately prior to such combination shall be proportionately decreased and the Exercise Price
shall be proportionately increased. Any such adjustments pursuant to this Section 5.2 shall
be effective at the close of business on the effective date of such subdivision or combination or
if any adjustment is the result of a stock dividend or distribution then the effective date for
such adjustment based thereon shall be the record date therefor.



          5.3 Adjustment for Reorganization, Consolidation, Merger, Etc. In case of any
reorganization of the Company (or any other corporation, the securities of which are at the time
receivable on the exercise of this Warrant) after the Base Date or in case after such date the
Company (or any such other corporation) shall consolidate with or merge into another corporation or
convey all or substantially all of its assets to another corporation, then, and in each such case,
the Holder of this Warrant upon the exercise thereof as provided in Section 1 at any time
after the consummation of such reorganization, consolidation, merger or conveyance, shall be
entitled to receive, in lieu of the securities and property receivable upon the exercise of this
Warrant prior to such consummation, the securities or property to which such Holder would have been
entitled upon such consummation if such Holder had exercised this Warrant immediately prior
thereto; in each such case, the terms of this Warrant shall be applicable to the securities or
property receivable upon the exercise of this Warrant after such consummation.



          5.4 No Impairment. The Company will not, by amendment of its Articles of Incorporation
or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against impairment. Without limiting the
generality of the foregoing, while this Warrant is outstanding, the Company will take all such
action as may be necessary or appropriate in order that the Company may validly and legally issue
or sell fully paid and non-assessable shares of capital stock upon the exercise of this Warrant.



          5.5 Certificate as to Adjustments. In each case of an adjustment in the number of
shares of Warrant Stock or Other Securities receivable on the exercise of this Warrant, the Company
at its expense will promptly compute such adjustment in accordance with the terms of this Warrant
and prepare a certificate executed by an executive officer of the Company setting forth such
adjustment and showing in detail the facts upon which such adjustment is based. The Company will
forthwith mail a copy of each such certificate to the Holder.



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          5.6 Notices of Record Date, Etc. In case:



          (a) the Company shall take a record of the holders of its Common Stock (or Other Securities at
the time receivable upon the exercise of the Warrant) for the purpose of entitling them to receive
any dividend (other than a cash dividend at the same rate as the rate of the last cash dividend
theretofore paid) or other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities, or to receive any other right; or



          (b) of any capital reorganization of the Company, any reclassification of the capital stock of
the Company, any consolidation or merger of the Company with or into another corporation, or any
conveyance of all or substantially all of the assets of the Company to another corporation; or



          (c) of any voluntary or involuntary dissolution, liquidation or winding up of the Company,



then, and in each such case, the Company shall mail or cause to be mailed to the Holder of the
Warrant at the time outstanding a notice specifying, as the case may be, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding up is to take place, and the time, if any, which is to be fixed, as to which the holders of
record of Common Stock (or such other securities at the time receivable upon the exercise of the
Warrant) shall be entitled to exchange their shares of Common Stock (or such other securities) for
securities or other property deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding up. Such notice shall be mailed at least
twenty (20) days prior to the date therein specified and the Warrant may be exercised prior to said
date during the term of the Warrant.



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     6. Legend. Unless the shares of Warrant Stock or Other Securities have been registered
under the Securities Act, upon exercise of any of the Warrants and the issuance of any of the
shares of Warrant Stock or Other Securities, all certificates representing such securities shall
bear on the face thereof substantially the following legend:



“The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the “Act”) and may not be sold
or transferred in the absence of an effective registration statement under
the Act or an opinion of counsel satisfactory to the Company that such
registration is not required. The securities represented by this
certificate are subject to certain restrictions and agreements contained in,
that certain Warrant Agreement dated ___, 2007, by and between the original
Holder and the Company and, may not be sold, assigned, transferred,
encumbered, pledged or otherwise disposed of except upon compliance with the
provisions of such Warrant Agreement. By the acceptance of the shares of
capital stock evidenced by this certificate, the holder agrees to be bound
by such Warrant Agreement and all amendments thereto. A copy of such
Warrant Agreement has been filed at the office of the Company.



The securities represented by this certificate and the holder of such
securities are subject to the terms and conditions (including, without
limitation, voting agreements and restrictions on transfer) set forth in a
Shareholders Agreement, dated as of ___, 200___, a copy of which may be
obtained from the Company. No transfer of such securities will be made on
the books of the Company unless accompanied by evidence of compliance with
the terms of such agreement.”



     7. Lock-Up Agreement. The Holder hereby agrees that, during the period of duration
(not to exceed one hundred eighty (180) days) specified by the Company and an underwriter of Common
Stock or other securities of the Company in an agreement in connection with any initial public
offering of the Company’s securities, following the effective date of the registration statement
for a public offering of the Company’s securities filed under the Securities Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company held by it at any time during such period, except Common Stock, if
any, included in such registration.



     8. No Right as a Shareholder. This Warrant does not entitle the Holder to any voting
rights or other rights as a shareholder of the Company.



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     9. Registration Under the Securities Act of 1933.



