UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 15, 2021
SUNHYDROGEN, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 000-54437 | 26-4298300 | ||
|
(State or other jurisdiction
of incorporation) |
(Commission File Number) |
(IRS Employer
Identification No.) |
10 E. Yanonali, Suite 36
Santa Barbara, CA 93101
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code: (805) 966-6566
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading
Symbol(s) |
Name of each exchange on which registered | ||
| Not applicable | Not applicable | Not applicable |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b2 of the Securities Exchange Act of 1934 (§240.12b2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement
On December 15, 2021, SunHydrogen, Inc. (the “Company”) entered into a securities purchase agreement (the “Securities Purchase Agreement”) with an accredited investor (the “Investor”). Under the terms of the Securities Purchase Agreement, the Company and Investor acknowledge there was $187,800 of principal remaining under the note issued to the Investor by the Company on February 3, 2017, plus $80,365 of accrued interest, representing a total aggregate note balance of $268,165 (the “Note”). Pursuant to the Securities Purchase Agreement, the Company and Investor agreed that the Company shall sell and the Investor agreed to purchase 2,700 shares of the Company’s newly designated Series C Preferred Stock (the “Shares”) for a total purchase price of $268,165 (the “Purchase Price”). The Shares have a 10% stated annual dividend, no voting rights, has a face value of $100 per share, and is convertible into the Company’s Common Stock at a fixed conversion price that equals the effective conversion price of the Note on the date of the Securities Purchase Agreement. Pursuant to the Securities Purchase Agreement, the Investor agreed to tender the Note to the Company for cancellation and foregoes all future accrued interest rights under the Note, as the total Purchase Price of the Shares.
The description of the Securities Purchase Agreement is only a summary and is qualified in its entirety by reference to the full text of the Securities Purchase Agreement attached as Exhibit 10.1 hereto. A summary of the rights and preferences of the Certificate of Designation of the Shares is disclosed below and is qualified in its entirety by reference to the full text of the form of the Certificate of Designation attached as Exhibit 3.1 hereto.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
On December 15, 2021,the Company filed a certificate of designation of preferences, rights and limitations (the “Certificate of Designation”) of Series C Preferred Stock (the “Series C Preferred Stock”), with the Secretary of State of Nevada, designating 17,000 shares of preferred stock, par value $0.001 of the Company, as Series C Preferred Stock. Each share of Series C Preferred Stock shall have a stated face value of $100.00 (“Stated Value”), and is convertible into shares of common stock (“Common Stock”) of the Company at a conversion price equal to $0.00095.
The Series C Preferred Stock holders shall be entitled to receive out of any funds and assets of the Company legally available prior and in preference to any declaration or payment of any dividend on the common stock of the Company (the “Common Stock”), cumulative dividends, at an annual rate of 10% of the Stated Value (the “Preferred Dividend”). The Preferred Dividend will accrue commencing on the date of issuance of the Series C Preferred Stock and shall be payable in cash or shares of Common Stock. In the event the Company shall declare or pay a dividend on its shares of Common Stock (other than dividend payable in shares of Common Stock), the holders of Series C Preferred Stock shall also be entitled to receive payment of such dividend on an as-if-converted basis with respect to the Series C Preferred Stock.
The Series C Preferred Stock confers no voting rights on holders, except with respect to matters that materially and adversely affect the voting powers, rights or preferences of the Series C Preferred Stock or as otherwise required by applicable law.
This description of the Certificate of Designation is only a summary and is qualified in its entirety by reference to the full text of the form of the Certificate of Designation attached as Exhibit 3.1 hereto.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
|
Exhibit
Number |
Description | |
| 3.1 | Certificate of Designation of Series C Preferred Stock | |
| 10.1 | Form of Securities Purchase Agreement | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SUNHYDROGEN, INC. | |
| Date: December 17, 2021 | /s/ Timothy Young |
| Timothy Young | |
| Chief Executive Officer |
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Exhibit 3.1
CERTIFICATE OF DESIGNATION
OF
SUNHYDROGEN, INC.
