Attached files
file | filename |
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8-K - Biostar Pharmaceuticals, Inc. | biostarpharm-8k110209.htm |
EX-4.1 - Biostar Pharmaceuticals, Inc. | ex4-1.htm |
EX-99.2 - Biostar Pharmaceuticals, Inc. | ex99-2.htm |
EX-99.1 - Biostar Pharmaceuticals, Inc. | ex99-1.htm |
EX-99.3 - Biostar Pharmaceuticals, Inc. | ex99-3.htm |
Exhibit
3.1
ARTICLES
SUPPLEMENTARY
TO
THE ARTICLES OF INCORPOATION
OF
BIOSTAR
PHARMACEUTICALS, INC.
Biostar
Pharmaceuticals, Inc., a corporation organized and existing under the laws of
the State of Maryland (the “Corporation”), hereby certifies to the State
Department of Assessments and Taxation of Maryland, that:
FIRST: Pursuant
to the authority granted to and vested in the Board of Directors of the
Corporation (the “Board of Directors”) in accordance with Article SIXTH of the
Articles of Incorporation of the Corporation, the Board of Directors took action
by unanimous written consent on October 28, 2009, classifying five million
(5,000,000) unissued shares of the par value of $0.001 per share of the
Preferred Stock of the Corporation (as defined in the Charter) as Series B
Convertible Preferred Stock by setting before the issuance of such
shares, the preferences, rights, voting powers, restrictions, limitations as to
dividends, qualification or terms of redemption of, and the conversion or other
rights, thereof as hereinafter set forth.
SECOND:
A description of the shares so classified with the preferences, conversions and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as set by the board of
directors of the Corporation is as set forth in Annex
A attached hereto.
THIRD:
The shares of aforesaid have been duly classified by the board of directors
pursuant to authority and power contained in the charter of the
Corporation.
FOURTH:
The undersigned Secretary of the Corporation acknowledges these Articles
Supplementary to be the corporate act of the Corporation and, as to all matters
or facts required to be verified under oath, the undersigned Chief Executive
Officer acknowledges that to the best of his knowledge, information and belief,
these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN
WITNESS WHEREOF, Biostar Pharmaceuticals, Inc., has caused these presents to be
signed in its name and on its behalf by its Chief Executive Officer and
witnessed by its Secretary on October 28, 2009.
By /s/ Ronghua Wang
Name:
Ronghua Wang
Title:
Chief Executive Officer
ATTEST:
By
/s/ Shuang Gong
Name:
Shuang Gong
Title:
Secretary
BIOSTAR
PHARMACEUTICALS, INC.
Statement
of Designations
Section 1. Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the
Purchase Agreement (as defined below) shall have the meanings given such terms
in the Purchase Agreement. For the purposes hereof, the following terms shall
have the following meanings:
“9.9% Limitation”
shall have the meaning set forth in the Purchase Agreement.
“Bankruptcy Event”
means any of the following events: (a) the Company or any Significant Subsidiary
(as such term is defined in Rule 1.02(s) of Regulation S-X) thereof commences a
case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction relating to the Company or any Significant
Subsidiary thereof; (b) there is commenced against the Company or any
Significant Subsidiary thereof any such case or proceeding that is not stayed or
dismissed within 90 days after commencement; (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) the Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within 90 days; (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors; (f)
the Company or any Significant Subsidiary thereof calls a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of
its debts; or (g) the Company or any Significant Subsidiary thereof, by any act
or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for
the purpose of effecting any of the foregoing.
“Closing Date” means
the Closing Date, as defined in the Purchase Agreement.
“Commission” means the
Securities and Exchange Commission.
“Common Stock” means
the Company’s common stock par value $.001 per share.
“Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Conversion Date”
shall have the meaning set forth in Section 6(a).
“Conversion Ratio”
shall mean the number of shares of Common Stock issuable upon conversion of one
share of Series B Preferred Stock. Each share of Series B Preferred Stock shall
be convertible into one (1.0) share of Common Stock (the “Conversion Ratio”),
subject to adjustment as provided in this Statement of
Designations.