          9.1 Piggyback Registration. If at any time during the period commencing on the date
that is six months following the closing date of an initial public offering of the Common Stock and
ending on the Expiration Date, the Company proposes to register any shares of its Common Stock
under the Securities Act on any form for registration thereunder (the “Registration
Statement”) for its own account or the account of shareholders (other than a
registration relating to (i) shares of Common Stock underlying a stock option, restricted
stock, stock purchase or compensation or incentive plan or of stock issued or issuable pursuant to
any such plan, or a dividend investment plan; (ii) a registration of securities proposed to be
issued in exchange for securities or assets of, or in connection with a merger or consolidation
with, another corporation or other entity; or (iii) a registration of securities proposed to be
issued in exchange for other securities of the Company), it will at such time give prompt written
notice to the Holder of its intention to do so (the “Section 9.1 Notice”). Upon the
written request of the Holder given to the Company within ten (10) days after the giving of any
Section 9.1 Notice setting forth the number of shares of Warrant Stock intended to be disposed of
by the Holder and the intended method of disposition thereof, the Company will include or cause to
be included in the Registration Statement the shares of Warrant Stock which the Holder has
requested to register, to the extent provided in this Section 9 (a “Piggyback
Registration”). Notwithstanding the foregoing, the Company may, at any time, withdraw or cease
proceeding with any registration pursuant to this Section 9.1 if it shall at the same time withdraw
or cease proceeding with the registration of the Common Stock originally proposed to be registered.
The Company shall be obligated to file and cause the effectiveness of only one (1) Piggyback
Registration. The shares of Warrant Stock set forth in the Section 9.1 Notice are referred to for
purposes of this Section 9 as the “Registrable Shares”.



          9.2 Company Covenants. Whenever required under this Section 9 to include Registrable
Shares in a Registration Statement, the Company shall, as expeditiously as reasonably possible:



          (i) Use its commercially reasonable efforts to cause such Registration Statement to become
effective and cause such Registration Statement to remain effective until the earlier of the Holder
having completed the distribution of all its Registrable Shares described in the Registration
Statement or six (6) months from the effective date of the Registration Statement (or such later
date by reason of suspensions the effectiveness as provided hereunder). The Company will also use
its commercially reasonable efforts to, during the period that such Registration Statement is
required to be maintained hereunder, file such post-effective amendments and supplements thereto as
may be required by the Securities Act and the rules and regulations thereunder or otherwise to
ensure that the Registration Statement does not contain any untrue statement of material fact or
omit to state a fact required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they are made, not misleading; provided,
however, that if applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permits, in lieu of filing a post-effective amendment that (i) includes
any prospectus required by Section 10(a)(3) of the Securities Act or (ii) reflects facts or events
representing a material or fundamental change in the information set forth in the Registration
Statement, the Company may incorporate by reference information required to be included in (i) and
(ii) above to the extent such information is contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
in the Registration Statement.



          (ii) Prepare and file with the Unites States Securities and Exchange Commission (the
“SEC”) such amendments and supplements to such Registration Statement, and
the prospectus used in connection with such Registration Statement, as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of all securities covered
by such Registration Statement.



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          (iii) Furnish to the Holder such numbers of copies of a prospectus, including a preliminary
prospectus as amended or supplemented from time to time, in conformity with the requirements of the
Securities Act, and such other documents as it may reasonably request in order to facilitate the
disposition of Registrable Shares owned by the Holder; provided that, in no event, shall the
Company be required to incur printing expenses in excess of $1,000 in complying with its
obligations under this Section 9.2(iii).



          (iv) Use its commercially reasonable efforts to register and qualify the securities covered by
such Registration Statement under such other federal or state securities laws of such jurisdictions
as shall be reasonably requested by the Holder; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by the Securities
Act.



          (v) In the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriter of such
offering.



          (vi) Notify the Holder, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, (a) when the Registration Statement or any post-effective
amendment and supplement thereto has become effective; (b) of the issuance by the SEC of any stop
order or the initiation of proceedings for that purpose (in which event the Company shall make use
commercially reasonable efforts to obtain the withdrawal of any order suspending effectiveness of
the Registration Statement. at the earliest possible time or prevent the entry thereof); (c) of the
receipt by the Company of any notification with respect to the suspension of the qualification of
the Registrable Shares for sale in any jurisdiction or the initiation of any proceeding for such
purpose; and (d) of the happening of any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.



          (vii) Cause all such Registrable Shares registered hereunder to be listed on each securities
exchange or quotation service on which similar securities issued by the Company are then listed or
quoted.



          (viii) Provide a transfer agent and registrar for all Registrable Shares registered pursuant
hereunder and CUSIP number for all such Registrable Shares, in each case not later than the
effective date of such registration.



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          9.3 Furnish Information. In connection with a registration in which the Holder is
participating, such Holder agrees to execute and deliver such other agreements as may be reasonably
requested by the Company or the underwriter. In addition, if requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the Company, the Holder
shall provide, within ten (10) days of such request, such information related to such Holder as may
be required by the Company or such representative in connection with the completion of any public
offering of the Company’s securities pursuant to a registration statement filed under the
Securities Act.



          9.4 Expenses of Company Registration. All expenses other than underwriting discounts
and commissions and any counsel engaged by the Holder incurred in connection with registrations,
filings or qualifications pursuant to Section 9.1, including, without limitation, all registration,
filing and qualification fees, printers’ and accounting fees and fees and disbursements of counsel
for the Company (the “Registration Expenses”) shall be borne by the Company.



          9.5 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company’s capital stock, the Company shall not be required under
Section 9.1 to include any of the Holder’s Registrable Shares in such underwriting unless the
Holder accepts the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the underwriters), and then
only in such quantity as the underwriters determine in their sole and reasonable discretion will
not materially jeopardize the success of the offering by the Company, and the Holder enters into
such lock-up agreements as may be reasonably required of other selling shareholders in such
Registration Statement. If the total amount of securities, including Registrable Shares, requested
by shareholders to be included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole and reasonable discretion is compatible
with the success of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Shares, which the underwriters determine
in their sole and reasonable discretion will not materially jeopardize the success of the offering
(the securities so included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each selling shareholder or
in such other proportions as shall mutually be agreed to by such selling shareholders). For
purposes of the preceding parenthetical concerning apportionment, for any selling shareholder who
is a holder of Registrable Shares and is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of any such partners
and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed
to be a single “selling shareholder”, and any pro-rata reduction with respect to such “selling
shareholder” shall be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such “selling shareholder”, as defined in this
sentence.