1. The name of the corporation is SUNHYDROGEN, Inc., a Nevada corporation (the “Corporation”).
2. By resolution of the board of directors pursuant to a provision in the articles of incorporation of the Corporation, this certificate establishes the following regarding the voting powers, designations, preferences, limitations, restrictions and relative rights of the following class or series of stock.
This series of the Corporation’s Preferred Stock shall be designated “Series C Preferred Stock”. The number of shares constituting the Series C Preferred Stock shall be Seventeen Thousand (17,000) shares. The total face value of this entire series is One Million Seven Hundred Thousand Dollars ($1,700,000.00). Each share of Series C Preferred Stock shall have a stated face value of One Hundred Dollars ($100.00) (“Stated Value”), and is convertible into shares of fully paid and non-assessable shares of common stock (“Common Stock”) of the Corporation in accordance with Section 3 below. The Series C Preferred Stock shall have the rights, preferences and privileges set forth below:
Section 1. Dividends. The holders of outstanding shares of the Series C Preferred Stock (the “Holders”) shall be entitled to receive out of any funds and assets of the Company legally available prior and in preference to any declaration or payment of any dividend on the common stock of the Company (the “Common Stock”), cumulative dividends, at an annual rate of 10% of the Stated Value (the “Preferred Dividend”). The Preferred Dividend will accrue commencing on the date of issuance of the Series C Preferred Stock and shall be payable in cash or shares of Common Stock. Dividends payable in Common Stock shall be determined by dividing the amount of dividend payable per share of Series C Preferred Stock by a price per share equal to 75% multiplied by the average 5-day closing price of the Company’s publicly traded Common Stock preceding the payment date. The Preferred Dividend shall be paid no later than 10 days after the end of each calendar quarter.
In the event the Company shall declare or pay a dividend on its shares of Common Stock (other than dividend payable in shares of Common Stock), the holders of Series C Preferred Stock shall also be entitled to receive payment of such dividend on an as-if-converted basis with respect to the Series C Preferred Stock.
In the event that the Corporation shall pay dividends under this Section 1 in shares of Common Stock, the number of dividend shares distributed to Holder shall not exceed the limits set forth in Section 3(c) below, Limitations of Conversions, and the remaining balance of dividend shares shall accrue on the books on the Corporation in favor of the Holders. The Holders may at any time request the distribution of any accrued stock dividend, subject to the limitations of Section 3(c) below, by sending a written notice to the Corporation.
Section 2. Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holder of each outstanding share of the Series C Preferred Stock shall be entitled to receive, out of the assets of the Corporation available for distribution to its shareholders upon such liquidation, whether such assets are capital or surplus of any nature, an amount equal to One Hundred Dollars ($100.00) for each such share of the Series C Preferred Stock (as adjusted for any combinations, consolidations, stock distributions or stock dividends with respect to such shares), plus all dividends, if any, declared and unpaid thereon as of the date of such distribution, before any payment shall be made or any assets distributed to the holders of the Common Stock, and, after such payment, the remaining assets of the Corporation shall be distributed to the holders of Common Stock. No other current or future equity holders of the Corporation shall have higher priority of liquidation preference than holders of Series C Preferred Stock, without explicit approval of a majority of the holders of Series C Preferred Stock.
(a) If the assets to be distributed pursuant to this Section 2 to the holders of the Series C Preferred Stock shall be insufficient to permit the receipt by such holders of the full preferential amounts aforesaid, then all of such assets shall be distributed among such holders of Series C Preferred Stock ratably in accordance with the number of such shares then held by each such holder.
(b) The sale of all or substantially all of the Corporation’s assets, any consolidation or merger of the Corporation with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Corporation immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the Corporation’s voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Corporation’s voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of the Corporation, shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2.