“Conversion Price”
shall mean $1.75, subject to adjustment as provided in this Statement of
Designations.
“Conversion Shares”
means, collectively, the shares of Common Stock into which the shares of Series
B Preferred Stock are convertible in accordance with the terms
hereof.
“Conversion Shares
Registration Statement” means a registration statement that meets the
requirements of the Registration Rights Agreement and registers the resale of
the Conversion Shares by the Holder, who shall be named as a “selling
stockholder” thereunder, all as provided in the Registration Rights
Agreement.
“Conversion Value”
means an amount determined by multiplying the number of Conversion Shares as to
which a value is to be determined by the average of the closing prices of the
Common Stock on the principal market or exchange on which the Common Stock is
traded for the five days prior to the date as of which a Conversion Value is
being determined.
“Dilutive Issuance”
shall have the meaning set forth in Section 7(b) hereof.
“Effective Date” means
the date that the Conversion Shares Registration Statement is declared effective
by the Commission.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended.
“Exempt Issuance”
shall have the meaning set forth in the Purchase Agreement.
“Fundamental
Transaction” shall have the meaning set forth in Section 7(f)(iv)
hereof.
“Holder” shall have
the meaning given such term in Section 2 hereof.
“Investors” shall mean
the persons named in Schedule A to the Purchase Agreement.
“Original Issue Date”
shall mean the date of the first issuance of any shares of the Series B
Preferred Stock regardless of the number of transfers of any particular shares
of Series B Preferred Stock and regardless of the number of certificates which
may be issued to evidence such Series B Preferred Stock.
“Person” means a
corporation, an association, a partnership, a limited liability company, a
business association, an individual, a trust, a government or political
subdivision thereof or a governmental agency.
“Purchase Agreement”
means the Securities Purchase Agreement dated as of November 2, 2009, relating
to the sale of (a) 2,060,000 shares of the Company’s Series B Preferred Stock,
and (b) warrants to purchase up to 500,000 shares of the Company’s Common Stock
at $3.00 per share, as amended, modified or supplemented from time to time, a
copy of which is on file at the principal offices of the Company.
“Securities” shall
have the meaning set forth in Section 1.3.36 of the Purchase
Agreement.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series B Preferred
Stock” shall have the meaning set forth in Section 2.
“Subsidiary” shall
mean a corporation, limited liability company, partnership, joint venture or
other business entity of which the Company owns beneficially or of record more
than a majority of the equity interest.
“Trading Day” means a
day on which the Common Stock is traded on a Trading Market.
“Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
OTC Bulletin Board.
“Transaction
Documents” shall have the meaning set forth in the Purchase
Agreement.
“VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the primary Trading Market on which the Common Stock is then
listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day
from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function;
(b) if the Common Stock is not then listed or quoted on the Trading Market
and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (c) in
all other cases, the fair market value of a share of Common Stock as determined
by a nationally recognized-independent appraiser selected in good faith by
Purchasers holding a majority of the principal amount of Series B Preferred
Stock then outstanding.
Rank of Series. For
purposes of this Statement of Designations, any stock of any series or class of
the Corporation shall be deemed to rank:
(a)
senior to the shares of Series B Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if the holders of
such class or classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series B Preferred Stock;
(b) on a
parity with shares of Series B Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, whether or not the
dividend rates, dividend payment dates or redemption or liquidation prices per
share or sinking fund provisions, if any, be different from those of Series B
Preferred Stock, if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution, liquidation or
winding up of the Corporation, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without preference or priority,
one over the other, as between the holders of such stock and the holders of
shares of Series B Preferred Stock;
(c)
junior to shares of Series B Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if such class shall
be Common Stock or if the holders of shares of Series B Preferred Stock shall be
entitled to receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in preference
or priority to the holders of shares of such class or classes.