          9.6 Indemnification. In the event that any Registrable Shares are included in a
Registration Statement under this Section 9.



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          (i) To the extent permitted by law, the Company will indemnify and hold harmless the Holder,
any underwriter (as defined in the Securities Act) for the Holder and each person, if any, who
controls the Holder or underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a “Violation”): (i) any untrue statement
or alleged untrue statement of a material fact contained in such Registration Statement, including
any preliminary prospectus or final prospectus contained therein or any amendments or supplements
thereto, (ii) the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and the Company will pay to
the Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained in this Section
9.6(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which consent shall not
be unreasonably withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by the Holder, underwriter or controlling
person.



          (ii) To the extent permitted by law, the Holder will indemnify and hold harmless the Company,
its directors, officers, and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act, any underwriter, any other holder selling securities in
such Registration Statement and any controlling person of any such underwriter or other holder,
against any losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, or the Exchange Act, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information furnished by the Holder
expressly for use in connection with such registration; and the Holder will pay, as incurred, any
legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to
this Section 9.6(ii), in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained in
this Section 9.6(ii) shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, further, that, in no event shall any
indemnity under this Section 9.6(ii) exceed 20% of the cash value of the gross proceeds from the
offering received by the Holder.



12









 





          (iii) Promptly after receipt by an indemnified party under this Section 9.6 of notice of the
commencement of any action (including any governmental action), such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this Section 9.6,
deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly notified, to assume the defense thereof with
counsel selected by the indemnifying party and approved by the indemnified party (whose approval
shall not be unreasonably withheld); provided, however, that an indemnified party (together with
all other indemnified parties which may be represented without conflict by one counsel) shall have
the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section 9.6, but the
omission so to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this Section 9.6.



          (iv) If the indemnification provided for in this Section 9.6 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the alleged omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement or omission.



          (v) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.



          (vi) The obligations of the Company and the Holder under this Section 9.6 shall survive the
completion of any offering of Registrable Shares in a Registration Statement under this Section 9,
and otherwise.



13









 





          9.7. Reports Under Securities Exchange Act of 1934. With a view to making available
to the Holder the benefits of Rule 144 under the Securities Act (“Rule 144”) and any
other rule or regulation of the SEC that may at any time permit the Holder to sell shares of
the Company’s Common Stock to the public without registration, commencing immediately after the
date on which a registration statement filed by the Company under the Securities Act becomes
effective, the Company agrees to use its best efforts to:



          (i) make and keep public information available, as those terms are understood and defined in
Rule 144;



          (ii) file with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and



          (iii) furnish to the Holder, so long as the Holder owns any Registrable Shares, forthwith upon
request (i) a copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (ii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.



          9.8. Permitted Transferees. The rights to cause the Company to register Registrable
Shares granted to the Holder by the Company under this Section 9 may be assigned in full by a
Holder in connection with a transfer by the Holder of its Registrable Shares if: (a) the Holder
gives prior written notice to the Company; (b) such transferee agrees to comply with and be bound
by the terms and provisions of this Agreement; (c) such transfer is otherwise in compliance with
this Agreement and (d) such transfer is otherwise effected in accordance with applicable securities
laws. Except as specifically permitted by this Section 9.8, the rights of a Holder with respect to
Registrable Shares as set out herein shall not be transferable to any other person, and any
attempted transfer shall cause all rights of the Holder therein to be forfeited.



          9.9 Termination of Registration Rights. The Holder shall no longer be entitled to
exercise any registration rights provided for in Section 9.1 after such time at which all
Registrable Shares held by the Holder can be sold in any three-month period without registration in
compliance with Rule 144(k) of the Act.



     10. Notices. All notices required hereunder shall be in writing and shall be deemed
given when telegraphed, delivered personally or within two (2) days after mailing when mailed by
certified or registered mail, return receipt requested, to the Company at its principal office, or
to the Holder at the address set forth on the record books of the Company, or at such other address
of which the Company or the Holder has been advised by notice hereunder. A copy of any notices
provided to the Company hereunder shall be concurrently provided to the Company’s legal counsel
addressed to Hunton & Williams, LLP, Attn: David E. Wells, Esq., 1111 Brickell Avenue, Suite 2500,
Miami, Florida 33131.



     11. Applicable Law. The Warrant is issued under and shall for all purposes be governed
by and construed in accordance with the laws of the State of Florida, without giving effect to the
choice of law rules thereof.



14









 





     12. Modification of the Terms. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the Holder and the
Company.



     13. 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.



     14. Waiver of Jury Trial. THE COMPANY AND THE HOLDER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER
OF THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY THE HOLDER AND
THE COMPANY.



     15. Payment of Certain Taxes and Charges. The Company shall not be required to issue
or deliver any certificate for shares of Common Stock or other securities upon the exercise of this
Warrant or to register any transfer of this Warrant until any applicable transfer tax and any other
taxes or governmental charges that the Company may be required by law to collect in respect of such
exercise or transfer shall have been paid, such tax being payable by Holder at the time of
surrender for the exercise or transfer.



     16. Register. The Company or its stock transfer agent, if any, will maintain a
register containing the name and address of the Holder of this Warrant and of the holders of other
warrants of like tenor issued simultaneously hereunder. Any Holder may change its, his or her
address as shown on the warrant register by written notice to the Company requesting such change.
The Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in this Warrant on the
part of any other person.



15









 





     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf, in its
corporate name, by its duly authorized officer, all as of the day and year first above written.



	 	 	 	 	 
	 	BIOHEART, INC.