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Section 3. Conversion. The Series C Preferred Stock shall be subject to conversion into Common Stock upon the following terms and conditions:
| (a) | Timing and Mechanics of Conversion. |
| The Holder has the right, at any time, at its election, to convert shares of Series C Preferred Stock into shares of Common Stock, provided that the Company has enough authorized shares of Common Stock to issue upon each conversion of the Preferred Stock. The conversion price shall be $0.00095 (the “Conversion Price”), subject to adjustments described in Section 3. The number of shares of Common Stock receivable upon conversion of one share of Series C Preferred Stock equals the Stated Value divided by the Conversion Price. A conversion notice (the “Conversion Notice”) may be delivered to Corporation by method of Holder’s choice (including but not limited to email, facsimile, mail, overnight courier, or personal delivery), and all conversions shall be cashless and not require further payment from the Holder. If no objection is delivered from the Corporation to the Holder, with respect to any variable or calculation reflected in the Conversion Notice within 24 hours of receipt of the Conversion Notice, the Corporation shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Corporation shall deliver the shares of Common Stock from any conversion to the Holder (in any name directed by the Holder) within three (3) business days of Conversion Notice delivery. If the Corporation is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, then upon request of the Holder and provided that the shares to be issued are eligible for transfer under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), or are effectively registered under the Securities Act, the Corporation shall cause its transfer agent to electronically issue the Common Stock issuable upon conversion to the Holder through the DTC Direct Registration System (“DRS”). If the Corporation is not participating in the DTC FAST program, then the Corporation agrees in good faith to apply and cause the approval for participation in the DTC FAST program. |
| (b) | Conversion Delays. If Corporation fails to deliver shares in accordance with the timeframe stated in this Section 3, then for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until share delivery is made; and such penalty may be converted into Common Stock at the Conversion Price or payable in cash, at the sole option of the Holder (under the Holder’s and the Corporation’s expectations that any penalty amounts shall tack back to the original date of the issuance of Series C Preferred Stock, consistent with applicable securities laws). |
| (c) | Limitation of Conversions. In no event shall the Holder be entitled to convert any Series C Preferred Stock, such that upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Series C Preferred Stock or the unexercised or unconverted portion of any other security of the Corporation subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of Series C Preferred Stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days prior notice to the Corporation, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). |
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| (d) | Adjustment to Conversion Price for Stock Dividends, Consolidations and Subdivisions. In case the Corporation at any time after the first issuance of a share of the Series C Preferred Stock shall declare or pay on the Common Stock any dividend in shares of Common Stock, or effect a subdivision of the outstanding shares of the Common Stock into a greater number of shares of the Common Stock (by reclassification or otherwise than by payment of a dividend payable in shares of the Common Stock), or shall combine or consolidate the outstanding shares of the Common Stock into a lesser number of shares of the Common Stock (by reclassification or otherwise), then, and in each such case, the Conversion Price (as previously adjusted) in effect immediately prior to such declaration, payment, subdivision, combination or consolidation shall, concurrently with the effectiveness of such declaration, payment, subdivision, combination or consolidation, be proportionately adjusted. |
| (e) | Adjustments for Reclassifications and Certain Reorganizations. In case the Corporation at any time after the first issuance of a share of the Series C Preferred Stock shall reclassify or otherwise change the outstanding shares of the Common Stock, whether by capital reorganization, reclassification or otherwise, or shall consolidate with or merge with or into any other corporation where the Corporation is not the surviving corporation but not otherwise, then, and in each such case, each outstanding share of the Series C Preferred Stock shall, immediately after the effectiveness of such reclassification, other change, consolidation or merger, be convertible into the type and amount of stock and other securities or property which the holder of that number of shares of the Common Stock into which such share of the Series C Preferred Stock would have been convertible before the effectiveness of such reclassification, other change, consolidation or merger would be entitled to receive in respect of such shares of the Common Stock as the result of such reclassification, other change, consolidation or merger. |
| (f) | Fractional Shares. No fractional shares of the Common Stock shall be issuable upon the conversion of shares of the Series C Preferred Stock and the Corporation shall pay the cash equivalent of any fractional share upon such conversion. |
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| (g) | Reservation of Stock Issuable Upon Conversion. Following the amendment of the Company’s Articles of Incorporation to increase the shares of Common Stock that the Company is authorized to issue, the Corporation shall at all times reserve and keep available out of its authorized but unissued shares of the Common Stock, solely for the purpose of effecting the conversion of the Series C Preferred Stock, such number of shares of the Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series C Preferred Stock; and if at any time the number of authorized but unissued shares of the Common Stock shall not be sufficient to effect the conversion of all outstanding shares of the Series C Preferred Stock, the Corporation will take such corporate action as is necessary to increase its authorized by unissued shares of the Common Stock to such number of shares as shall be sufficient for such purpose. |
Section 4. Notices. Any notice required by the provisions of this Certificate of Designation to be given to holders of shares of the Series C Preferred Stock shall be deemed given three days following the date on which mailed by certified mail, return receipt requested, postage prepaid, addressed to such holder at the address last appearing on the books of the Corporation for such holder or given by such holder to the Corporation for the purpose of notice, or if no such address appears or is so given, at the principal office of the Corporation, or upon personal delivery to the aforementioned address.