Section 2. Designation and
Amount. The series of preferred stock, par value $.001 per share
(“Preferred Stock”), consisting of five million (5,000,000) shares shall be
designated as the Company’s Series B Convertible Preferred Stock (the “Series B Preferred
Stock”) and the number of shares so designated shall be (which shall not
be subject to increase without the consent of all of the holders of 75% of the
then outstanding shares of Series B Preferred Stock (each a “Holder” and
collectively, the “Holders”). In the
event that the Company shall change the par value of the Preferred Stock, the
par value of the Series B Preferred Stock shall be likewise changed. In the
event of the conversion of shares of Series B Preferred Stock into this
Company’s Common Stock, pursuant to Section 6 hereof, or in the event that the
Company shall otherwise acquire and cancel any shares of Series B Preferred
Stock, the shares of Series B Preferred Stock so converted or otherwise acquired
and canceled shall have the status of authorized but unissued shares of
preferred stock, without designation as to series until such stock is once more
designated as part of a particular Series by the Company’s Board of Directors.
In addition, if the Company shall not issue the maximum number of shares of
Series B Preferred Stock, the Company may, from time to time, by resolution of
the Board of Directors and the approval of the holders of a majority of the
outstanding shares of Series B Preferred Stock, reduce the number of shares of
Series B Preferred Stock authorized, provided, that no such reduction shall
reduce the number of authorized shares to a number which is less than the number
of shares of Series B Preferred Stock then issued or reserved for issuance. The
number of shares by which the Series B Preferred Stock is reduced shall have the
status of authorized but unissued shares of Preferred Stock, without designation
as to series, until such stock is once more designated as part of a particular
Series by the Company’s Board of Directors. The Board of Directors shall cause
to be filed with the Secretary of State of the State of Maryland such
certificate as shall be necessary to reflect any reduction in the number of
shares constituting the Series B Preferred Stock.
Section 3. Dividends and Other
Distributions. No dividends shall be payable with respect to the Series B
Preferred Stock. No dividends shall be declared or payable with respect to the
Common Stock while the Series B Preferred Stock is outstanding. The Company
shall not redeem or purchase any shares of Common Stock or any other class or
series of capital stock which is junior to or on a parity with the Series B
Preferred Stock while the Series B Preferred Stock is outstanding.
Section 4. Voting Rights. The
Series B Preferred Stock shall have no voting rights except as required by law.
However, so long as any shares of Series B Preferred Stock are outstanding, the
Company shall not, without the affirmative approval of the Holders of 75% of the
shares of the Series B Preferred Stock then outstanding, (a) alter or change
adversely the powers, preferences or rights given to the Series B Preferred
Stock or alter or amend this Statement of Designations, (b) authorize or create
any class of stock ranking as to dividends or distribution of assets upon a
Liquidation (as defined in Section 5) senior to or otherwise pari passu with the
Series B Preferred Stock, or any of preferred stock possessing greater voting
rights or the right to convert at a more favorable price than the Series B
Preferred Stock, (c) amend its certificate of incorporation or other charter
documents in breach of any of the provisions hereof, (d) increase the authorized
number of shares of Series B Preferred Stock or the number of authorized shares
of Preferred Stock, or (e) enter into any agreement with respect to the
foregoing. Notwithstanding any other provision of the Statement of Designations;
the provisions of Section 6(c) of this Statement of Designations may not be
amended or waived.
Section 5. [INTENTIONALLY
OMITTED]
Section 6.
Conversion.