 	 
	 	By:  	    
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



16









 






	 	 	 	 	 



EXHIBIT
C1




TRANSFEREE REPRESENTATION LETTER




Dated as of                     , 2007




Attention: William H. Kline

Chief Financial Officer

Bioheart, Inc.

13794 NW 4th Street, Suite 212

Sunrise Florida 33325




Mr. Kline:





     This letter is in reference to the assignment to                      (the “Investor”) of a warrant to
purchase                                 shares of the common stock of the Company on the terms and conditions set
forth in the Warrant Agreement (the “Warrant Agreement”), attached hereto as Exhibit A (the
“Securities”).



     1. In connection with the acquisition of the Securities, the Investor hereby makes the
following acknowledgments, representations and agreements:



          (a) The Investor understands that the Company has relied on the information and
representations with respect to the Investor set forth in this letter in determining whether an
investment in the Company is suitable for the Investor, and the Investor represents and warrants
that all such information is true and correct as of the date hereof.



          (b) The Investor must bear the economic risk of the acquisition of the Securities for the
foreseeable future because the offer and sale of the Securities are not registered under the
Securities Act of 1933, as amended (the “Securities Act”), or any applicable state securities laws.
The Investor understands that the offering and sale of the Securities is intended to be exempt
from registration under the Securities Act, by virtue of Section 4(2) and/or Section 4(6) thereof
and/or the provisions of Regulation D promulgated there under, based, in part, upon the
representations, warranties and agreements of the Investor contained in this Subscription
Agreement.



          (c) 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.



          (d) The Investor is acquiring the Securities solely for such Investor’s own account for
investment and not with a view to resale or distribution thereof, in whole or in part. The
Investor has no contract, undertaking, agreement or arrangement, formal or informal, oral or
written, with any person to sell or transfer all or any part of the Securities, and the Investor
has
no plans to enter into any such contract, undertaking, agreement or arrangement.



17









 





          (e) The Investor is aware that the Securities are “restricted securities,” and the Investor
must bear the substantial economic risks of the investment in the Securities indefinitely because
none of the Securities may be sold, hypothecated or otherwise disposed of unless subsequently
registered under the Securities Act and applicable state securities laws or unless counsel
(satisfactory to the Company) renders an opinion (satisfactory to the Company) that registration
under the Securities Act and any applicable state securities laws is not required. The Company has
not agreed to make available an exemption from the registration requirements of the Securities Act
for resale of any of the Securities and is under no obligation to register any of the Securities
under the Securities Act or any state securities laws.



          (f) The Investor meets the requirements of at least one of the suitability standards for an
“accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act. The
Investor agrees to furnish any additional information requested by the Company to assure compliance
with applicable federal and state securities laws in connection with the purchase and sale of the
Securities.



          (g) The Investor has adequate means of providing for its current financial needs and possible
personal contingencies and has no need for liquidity in its investment in the Securities.



          (h) The Investor is able to bear the economic risks inherent in its investment in the
Securities. The Investor further acknowledges that an important consideration bearing on its
ability to bear the economic risk of its acquisition of the Securities is whether it can afford a
complete loss of its entire investment in the Securities, and that the Investor can afford a
complete loss of its entire investment in the Securities.



          (i) The Investor has such knowledge and experience in business, financial and investment
matters so that the Investor is capable of evaluating the merits and risks of an investment in the
Securities.



          (j) The Investor has had a reasonable opportunity to ask questions of and receive answers from
a person or persons acting on behalf of the Company concerning the Company and the offering of the
Securities and all such questions have been answered to the full satisfaction of the Investor.



          (k) To the full satisfaction of Investor, the Investor has been furnished any materials the
Investor has requested relating to the Company or the offering of the Securities. The Investor has
received, has read carefully and understands all such materials and this Subscription Agreement.



          (l) An investment in the Company is highly speculative and involves a risk of loss of the
entire investment and no assurance can be given of any income from such investment.



          (m) The Investor has taken no action, which would give rise to any claim by
any person for brokerage commissions, finders’ fees or the like relating to this Subscription
Agreement or the transactions contemplated hereby.



18









 





          (n) The Investor has the power and authority to execute this Subscription Agreement and to
perform its obligations hereunder and consummate the transactions contemplated hereby and the
person signing this Subscription Agreement on behalf of the Investor has been duly authorized to
execute and deliver this Subscription Agreement.



          (o) The Investor has consulted with its own legal, regulatory, tax, business, investment,
financial and accounting advisers in connection with its acquisition of the Securities. The
Investor has made its own investment decisions based upon its own judgment, due diligence and
advice from such advisers as it has deemed necessary and is not relying upon any information,
representation or warranty by the Company or any agent of the Company, other than representations
and warranties set forth in the Distribution and License Agreement, in determining to invest in the
Company.



     2. This Subscription Agreement and the representations herein shall be governed by and
construed under the laws of the State of Florida and shall be binding upon my heirs, executors,
administrators, legal representatives, successors and assigns, and inure to the benefit of the
company’s successors and assigns.



THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES
LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.



     THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT, AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
THE INVESTOR SHOULD BE AWARE THAT HE, SHE OR IT MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.



19









 





     IN WITNESS WHEREOF, the Investor has executed this Subscription Agreement on the date set
forth above.



	 	 	 	 	 
	 	 	 
	 	    
 	 
	 	 	 
	 	 	 
	 




20









 





EXHIBIT A




WARRANT EXERCISE FORM




To: Bioheart, Inc.




ELECTION TO EXERCISE




     The undersigned hereby exercises its rights to purchase _________ shares of the Subject
Shares covered by the within Warrant and tenders payment herewith in the amount of $____________
in accordance with the terms thereof, and requests that certificates for such securities be issued
in the name of, and delivered to:


 



 



 



(Print Name, Address and Social Security
or Tax Identification Number)



and, if such number of shares shall not be all the Subject Shares covered by the within Warrant,
that a new Warrant for the balance of the Subject Shares covered by the within Warrant be
registered in the name of, and delivered to, the undersigned at the address stated below.