Section 5. Voting Rights. Except as required by law or as specifically provided herein, the Holders of Series C Preferred shall not be entitled to vote, as a separate class or otherwise, on any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting); provided, however, that each Holder of outstanding shares of Series C Preferred shall be entitled, on the same basis as holders of Common Stock, to receive notice of such action or meeting.
Section 6. Protective Provisions. So long as any shares of the Series C Preferred Stock shall remain outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series C Preferred Stock voting together as one class alter or change the rights, preferences or privileges of the shares of the Series C Preferred Stock so as to affect materially and adversely such shares.
The Corporation hereby covenants and agrees that the Corporation will not, by amendment of its Certificate of Incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Designation, and will at all times carry out all the provisions of this Certificate of Designation and take all action as may be required to protect the rights of the Holders. Notwithstanding anything to the contrary, the Company may designate additional series of Preferred Stock provided such designations do not violate this Section 6.
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Section 7. Status of Converted Stock. In the event any shares of the Series C Preferred Stock shall be converted pursuant to Section 3 above, the shares so converted shall be cancelled and shall revert to the Corporation’s authorized but unissued Preferred Stock.
Section 8. Transferability. This Series C Preferred Stock shall be transferable and may be assigned by the Holder, to anyone of its choosing without Corporation’s approval, subject to applicable securities laws. The Holder covenants not to engage in any unregistered public distribution of the Series C Preferred Stock when making any assignments.
Section 9. Notices. Any notice required hereby to be given to the holders of shares of the Series C Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his, her or its address appearing on the books of the Corporation for such holder or given by such holder to the Corporation for the purpose of notice, or if no such address appears or is so given, at the principal office of the Corporation, or upon personal delivery to the aforementioned address.
Section 10. Public Disclosure. The Corporation and the Holder agree not to issue any public statement with respect to the Holder’s investment or proposed investment in the Corporation’s Series C Preferred Stock, or the terms of any agreement or covenant without the other party’s prior written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation.
Section 11. Miscellaneous.
(a) The headings of the various sections and subsections of this Certificate of Designation are for convenience of reference only and shall not affect the interpretation of any of the provisions of this Certificate of Designation.
(b) Whenever possible, each provision of this Certificate of Designation shall be interpreted in a manner as to be effective and valid under applicable law and public policy. If any provision set forth herein is held to be invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions of this Certificate of Designation. No provision herein set forth shall be deemed dependent upon any other provision unless so expressed herein. If a court of competent jurisdiction should determine that a provision of this Certificate of Designation would be valid or enforceable if a period of time were extended or shortened, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.
(c) Except as may otherwise be required by law, the shares of the Series C Preferred Stock shall not have any powers, designations, preferences or other special rights, other than those specifically set forth in this Certificate of Designation.
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IN WITNESS WHEREOF, this Certificate of Designation has been executed by a duly authorized officer of the Corporation on this 15th day of December 2021.