(a)Conversions
at Option of Holder. Each
share of Series B Preferred Stock shall be initially convertible (subject to the
limitations set forth in Section 6(c)), into such number of shares of Common
Stock based on the Conversion Ratio at the option of the Holders, at any time
and from time to time from and after the Original Issue Date; provided, however,
that until the Restated Certificate, as defined in the Purchase Agreement, is
filed with the Secretary of State of the State of Maryland, the Series B
Preferred Stock shall not be convertible into Common Stock to the extent that
such conversion would result in the issuance of more than the number of
authorized shares of Common Stock. Holders shall effect conversions by providing
the Company with the form of conversion notice attached hereto as Annex
A (a “Notice of
Conversion”) as fully and
originally executed by the Holder, together with the delivery by the Holder to
the Company of the stock certificate(s) representing the number of shares of
Series B Preferred Stock so converted, with such stock certificates being duly
endorsed in full for transfer to the Company or with an applicable stock power
duly executed by the Holder in the manner and form as deemed reasonable by the
transfer agent of the Common Stock. Each Notice of Conversion shall specify the
number of shares of Series B Preferred Stock to be converted, the number of
shares of Series B Preferred Stock owned prior to the conversion at issue, the
number of shares of Series B Preferred Stock owned subsequent to the conversion
at issue, the stock certificate number and the shares of Series B Preferred
Stock represented thereby which are accompanying the Notice of Conversion, and
the date on which such conversion is to be effected, which date may not be prior
to the date the Holder delivers such Notice of Conversion and the applicable
stock certificates to the Company by overnight delivery service (the
“Conversion
Date”). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the
Trading Day immediately following the date that such Notice of Conversion and
applicable stock certificates are received by the Company. The calculations and
entries set forth in the Notice of Conversion shall control in the absence of
manifest or mathematical error. Shares of Series B Preferred Stock converted
into Common Stock in accordance with the terms hereof shall be canceled and may
not be reissued. If the Conversion Price is adjusted pursuant to Section 7 or as
otherwise provided in this Statement of Designations, the Conversion Ratio shall
likewise be adjusted and the new Conversion Ratio shall determined by
multiplying the Conversion Ratio in effect by a fraction, the numerator of which
is the Conversion Price in effect before the adjustment and the denominator of
which is the new Conversion Price. Thereafter, subject to any further
adjustments in the Conversion Price, each share of Series B Preferred Stock
shall be initially convertible into Common Stock based on the new Conversion
Ratio.
(b)Automatic
Conversion Upon Change of Control. Subject to Section 5, all of the
outstanding shares of Series B Preferred Stock shall be automatically converted
into the Conversion Shares upon the close of business on the business day
immediately preceding the date fixed for consummation of any transaction
resulting in a Change of Control of the Company (an “Automatic Conversion
Event”). A “Change in Control” means a consolidation or merger of the Company
with or into another company or entity in which the Company is not the surviving
entity or the sale of all or substantially all of the assets of the Company to
another company or entity not controlled by the then existing stockholders of
the Company in a transaction or series of transactions. The Company shall not be
obligated to issue certificates evidencing the Conversion Shares unless
certificates evidencing the shares of Series B Preferred Stock so converted are
either delivered to the Company or its transfer agent or the holder notifies the
Company or its transfer agent in writing that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection therewith. Upon
the conversion of the Series B Preferred Stock pursuant to this Section 6(b),
the Company shall promptly send written notice thereof, by hand delivery or by
overnight delivery, to the holders of record of all of the Series B Preferred
Stock at their addresses then shown on the records of the Company, which notice
shall state that certificates evidencing shares of Series B Preferred Stock must
be surrendered at the office of the Company (or of its transfer agent for the
Common Stock, if applicable).
(c)Beneficial
Ownership Limitation.
Except as provided in Section 6(b) of this Statement of Designations, which
shall apply as stated therein if an Automatic Conversion Event shall occur, the
right of the Holder to convert the Series B Preferred Stock shall be subject to
the 9.9% Limitation, with the result that Company shall not effect any
conversion of the Series B Preferred Stock, and the Holder shall not have the
right to convert any portion of the Series B Preferred Stock, to the extent that
after giving effect to such conversion, the Holder (together with the Holder’s
affiliates), as set forth on the applicable Notice of Conversion, would
beneficially own in excess of 9.9% of the number of shares of the Common Stock
outstanding immediately after giving effect to such conversion. For the
purposes of this Agreement beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act, and Regulation 13d-3
thereunder. For purposes of this Section 6(c), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in the most recent of the
following: (A) the Company’s most recent quarterly reports (Form 10-Q), Annual
Reports (Form 10-K), or definitive proxy statement or information statement as
filed with the Commission under the Exchange Act, (B) a more recent public
announcement by the Company, or (C) any other written notice by the Company or
the Company’s transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company
shall within two (2) Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including the
Series B Preferred Stock, by the Holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was publicly reported by
the Company. The 9.9% Limitation may be not be waived or
amended.
