RETC 12 Retech Corporation (CE)

Item 1.01 Entry into a Material Definitive Agreement.

On January 14, 2019, 12 ReTech Corp., a Nevada corporation (the “Corporation”) entered into an Exchange of Equity Agreement (the “Exchange Agreement”) by and among Red Wire Group, LLC, a Utah limited liability company (“Red Wire”) and the members of Red Wire (the “Members”). Pursuant to the terms of the Exchange Agreement, at closing the Corporation will acquire (i) 75% of the membership interests of Red Wire in exchange for 54,000 shares of the Corporation’s Series D-6 Preferred Stock and (ii) the remaining 25% of the membership interests of Red Wire in exchange for 37,500 shares of the Corporation’s Series D-5 Preferred Stock.

The conversion of the Series D-6 Preferred Stock is subject to a leak-out provision whereby the Member has the right but not the obligation to convert a maximum of twenty-five percent (25%) or no greater than 13,500 shares of Series D-6 Preferred Stock after the 6-month anniversary of closing and thereafter an additional quantity of no greater than 13,500 shares of Series D-6 Preferred Stock every six months until all shares of Series D-6 Preferred Stock that are owned by Member have been converted. All Conversions, if any, are at Market Price with no discount to Market.

The conversion of Series D-5 Preferred Stock is available after the 6-month anniversary of closing, subject to the Corporation’s right of first refusal to purchase the Members’ Series D-5 Preferred Stock at face value plus accrued dividends within 10 days of receipt of said Members’ notice of exercise of the conversion rights of the Series D-5 Preferred Stock. The Members holding Series D-5 Preferred Stock have the right but not the obligation to exercise a put option back to the Corporation or its assignee for any remaining unconverted Series D-5 Preferred Stock at nine months after closing in the amount of $150,000 in the aggregate less any proceeds from the converted and sold shares that the Members holding Series D-5 Preferred Stock had received from any conversions. The Corporation will have 30 days from receipt of a put demand to repurchase all such tendered shares. This put option expires if unexercised 12 months after closing of the Exchange Agreement. All conversions, if any, are at Market Price with no discount to Market.

In no event shall any Member, together with their affiliates, own or have a right to receive more than 9.99% of the issued and outstanding shares of the Corporation’s common stock at any given time.

The powers, preferences and rights, and the qualifications, limitations and restrictions of the Series D-5 and Series D-6 Preferred Stock are set forth in the Corporation’s Current Report on Form 8-K and exhibits attached thereto previously filed with the Securities and Exchange Commission on January 11, 2019.

Red Wire will continue its operations uninterrupted following the closing and will retain key employees. The Exchange Agreement includes customary representations, warranties and covenants of the parties. The closing of the Exchange Agreement is subject to certain closing conditions, including that the Members have not materially misrepresented any of the representations contained in the Exchange Agreement and its exhibits. The Exchange Agreement may also be terminated by mutual consent of the parties.