SUNHYDROGEN, INC.
| By: | /s/ Timothy Young | ||
| Name: | Timothy Young | ||
| Title: | President | ||
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Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (“Agreement”) is entered into as of December 15, 2021, by and between SunHydrogen, Inc., a Nevada corporation (the “Company”), and (the “Investor”), with respect to the following facts:
R E C I T A L S
A. The Company entered into a 10% interest, 5-year maturity, convertible note transaction with the Investor on February 3, 2017 (the “Note”). The current aggregate outstanding principal sum of the Note is $187,800 and the accrued interest to date is $80,365 representing a total aggregate note balance of $268,165. The Note is convertible into the Company’s common stock, par value $0.001 (the “Common Stock”), at an adjustable conversion price that is the lowest of (a) fifty percent (50%) of the lowest trade price of Common Stock recorded since the original Effective Date (as defined in the Note) of the Note, or (c) the lowest effective price per share granted to any person or entity after the Effective Date (as defined in the Note).
B. The Company agrees to sell and the Investor agrees to purchase Two Thousand, Seven Hundred (2,700) shares of the Company’s newly designated Series C Preferred Stock (the “Shares”) for a total purchase price of $268,165 (the “Purchase Price”). The Series C Preferred Stock has a 10% stated annual dividend, no voting rights, has a face value of $100 per share, and is convertible into the Company’s Common Stock at a fixed conversion price that equals the effective conversion price of the Note on the date of this Agreement. The terms and conditions of the Series C Preferred stock (the “Series C Preferred Stock”) is set forth in the certification of designation attached hereto as Exhibit A (the “Certificate of Designation”).
C. The Investor agrees to tender the Note to the Company for cancellation and foregoes all future accrued interest rights and other rights under the Note, as the total Purchase Price of the Shares.
D. The closing of the transactions contemplated by this Agreement (the “Closing”) will be deemed to have occurred upon the completion of the deliveries by each Party to this Agreement as described in Section 2 of this Agreement.
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the parties to this Agreement, and in light of the recitals stated above, the parties to this Agreement hereby agree as follows:
Section 1. PURCHASE OF SHARES
The Investor agrees to tender the Note to the Company for cancellation as the total Purchase Price of the Shares. The Investor agrees that upon the full execution of this Agreement, the Note shall be deemed fully paid and satisfied, null and void and no interest, fees or principal shall be due thereon. In the event the Note is lost or destroyed, the Investor hereby warrants that the Note is lost or destroyed and agrees to immediately surrender to the Company said Note should it later be found and the Investor shall provide the Company with an affidavit of loss of said Note. The Investor hereby agrees to indemnify and hold harmless the Company and its affiliates against all liability, costs, damages, claims or expenses which may be incurred by any of them as a result of any claim to ownership of the lost Note asserted by the Investor or by anyone other than the Investor.
Section 2. DELIVERIES
2.1 The Company. The Company agrees and represents that upon the full execution of this Agreement, the Series C Preferred Stock shall be duly authorized, and the Shares are considered immediately and validly issued, fully paid and nonassessable, free and clear of all liens imposed by the Company other than restrictions on transfer provided for in this Agreement or the Certificate of Designation. The Company will or will cause its transfer agent to deliver a certificate evidencing the Shares issuable to the Investor within five (5) business days of the Closing. For all intent and purposes, upon the full execution of this Agreement, the Company agrees that the Investor is the immediate beneficial owners of the Shares and may exercise any and all rights under this Agreement or the Certification of Designation, regardless of when the certificates were delivered to the Investor.
2.2 The Investor. The Investor agrees that the Note shall be immediately and automatically cancelled on the books of the Company upon the full execution of this Agreement. The Investor also agrees to deliver any other document reasonably requested by the Company that it deems necessary for the consummation of the transactions contemplated by this Agreement.