	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Name	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(Print)
	 
	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	(Signature)






 









 





To: Bioheart, Inc.



NOTICE OF CASHLESS EXERCISE




(To be executed upon exercise of Warrant

pursuant to Section 1(e)




     The undersigned hereby irrevocably elects to exchange its Warrant for _____________ shares of
the Subject Shares pursuant to the cashless exercise provisions of the within Warrant, as provided
for in Section 1(e) of such Warrant, and requests that a certificate or certificates for the shares
be issued in the name of and delivered to:


 



 



 



(Print Name, Address and Social Security
or Tax Identification Number)



and, if such number of shares shall not be all the Subject Shares which the undersigned is entitled
to purchase in accordance with the within Warrant, that a new Warrant for the balance of the
Subject Shares covered by the within Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below.






	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Name	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(Print)
	 
	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	(Signature)








	 	 	 
	 

	 	(Signature must conform in all respects
to the name of the Holder as specified on
the face of the Warrant)







 









 





EXHIBIT C




ASSIGNMENT FORM





			
	FOR VALUE RECEIVED,	 	
  





hereby sells, assigns and transfers unto





			
	Name	 	
  





(Please typewrite or print in block letters)



the right to purchase up to _____________ shares of Common Stock of BIOHEART, INC., a Florida
corporation, pursuant to Section 4 of this Warrant, to the extent of shares as to which such right
is exercisable and does hereby irrevocably constitute and appoint Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.




DATED: ________,200_
















 




Exhibit D



 



Page 1




17 C.F.R. § 230.144A




Effective: [See Text Amendments]




Code of Federal Regulations Currentness
 Title
17. Commodity and Securities Exchanges
  Chapter II.
Securities and Exchange Commission
   
Part 230. General Rules and Regulations, Securities Act of 1933 (Refs & Annos)
    General
(Refs & Annos)



§ 230.144A Private resales of securities to institutions.




Preliminary Notes:



1. This section relates solely to the application of section 5 of the Act and not to antifraud or
other provisions of the federal securities laws.



2. Attempted compliance with this section does not act as an exclusive election; any seller
hereunder may also claim the availability of any other applicable exemption from the registration
requirements of the Act.



3. In view of the objective of this section and the policies underlying the Act, this section is
not available with respect to any transaction or series of transactions that, although in technical
compliance with this section, is part of a plan or scheme to evade the registration provisions of
the Act. In such cases, registration under the Act is required.



4. Nothing in this section obviates the need for any issuer or any other person to comply with the
securities registration or broker-dealer registration requirements of the Securities Exchange Act
of 1934 (the Exchange Act), whenever such requirements are applicable.



5. Nothing in this section obviates the need for any person to comply with any applicable state law
relating to the offer or sale of securities.



6. Securities acquired in a transaction made pursuant to the provisions of this section are deemed
to be restricted securities within the meaning of § 230.144(a)(3) of this chapter.



7. The fact that purchasers of securities from the issuer thereof may purchase such securities with
a view to reselling such securities pursuant to this section will not affect the availability to
such issuer of an exemption under section 4(2) of the Act, or Regulation D under the Act, from the
registration requirements of the Act.




(a) Definitions.





(1) For purposes of this section, qualified institutional buyer shall mean:




(i) Any of the following entities, acting for its own account or the accounts of other qualified
institutional buyers, that in the aggregate owns and invests on a discretionary basis at least
$100 million in securities of issuers that are not affiliated with the entity:




(A) Any insurance company as defined in section 2(13) of the Act;



     Note: A purchase by an insurance company for one or more of its separate accounts, as defined
by section 2(a)(37) of the Investment Company Act of 1940 (the “Investment Company Act”), which are
neither registered under section 8 of the Investment Company Act nor required to be so registered,
shall be deemed to be a purchase for the account of such insurance company.




(B) Any investment company registered under the Investment Company Act or any business
development company as defined in section 2(a)(48) of that Act;




(C) Any Small Business Investment Company licensed by the U.S. Small Business Administration
under section 301(c) or (d) of the Small Business Investment Act of 1958;




(D) Any plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the benefit of its
employees;




(E) Any employee benefit plan within the meaning of title I of the Employee Retirement
Income Security Act of 1974;



© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.





 









 





Page 2




17 C.F.R. § 230.144A








(F) Any trust fund whose trustee is a bank or
trust company and whose participants are exclusively plans of the types identified in
paragraph (a)(1)(i) (D) or (E) of this section, except trust funds that include as
participants individual retirement accounts or H.R. 10 plans.




(G) Any business development company as defined in section 202(a)(22) of the Investment
Advisers Act of 1940;




(H) Any organization described in section 501(c)(3) of the Internal Revenue Code,
corporation (other than a bank as defined in section 3(a)(2) of the Act or a savings and
loan association or other institution referenced in section 3(a)(5)(A) of the Act or a
foreign bank or savings and loan association or equivalent institution), partnership, or
Massachusetts or similar business trust; and




(I) Any investment adviser registered under the Investment Advisers Act.




(ii) Any dealer registered pursuant to section 15 of the Exchange Act, acting for its own
account or the accounts of other qualified institutional buyers, that in the aggregate owns and
invests on a discretionary basis at least $10 million of securities of issuers that are not
affiliated with the dealer, Provided, That securities constituting the whole or a part of an
unsold allotment to or subscription by a dealer as a participant in a public offering shall not
be deemed to be owned by such dealer;




(iii) Any dealer registered pursuant to section 15 of the Exchange Act acting in a riskless
principal transaction on behalf of a qualified institutional buyer;



     Note: A registered dealer may act as agent, on a non-discretionary basis, in a transaction
with a qualified institutional buyer without itself having to be a qualified institutional buyer.