(d)Mechanics
of Conversion
(i)Delivery of
Certificate Upon Conversion. Except as otherwise set forth herein,
not later than three Trading Days after each Conversion Date (the “Share
Delivery Date”), the
Company shall deliver to the Holder (A) a certificate or certificates which,
after the Effective Date, shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the conversion of
shares of Series B Preferred Stock, and (B) a bank check in the amount of
accrued and unpaid dividends (if the Company has elected or is required to pay
accrued dividends in cash). After the Effective Date, the Company shall, upon
request of the Holder, deliver any certificate or certificates required to be
delivered by the Company under this Section electronically through the
Depository Trust Company or another established clearing Company performing
similar functions if the Company’s transfer agent has the ability to deliver
shares of Common Stock in such manner. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed
by the applicable Holder by the third Trading Day after the Conversion Date, the
Holder shall be entitled to elect by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Series B Preferred Stock tendered for
conversion.
(ii)Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue
and deliver the Conversion Shares upon conversion of Series B Preferred Stock in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares.
In the event a Holder shall elect to convert any or all of its Series B
Preferred Stock, the Company may not refuse conversion based on any claim that
such Holder or any one associated or affiliated with the Holder of has been
engaged in any violation of law, agreement or for any other reason (other than
the inability of the Company to issue shares of Common Stock as a result of the
limitation set forth in Section 6(c) hereof) unless an injunction from a court,
on notice, restraining and or enjoining conversion of all or part of this Series
B Preferred Stock shall have been sought and obtained and the Company posts a
surety bond for the benefit of the Holder in the amount of 150% of the
Conversion Value of Series B Preferred Stock which is subject to the injunction,
which bond shall remain in effect until the completion of arbitration/litigation
of the dispute and the proceeds of which shall be payable to such Holder to the
extent it obtains judgment. In the absence of an injunction precluding the same,
the Company shall issue Conversion Shares or, if applicable, cash, upon a
properly noticed conversion. If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 6(d)(i) within two Trading Days
of the Share Delivery Date applicable to such conversion, the Company shall pay
to such Holder, in cash, as liquidated damages and not as a penalty, for each
$5,000 of Conversion Value of Series B Preferred Stock being converted, $50 per
Trading Day (increasing to $100 per Trading Day after three (3) Trading Days and
increasing to $200 per Trading Day six (6) Trading Days after such damages begin
to accrue) for each Trading Day after the Share Delivery Date until such
certificates are delivered. Nothing herein shall limit a Holder’s right to
pursue actual damages for the Company’s failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
(iii)Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. If the Company fails to deliver to
the Holder such certificate or certificates pursuant to Section 6(d)(i) by a
Share Delivery Date, and if after such Share Delivery Date the Holder purchases
(in an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which the Holder
was entitled to receive upon the conversion relating to such Share Delivery Date
(a “Buy-In”), then the Company shall pay in cash
to the Holder the amount by which (x) the Holder’s total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the price at which the sell order giving rise to such purchase obligation
was executed. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Series B Preferred Stock with respect to which the
aggregate sale price giving rise to such purchase obligation is $10,000, under
clause (A) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the
Company. Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of the shares of Series B Preferred Stock
as required pursuant to the terms hereof.