2.3 Reservation of Shares of Common Stock. Within five (5) business days of the date of this Agreement, the Company shall submit irrevocable written instructions to its transfer agent to reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of the Shares (the “Reserved Shares”). If at any time the Company changes its transfer agent, while any shares of Series C Preferred Stock are outstanding, then the Company shall promptly submit similar irrevocable written instructions to such new transfer agent within five (5) business days of the effective date of change in transfer agent. The Company shall promptly deliver to the Investor written confirmation from the transfer agent when the shares of Common Stock are properly reserved for the sole benefit of the Investor. If on the date of this Agreement, the Company does not have enough authorized shares of Common Stock to issue upon the full conversion of the Series C Preferred Stock, then the Company agrees to immediately instruct its current transfer agent to reserve all remaining authorized shares as Reserved Shares for the benefit of the Investor, and to undertake and use its best efforts to amend its Articles of Incorporation to increase the number of shares of Common Stock that it is authorized to issue, within 90 days of the date hereof. The Company acknowledges that failure to comply with this Section 2.3 will cause enormous and immeasurable monetary damages to the Investor. Therefore, in the event of any failure to timely and properly reserved shares under this Section 2.3, the Company agrees to immediately pay Investor a cash amount equal to one (1%) percent of the aggregate fair market value of all the Common Stock underlying the outstanding Series C Preferred Stock for every 30 days such failure is not resolved, which amount shall not exceed ten (10%) percent in the aggregate in any twelve month period, in addition to any other damages the Investor may prove in an applicable court of law.
2.4 Reservation of Shares of Series C Preferred Stock. The Company hereby agrees that the entire series of Series C Preferred Stock shall be reserved and used exclusively for issuance upon exchange of its outstanding convertible notes with an effective conversion price that is the same as the Conversion Price described in the Certification of Designation, subject to adjustment as provided in the Certificate of Designation.
Section 3. EQUITABLE Relief.
3.1 Damages Inadequate. Each party acknowledges that it would be impossible to measure in money the damages to the other party if there is a failure to comply with any covenants or provisions of this Agreement, and agrees that in the event of any breach of any covenant or provision, the other party to this Agreement will not have an adequate remedy at law.
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3.2 Equitable Relief. It is therefore agreed that the other party to this Agreement who is entitled to the benefit of the covenants or provisions of this Agreement which have been breached, in addition to any other rights or remedies which they may have, shall be entitled to immediate equitable relief to enforce such covenants and provisions, and that in the event that any such action or proceeding is brought in equity to enforce them, the defaulting or breaching party will not urge a defense that there is an adequate remedy at law.
Section 4. Investor Representation and Warranty
4.1 Investor’s Representations and Warranties. As a material inducement to the Company to enter into this Agreement and consummate the transaction contemplated hereunder, Investor represents warrants and covenants with and to the Company as follows:
| i. | Authorization and Binding Obligation. The Investor has the requisite legal capacity, power and authority to enter into, and perform under this Agreement, including with respect to canceling the Note and receiving the Shares. The execution, delivery and performance of this Agreement and performance by such Investor and the consummation by such Investor of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate, partnership or similar action on the part of such Investor and no further consent or authorization is required. This Agreement has been duly executed and delivered by the Investor, and constitute the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws. |
| ii. | Beneficial Owner. With respect to the Note (i) the Investor owns, beneficially and of record, good and marketable title to the Note, free and clear of any taxes, liens or encumbrances; (ii) the Note is not subject to any transfer restriction, other than the restriction that the Note not been registered under the Securities Act of 1933, as amended (the “1933 Act”) and, therefore, cannot be resold unless registered under the 1933 Act or in a transaction exempt from or not subject to the registration requirements of the 1933 Act; (iii) the Investor has not entered into any agreement or understanding with any person or entity to dispose of the Note; and (iv) at the Closing, the Investor will convey to the Company good and marketable title to the Note, free and clear of any security interests, liens, adverse claims, encumbrances, taxes or encumbrances. |
| iii. | Accredited Investor. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act. |
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| iv. | Purchase Entirely for Own Account. The Shares to be received by the Investor hereunder will be acquired for the Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by the Investor to hold the Shares for any period of time. The Investor is not a broker-dealer registered with the SEC under the Securities Exchange Act of 1934, as amended (the “1934 Act”) or an entity engaged in a business that would require it to be so registered. |