(iv) Any investment company registered under the Investment Company Act, acting for its own
account or for the accounts of other qualified institutional buyers, that is part of a family of
investment companies which own in the aggregate at least $100 million in securities of issuers,
other than issuers that are affiliated with the investment company or are part of such family of
investment companies. Family of investment companies means any two or more investment companies
registered under the Investment Company Act, except for a unit investment trust whose assets
consist solely of shares of one or more registered investment companies, that have the same
investment adviser (or, in the case of unit investment trusts, the same depositor), Provided
That, for purposes of this section:




(A) Each series of a series company (as defined in Rule 18f-2 under the Investment Company
Act [17 CFR 270.18f-2] ) shall be deemed to be a separate investment company; and




(B) Investment companies shall be deemed to have the same adviser (or depositor) if their
advisers (or depositors) are majority-owned subsidiaries of the same parent, or if one
investment company’s adviser (or depositor) is a majority-owned subsidiary of the other
investment company’s adviser (or depositor);




(v) Any entity, all of the equity owners of which are qualified institutional buyers, acting for
its own account or the accounts of other qualified institutional buyers; and




(vi) Any bank as defined in section 3(a)(2) of the Act, any savings and loan association or
other institution as referenced in section 3(a)(5)(A) of the Act, or any foreign bank or savings
and loan association or equivalent institution, acting for its own account or the accounts of
other qualified institutional buyers, that in the aggregate owns and invests on a discretionary
basis at least $100 million in securities of issuers that are not affiliated with it and that
has an audited net worth of at least $25 million as demonstrated in its latest annual financial
statements, as of a date not more than 16 months preceding the date of sale under the Rule in
the case of a U.S. bank or savings and loan association, and not more than 18 months preceding
such date of sale for a foreign bank or savings and loan association or equivalent institution.




(2) In determining the aggregate amount of securities owned and invested on a discretionary
basis by an entity, the following instruments and interests shall be excluded: bank deposit
notes and certificates of deposit; loan participations;
repurchase agreements; securities owned but subject to a repurchase agreement; and currency,
interest rate and commodity swaps.



© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.




 









 





Page 3




17 C.F.R. § 230.144A





(3) The aggregate value of securities owned and invested on a discretionary basis by an entity
shall be the cost of such securities, except where the entity reports its securities holdings in
its financial statements on the basis of their market value, and no current information with
respect to the cost of those securities has been published. In the latter event, the securities
may be valued at market for purposes of this section.




(4) In determining the aggregate amount of securities owned by an entity and invested on a
discretionary basis, securities owned by subsidiaries of the entity that are consolidated with
the entity in its financial statements prepared in accordance with generally accepted accounting
principles may be included if the investments of such subsidiaries are managed under the
direction of the entity, except that, unless the entity is a reporting company under section 13
or 15(d) of the Exchange Act, securities owned by such subsidiaries may not be included if the
entity itself is a majority-owned subsidiary that would be included in the consolidated
financial statements of another enterprise.




(5) For purposes of this section, riskless principal transaction means a transaction in which a
dealer buys a security from any person and makes a simultaneous offsetting sale of such security
to a qualified institutional buyer, including another dealer acting as riskless principal for a
qualified institutional buyer.




(6) For purposes of this section, effective conversion premium means the amount, expressed as a
percentage of the security’s conversion value, by which the price at issuance of a convertible
security exceeds its conversion value.




(7) For purposes of this section, effective exercise premium means the amount, expressed as a
percentage of the warrant’s exercise value, by which the sum of the price at issuance and the
exercise price of a warrant exceeds its exercise value.


(b) Sales by persons other than issuers or dealers. Any person, other than the issuer or a dealer,
who offers or sells securities in compliance with the conditions set forth in paragraph (d) of this
section shall be deemed not to be engaged in a distribution of such securities and therefore not to
be an underwriter of such securities within the meaning of sections 2(11) and 4(1) of the Act.



(c) Sales by Dealers. Any dealer who offers or sells securities in compliance with the conditions
set forth in paragraph (d) of this section shall be deemed not to be a participant in a
distribution of such securities within the meaning of section 4(3)(C) of the Act and not to be an
underwriter of such securities within the meaning of section 2(11) of the Act, and such securities
shall be deemed not to have been offered to the public within the meaning of section 4(3)(A) of the
Act.



(d) Conditions to be met. To qualify for exemption under this section, an offer or sale must meet
the following conditions:





(1) The securities are offered or sold only to a qualified institutional buyer or to an offeree
or purchaser that the seller and any person acting on behalf of the seller reasonably believe is
a qualified institutional buyer. In determining whether a prospective purchaser is a qualified
institutional buyer, the seller and any person acting on its behalf shall be entitled to rely
upon the following non-exclusive methods of establishing the prospective purchaser’s ownership
and discretionary investments of securities:




(i) The prospective purchaser’s most recent publicly available financial statements, Provided
That such statements present the information as of a date within 16 months preceding the date of
sale of securities under this section in the case of a U.S. purchaser and within 18 months
preceding such date of sale for a foreign purchaser;




(ii) The most recent publicly available information appearing in documents filed by the
prospective purchaser with the Commission or another United States federal, state, or local
governmental agency or self-regulatory organization, or with a foreign governmental agency or
self-regulatory organization, Provided That any such information is as of a date within 16
months preceding the date of sale of securities under this section in the case of a U.S.
purchaser and within 18 months preceding such date of sale for a foreign purchaser;