(iv)Reservation
of Shares Issuable Upon Conversion. The Company covenants that it will at
all times reserve and keep available out of its authorized and unissued shares
of Common Stock solely for the purpose of issuance upon conversion of the Series
B Preferred Stock, each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of persons other than the Holders, not
less than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 7) upon the conversion of all
outstanding shares of Series B Preferred Stock. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid, nonassessable and, if the Conversion
Shares Registration Statement is then effective under the Securities Act,
registered for public sale in accordance with such Conversion Shares
Registration Statement provided that the holder or its broker delivers
confirmation to the Company or its transfer agent to the effect that the
Conversion Shares have been sold pursuant to such registration
statement.
(v)Fractional
Shares. Upon a conversion
of the Series B Preferred Stock, the Company shall not be required to issue
stock certificates representing fractional shares of Common Stock. All
fractional shares shall be carried forward and any fractional shares which
remain after a Holder converts all of his or her Series B Preferred Stock shall
be dropped and eliminated.
(vi)Transfer
Taxes. The issuance of
certificates for shares of the Common Stock on conversion of the Series B
Preferred Stock shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such shares of Series B Preferred Stock so converted
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(vii)Absolute
Obligation. Except as
expressly provided herein, no provision of this Statement of Designations shall
alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the liquidated damages (if any) on, the shares of Series B
Preferred Stock at the time, place, and rate, and in the coin or currency,
herein prescribed.
Section 7. Certain
Adjustments.
(a)Stock
Dividends and Stock Splits. If the Company, at any time
subsequent to the Closing Date as long as the Series B Preferred Stock is
outstanding: (i) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Series B Preferred Stock), (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, (iii) combine (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (iv) issue by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(b)Price
Adjustment. From and after
the Closing Date and until such time as the Investors hold no Securities, except
for (i) Exempt Issuances, (ii) issuances covered by Sections 7(a) and 7(c)
hereof or (iii) an issuance of Common Stock upon exercise or upon conversion of
warrants, options or other convertible securities for which an adjustment has
already been made pursuant to this Section 7, as to all of which this Section
7(b) does not apply, if the Company closes on the sale or issuance of Common
Stock at a price, or issues warrants, options, convertible debt or equity
securities with a exercise price per share or conversion price which is less
than the Conversion Price then in effect (such lower sales price, conversion or
exercise price, as the case may be, being referred to as the “Lower Price”), the
Conversion Price in effect from and after the date of such transaction shall be
reduced to the Lower Price. For purpose of determining the exercise price of
warrants issued by the Company, the price, if any, paid per share for the
warrants shall be added to the exercise price of the
warrants. Notwithstanding the foregoing, this Section 7(b) shall be
null and void and have no further force or effect if EITF 07-5, as such may
amended, supplemented or modified by any accounting guidance and/or
announcement(s) issued by the Financial Accounting Standards Board, the Emerging
Issues Task Force or any other regulatory authority, will adversely effect the
Company’s financial condition as a result of this Section
7(b).
(c)Pro Rata
Distributions. If the
Company, at any time from and after the Closing Date and as long as the Series B
Preferred Stock is outstanding, shall distribute to all holders of Common Stock
(and not to Holders) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such case the
Conversion Price shall be determined by multiplying such Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then
fair market value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(d)Calculations. All calculations under this Section 7
shall be made to the nearest cent or the nearest 1/100th of a share, as the case
may be. The number of shares of Common Stock outstanding at any given time shall
not include shares owned or held by or for the account of the Company or any of
its subsidiaries. For purposes of this Section 7, the number of shares of Common
Stock deemed to be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares and shares owned
by subsidiaries, if any) actually issued and outstanding.
(e)Notice to
Holders.
(i)Adjustment
to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any of this Section 7, the
Company shall promptly mail to each Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company shall be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement), or the lowest possible adjustment price in the case of an
MFN Transaction (as defined in the Purchase Agreement).
(ii)Notices of
Other Events. If (A) the
Company shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock or
any Fundamental Transaction, (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Series B Preferred
Stock, and shall cause to be mailed to the Holders at their last addresses as
they shall appear upon the stock books of the Company, at least 30 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification is expected to
become effective or close, and the date as of which it is expected that holders
of the Common Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable upon such
reclassification or Fundamental Transaction; provided, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such
notice.