| v. | Disclosure of Information. The Investor has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Shares. Such Investor acknowledges receipt of copies of the Company’s most recent Annual Report on Form 10-K for its last fiscal year and all other reports filed by the Company pursuant to the 1934 Act since the filing of the 10-K and prior to the date hereof. |
| vi. | Proceedings. No proceedings relating to the Note is pending or, to the knowledge of the Investor, threatened before any court, arbitrator or administrative or governmental body that would adversely affect the Investor’s right and ability to surrender and exchange the Note. |
| vii. | Tax Consequences. The Investor acknowledges that the contents of this Agreement do not contain tax advice and Investor acknowledges that it has not relied and will not rely upon the Company with respect to any tax consequences related to the Note and receipt of the Shares. The Investor assumes full responsibility for all such consequences and for the preparation and filing of any tax returns and elections which may or must be filed in connection with the cancellation of the Note and/or the issuance of the Shares. |
| viii. | Reliance on Exemptions. The Investor understands that the Shares are being offered and exchanged in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein and in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Shares. |
| ix. | No Broker or Finder. Neither the Investor nor its agent or representative has engaged any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the Transactions contemplated herein. |
Section 5. MISCELLANEOUS
5.1 Further Assurances. The parties to this Agreement hereby agree to execute any other documents and take any further actions which are reasonably necessary or appropriate in order to implement the transactions contemplated by this Agreement.
5.2 Counterparts. This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.
5.3 Governing Law. This Agreement shall be construed in accordance with, and governed in all respects by, the laws of the State of Nevada.
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5.4 Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective heirs, successors and assigns, if any, and shall inure to the benefit of the parties hereto and their respective heirs, successors and assigns, if any.
5.5 Legends. The Investor understands that the Shares are characterized as “restricted securities” under the 1933 Act. The Investor further acknowledges that if the Shares are issued to the Investor in accordance with the provisions of this Agreement, such Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom. The Investor represents that it is familiar with Rule 144 promulgated under the 1933 Act, as presently in effect, and understands the resale limitations imposed thereby and by the 1933 Act. Investor acknowledges that the certificate(s) representing the Shares shall each conspicuously set forth on the face or back thereof a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
and any legend required by the “blue sky” laws of any state to the extent such laws are applicable to the securities represented by the certificates with such legend.
5.6 Severability. The provisions of this Agreement are severable and in the event that one or more of its provisions are deemed to be unenforceable or invalid for any reason, such finding will not affect the enforceability or validity of any other provision of this Agreement, which shall remain in full force and effect.
5.7 Public Disclosure. The Company and the Investor agree not to issue any public statement with respect to the Investor’s investment or proposed investment in the Company or the terms of any agreement or covenant without the other party’s prior written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation. The Company agrees to reference the Investor only as “an accredited investor” and attach only a form copy this Agreement in any of the Company’s filings with the Securities and Exchange Commission or any other public filings, except such full disclosures as may be required under applicable law or under any applicable order, rule or regulation.
5.8 Waiver. No failure or delay on the part of either party hereto in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege.
5.9 Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto and supersedes all prior agreements and understandings between the parties relating to the subject matter hereof.
5.10 Parties in Interest. None of the provisions of this Agreement or of any other document relating hereto is intended to provide any rights or remedies to any person (including, without limitation, any employees or creditors of the Company) other than the parties hereto and their respective heirs, successors and assigns, if any.
5.11 Authorized Signatures. Each party to this Agreement hereby represents that the persons signing below are duly authorized to execute this Agreement on behalf of their respective party.
[signatures on the next page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
| COMPANY: | sunhydrogen, INC. | ||
| By: | |||
| Timothy Young, Chief Executive Officer | |||
| INVESTOR: | |||
| By: | |||
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EXHIBIT A
CERTIFICATE OF DESIGNATION
SERIES C PREFERRED STOCK
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