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Page 4




17 C.F.R. § 230.144A





(iii) The most recent publicly available information appearing in a recognized securities
manual, Provided That such information is as of a date within 16 months preceding the date of
sale of securities under this section in the case of a U.S. purchaser and within 18 months
preceding such date of sale for a foreign purchaser; or




(iv) A certification by the chief financial officer, a person fulfilling an equivalent function,
or other executive officer of the purchaser, specifying the amount of securities owned and
invested on a discretionary basis by the purchaser as of a specific date on or since the close
of the purchaser’s most recent fiscal year, or, in the case of a purchaser that is a member of a
family of investment companies, a certification by an executive officer of the investment
adviser specifying the amount of securities owned by the family of investment companies as of a
specific date on or since the close of the purchaser’s most recent fiscal year;




(2) The seller and any person acting on its behalf takes reasonable steps to ensure that the
purchaser is aware that the seller may rely on the exemption from the provisions of section 5 of
the Act provided by this section;




(3) The securities offered or sold:




(i) Were not, when issued, of the same class as securities listed on a national securities
exchange registered under section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system; Provided, That securities that are convertible or exchangeable
into securities so listed or quoted at the time of issuance and that had an effective conversion
premium of less than 10 percent, shall be treated as securities of the class into which they are
convertible or exchangeable; and that warrants that may be exercised for securities so listed
or quoted at the time of issuance, for a period of less than 3 years from the date of issuance,
or that had an effective exercise premium of less than 10 percent, shall be treated as
securities of the class to be issued upon exercise; and Provided further, That the Commission
may from time to time, taking into account then-existing market practices, designate additional
securities and classes of securities that will not be deemed of the same class as securities
listed on a national securities exchange or quoted in a U.S. automated inter-dealer quotation
system; and




(ii) Are not securities of an open-end investment company, unit investment trust or face-amount
certificate company that is or is required to be registered under section 8 of the Investment
Company Act; and




(4)(i) In the case of securities of an issuer that is neither subject to section 13 or 15(d) of
the Exchange Act, nor exempt from reporting pursuant to Rule 12g3-2(b) (§ 240.12g3-2(b)
of this chapter) under the Exchange Act, nor a foreign government as defined in Rule 405 (§
230.405 of this chapter) eligible to register securities under Schedule B of the Act, the
holder and a prospective purchaser designated by the holder have the right to obtain from the
issuer, upon request of the holder, and the prospective purchaser has received from the issuer,
the seller, or a person acting on either of their behalf, at or prior to the time of sale, upon
such prospective purchaser’s request to the holder or the issuer, the following information
(which shall be reasonably current in relation to the date of resale under this section): a
very brief statement of the nature of the business of the issuer and the products and services
it offers; and the issuer’s most recent balance sheet and profit and loss and retained earnings
statements, and similar financial statements for such part of the two preceding fiscal years as
the issuer has been in operation (the financial statements should be audited to the extent
reasonably available).




(ii) The requirement that the information be reasonably current will be presumed to be satisfied
if:




(A) The balance sheet is as of a date less than 16 months before the date of resale, the
statements of profit and loss and retained earnings are for the 12 months preceding the date
of such balance sheet, and if such balance sheet is not as of a date less than 6 months
before the date of resale, it shall be accompanied by additional statements of profit and
loss and retained earnings for the period from the date of such balance sheet to a date less
than 6 months before the date of resale; and



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Page 5




17 C.F.R. § 230.144A






(B) The statement of the nature of the issuer’s business and its products and
services offered is as of a date within 12 months prior to the date of resale; or




(C) With regard to foreign private issuers, the required information meets the timing
requirements of the issuer’s home country or principal trading markets.


(e) Offers and sales of securities pursuant to this section shall be deemed not to affect the
availability of any exemption or safe harbor relating to any previous or subsequent offer or sale
of such securities by the issuer or any prior or subsequent holder thereof.



[55 FR 17945, April 30, 1990; 57 FR 48722, Oct. 28, 1992]



SOURCE: 62 FR 24573, May 6, 1997; 63 FR 6384, Feb. 6, 1998; 63 FR 13943,
13984, March 23, 1998; 64 FR 61449, Nov. 10, 1999; 65 FR 47284, Aug. 2, 2000;
66 FR 8896, 9017, Feb. 5, 2001; 67 FR 230, Jan. 2, 2002; 67 FR 13536,
March 22, 2002; 67 FR 19673, April 23, 2002; 68 FR 57777, Oct. 6, 2003; 72
FR 20414, April 24, 2007, unless otherwise noted.



AUTHORITY: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h,
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d,
78j, 78l, 78m, 78n, 78o, 78t, 78w,
78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29,
80a-30, and 80a-37, unless otherwise noted.; Section 230.151 is also issued under
15 U.S.C. 77s(a).; Section 230.160 is also issued under Section 104(d) of the Electronic
Signatures Act.; Sections 230.400 to 230.499 issued under 15 U.S.C. 77f, 77h,
77j, 77s, unless otherwise noted.; Section 230.473 is also issued under 15
U.S.C. 79(t).; Section 230.502 is also issued under 15 U.S.C. 80a-8, 80a-29,
80a-30.



17 C. F. R. § 230.144A, 17 CFR § 230.144A




     Current through July 19, 2007; 72 FR 39581



Copr. © 2007 Thomson/West




END OF DOCUMENT




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EXHIBIT E



Page 1




1992 WL 55818 (S.E.C. No - Action Letter)




(SEC No-Action Letter)




*1 Black




Box

Incorporated




Publicly Available February 28, 1992




SEC LETTER




1933 Act / s 5




February 28, 1992

Publicly Available February 28, 1992




Kenneth R. Koch, Esq.