(f)Exempt
Issuance. Notwithstanding
the foregoing, no adjustment in the Conversion Price will be made in respect of
an Exempt Issuance.
(g)Fundamental
Transaction. If, at any
time while this Series B Preferred Stock is outstanding, (i) the Company effects
any merger or consolidation of the Company with or into another Person, (ii) the
Company effects any sale of all or substantially all of its assets in one or a
series of related transactions, (iii) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental
Transaction”), then upon
any subsequent conversion of this Series B Preferred Stock, the Holder shall
have the right to receive, for each Conversion Share that would have been
issuable upon such conversion absent such Fundamental Transaction, the same kind
and amount of securities, cash or property as it would have been entitled to
receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one share of
Common Stock (the “Alternate
Consideration”). For
purposes of any such conversion, the determination of the Conversion Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Series B Preferred Stock following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall file a new Statement of Designations with the same terms and
conditions and issue to the Holder new preferred stock consistent with the
foregoing provisions and evidencing the Holder’s right to convert such preferred
stock into Alternate Consideration. The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
(f)(iv) and insuring that this Series B Preferred Stock (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction. Notwithstanding the foregoing or any other
provisions of this Statement of Designations, in the event that the agreement
relating to a Fundamental Transaction provides for the conversion or exchange of
the Series B Preferred Stock into equity or debt securities, cash or other
consideration and the agreement is approved by the holders of a majority of the.
then-outstanding shares of Series B Preferred Stock, then the holders of the
Series B Preferred Stock shall have only the rights set forth in such
agreement.
Section 8. Miscellaneous.
(a)Notices. Any and all notices or other
communications or deliveries to be provided by the Holders hereunder, including,
without limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service, addressed to the Company, at its principal address as reflected in its
most recent filing with the Commission. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile telephone
number or address of such Holder appearing on the books of the Company, or if no
such facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given when received, and any notice by telecopier
shall be effective if confirmation of receipt is given by the party to whom the
notice is transmitted.
(b)Lost or
Mutilated Preferred Stock Certificate. If a Holder’s Series B Preferred
Stock certificate shall be mutilated, lost, stolen or destroyed, the Company
shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the shares of
Series B Preferred Stock so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such certificate, and
of the ownership thereof, and indemnity, if requested, all reasonably
satisfactory to the Company.
(c)Next
Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business
Day.
(d)Headings. The headings contained herein are for
convenience only, do not constitute a part of this Statement of Designations and
shall not be deemed to limit or affect any of the provisions
hereof.
(e)Amendment. This Statement of Designations may be
amended with the approval of the Company’s board of directors and the consent of
the holders of seventy-five percent (75%) of the outstanding shares of Series B
Preferred Stock, except that the 9.9% Limitation may not be
waived.
ANNEX
A
NOTICE OF
CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF SERIES B
PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of Series B
Convertible Preferred Stock indicated below, into shares of common stock, par
value $0.001 per share (the “Common Stock”), of
Biostar Pharmaceuticals, Inc., a Maryland corporation (the “Company”), according
to the conditions hereof, as of the date written below. If shares are to be
issued in the name of a person other than undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.
Conversion
calculations:
Date
to Effect Conversion:
________________________________________
|
Number
of shares of Common Stock owned prior to Conversion:
______________
|
Number
of shares of Series B Preferred Stock to be Converted:
________________
|
Value
of shares of Series B Preferred Stock to be Converted:
__________________
|
Number
of shares of Common Stock to be Issued:
__________________________
|
Certificate
Number of Series B Preferred Stock attached
hereto:_________________
|
Number
of Shares of Series B Preferred Stock represented by attached
certificate:_________
|
Number
of shares of Series B Preferred Stock subsequent to Conversion:
________________
|
[HOLDER] | |
By: | |
Name: | |
Title: |