Squadron, Ellenoff, Pleasant & Lehrer

551 Fifth Avenue

New York, New York 10176Dear Mr. Koch:



Our responses to the interpretive questions raised in your letter of December 27, 1991 regarding
the positions expressed in the staff’s letter dated June 26, 1990 to Black Box Incorporated (the
“Black Box letter”) are as follows:





1. The staff’s positions in the Black Box letter were not based on the financial condition of
the company. Specifically, in response to your concerns expressed during our telephone
conversations, the staff’s position with respect to integration of the Black Box registered
initial public offering and a simultaneous unregistered offering by Black Box of convertible
debentures (the “Black Box offerings”) was a policy position taken primarily in consideration of
the nature and number of the offerees, and not based on the financial condition of the company.





2. The number of offerees and purchasers is a factor considered by the staff in evaluating the
applicability of the policy position. As we discussed, the Black Box policy position on
integration was simply a formal articulation of an informal position the staff has taken
previously with respect to simultaneous registered offerings and unregistered offerings to a
limited number of first-tier institutional investors in connection with structured financings.
Because the position expressed with respect to the Black Box offerings is a policy position, it
is narrowly construed by the staff. The staff interprets the position to be limited in
applicability to situations where a registered offering would otherwise be integrated with an
unregistered offering to i) persons who would be qualified institutional buyers for purposes of
Rule 144A and 2) no more than two or three large institutional accredited investors. The
position does not constitute a determination by the staff that the unregistered offering is in
fact a bona fide private placement.[FN1]


FN1 With regard to the availability of the Section 4(2) private offering exemption, it should be
noted that the staff takes the position that the filing of a registration statement is deemed to be
the commencement of the public offering. See letter from former director of the Division of
Corporation Finance, John J. Huber, to Michael Bradfield, general counsel of the Board of Governors
of the Federal Reserve System (March 23, 1984). Further, your attention is directed to SEC
Litigation Release No. 10241 (December 19, 1983), regarding SEC v. Michael A. Traiger, Traiger
Energy Investments (U.S.D.C.C.D.Cal.Civil Action No. 83-2738-LTL JPx).





3. The position of the staff with respect to integration of the Black Box offerings would not
have been different if common stock had been sold in both the public and the private offerings.
In this regard, it should be noted that the staff historically has treated an offering of a
class of securities and an offering of another security convertible into that class of
securities as offerings of the same class of securities for purposes of the integration
doctrine.


*2 I trust that the foregoing information is of assistance to you. Should you have any further
questions regarding this matter, please feel free to contact me again.




Sincerely,




Cecilia D. Blye

Special Counsel

December 27, 1991




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	1992 WL 55818 (S.E.C. No — Action Letter)
	 	Page 2






Special
Counsel
December 27, 1991
Office of Chief Counsel

Division of Corporation Finance

Securities and Exchange Commission

Judiciary Plaza

450 Fifth Street, N.W.

Washington,. D.C. 20549




Re: Black Box Incorporated



Gentlemen:



At the suggestion of Cecilia Blye of the staff of the Securities and Exchange Commission (the
“Commission”), I am writing to pose three interpretive questions concerning the Black Box
Incorporated no-action letter (“Black Box”) recently promulgated by the Commission. In Black Box,
the issuer on whose behalf the no-action request was made (the “Company”), proposed to engage in a
contemporaneous private placement of convertible debentures and a public offering of common stock.
Under the circumstances set forth in Black Box, the private placement and the public offering were
not integrated.



1. In Black Box, the Company was apparently financially troubled. Would the Staff’s answer have
changed if Black Box was not financially troubled or is Black Box a “hardship” exception to the
general rules on integration?



2. In Black Box, the private placement was made to up to 35 “qualified institutional buyers” (as
defined in Rule 144A promulgated under the Act, and up to four “accredited investors” (as defined
in Regulation D promulgated under the Act). Is there any limit on the number of “qualified
institutional buyers” or “accredited investors” to whom offers may be made or to whom sales may be
made in order to fall within the rationale of Black Box? In this connection, I note Ms. Blye’s
concern that sales made to large numbers of investors may indicate that a purportedly private
placement has been conducted as a public offering. However, when the Commission adopted
Regulation D, the Commission shifted away from the strict numerical limitations on investors under
former Rule 146. When Regulation D was adopted in 1982, the limitations on numbers of investors
(except for the limit of 35 on non-accredited investors) were eliminated. Rule 502(c) under
Regulation D focuses instead on the manner of offering and not the number of offerees. Thus,
although a large number of investors in an offering may be some indication that the offering was
conducted in a manner violative of the prohibition against a “general solicitation” under Rule
502(c), it is not by itself determinative of whether such a general solicitation has occurred.
Accordingly, I would think that the Commission would continue to rely on the body of interpretative
law that has grown up around Rule 502(c), rather than a numerical limitation on investors, to
determine whether a public offering has been made.



If the Staff does believe that a numerical limitation on investors is appropriate for Black Box to
apply, the limit should probably only apply to the number of “accredited investors” involved in the
private placement and should not restrict the number of “qualified institutional buyers”.
Inherent in the Commission’s recent adoption of Rule 144A is the assumption that “qualified
institutional buyers” do not need the protection which the registration process provides.



*3 3. In Black Box, the Company was privately placing convertible debentures and publicly selling
common stock. Would the Staff’s answer have changed if the securities being sold in the private
placement and the public offering were identical? For example, would the answer remain the same
if Common Stock were being sold in both the private placement and the public offering.



We appreciate the Commission’s consideration of these questions. If you have any questions
concerning the above, please contact me at (212)476-8362.



An original and seven copies of this letter are submitted herewith.



Very truly yours,



Kenneth R. Koch

SQUADRON, ELLENOFF, PLESENT & LEHRER

551 Fifth Avenue

New York, NY 10176

(212)661-6500





© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.