Item
1.01 Entry into a Material Definitive Agreement.
Stock
Redemption Agreement
Effective
August 20, 2019, Liberated Solutions, Inc. (the “Company”), and Brian Conway, a director and the Chief Executive
Officer of the Company, entered into a Stock Redemption Agreement (the “Stock Redemption Agreement”). Prior
to entry into the Stock Redemption Agreement, Mr. Conway was the owner of a number of Series A Preferred Stock, par value $0.001
per share, of the Company (the “Series A Stock”). The number of Series A Stock held by Mr. Conway is unclear,
as the books and records of the Company indicate that Mr. Conway held 10,000,000 shares of Series A Stock but the Certificate
of Designations for the Series A Stock provides that only 1,000,000 shares of Series A Stock are designated. Nonetheless, Mr.
Conway held all issued and outstanding shares of the Series A Stock, and therefore his holdings represented 100% of the Company’s
outstanding shares of Series A Stock. Pursuant to Securities and Exchange Commission (the “SEC”) rules, Mr.
Conway was deemed to be a “related person” due to his status as a significant stockholder and as a director and officer
of the Company. Pursuant to the terms of the Stock Redemption Agreement, the parties agreed that the Company would redeem all
shares of Series A Stock owned by Mr. Conway (the “Stock Redemption”). In exchange for the Stock Redemption,
the parties agreed that the Company would pay Mr. Conway $1,000 in cash in consideration for the acquisition of the Series A Stock.
In addition, as previously disclosed by the Company on the Form 8-K filed by the Company on August 20, 2019, the Company previously
designated a new class of preferred stock termed the Series X Convertible Preferred Stock, par value $0.001, of the Company (the
“Series X Stock”) and issued and sold to Mr. Conway one million (1,000,000) shares of the Series X Stock for
a total cash purchase price of $1,000.00, as additional consideration under the Stock Redemption Agreement. The Stock Redemption
closed in accordance with the terms in the Stock Redemption Agreement on August 20, 2019. Following effectiveness of the Stock
Redemption and the transactions set forth above, Mr. Conway no longer beneficially owns any shares of the Company’s Series
A Stock.
The
foregoing description of the Stock Redemption Agreement is not a complete description of all of the parties’ rights and
obligations under the Stock Redemption Agreement, and is qualified in its entirety by reference to the Stock Redemption Agreement,
a copy of which is filed as Exhibit 10.1 to this current report on Form 8-K and incorporated herein by reference.
Share
Exchange Agreement
On
August 22, 2019 (the “Effective Date”), the Company entered into an Exchange Agreement (the “Exchange
Agreement”) with Clifford Rhee, a shareholder of Ngen Technologies USA Corp, a Texas corporation (“Ngen”),
Edward Carter, a shareholder of Ngen, Peter Zimeri, a shareholder of Ngen, and Mr. Conway, pursuant to which Ngen will become
a wholly owned subsidiary of the Company. Mr. Rhee, Mr. Carter and Mr. Zimeri are referred to herein collectively as the “Shareholders”
and each individually as a “Shareholder.”
Prior
to the execution of the Exchange Agreement, Mr. Conway had sold 500,000 shares of the Series X Stock he acquired to Broken Circuit
Technologies, Inc. an affiliated entity of the Shareholders (“Broken Circuit”), for a purchase price of $50,000,
pursuant to an agreement between Broken Circuit and Mr. Conway (the “Purchase Agreement”), as disclosed in
the Schedule 14f-1 filed by the Company on August 21, 2019. Pursuant to the terms of the Purchase Agreement, Broken Circuit is
expected to acquire another 250,000 shares of Series X Stock from Mr. Conway prior to the closing of the transactions under the
Exchange Agreement, for an additional purchase price of $25,000, which will result in Mr. Conway having beneficial ownership of
$250,000 shares of Series X Stock.
Among
other conditions to the closing of the transactions contemplated by the Exchange Agreement (the “Closing”),
the Exchange Agreement requires that the Company redeem from Mr. Conway the 250,000 shares of Series X Stock held by Mr. Conway
as of the Closing, in return for (i) the cash payment to Mr. Conway of the sum of $25,000, which will be paid immediately following
the contribution of such amount to the Company by Ngen as described below, and (ii) the issuance to Mr. Conway of a number of
shares of common stock, par value $0.001 per share, of the Company (the “Liberated Common Stock”), constituting
2% of the issued and outstanding shares of Liberated Common Stock as of the date of the date of the closing of the transactions
contemplated by the Exchange Agreement.
Pursuant
to the terms of the Exchange Agreement, on the Closing, the Company will acquire from the Shareholders and the Shareholders agreed
to sell and transfer to the Company, all of the common stock, no par value per share, of Ngen (the “Ngen Common Stock”)
in exchange for the issuance to the Shareholders of 250,000 shares of Series X Stock of the Company, to be apportioned (i) 123,750
shares to Mr. Rhee; (ii) 123,750 shares to Mr. Carter and (iii) 2,500 shares to Mr. Zimeri.
The
Exchange Agreement may be terminated:
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By
mutual written consent of the parties,
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By
any of the parties if there is in effect a final non-appealable order, judgment, injunction
or decree entered by or with any governmental authority restraining, enjoining or otherwise
prohibiting consummation of the transactions pursuant to the Exchange Agreement,
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By
the Company if there has been a material breach of any representation, warranty, covenant
or agreement on the part of any of the Shareholders or Mr. Conway and such breach has
not been cured within 10 days after notice of breach,
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By
the Shareholders jointly if there has been a material breach of any representation, warranty,
covenant or agreement on the part of the Company or Mr. Conway and such breach has not
been cured within 10 days after notice of breach,
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By
Mr. Conway if there has been a material breach of any representation, warranty, covenant
or agreement on the part of the Company or the Shareholders and such breach has not been
cured within 10 days after notice of breach,
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by
the Shareholders in the event that a Material Adverse Effect (as defined in the Exchange
Agreement) with respect to the Company has occurred prior to the Closing;
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by
the Shareholders at any time in the event that the Shareholders’ due diligence
review of the Company is unsatisfactory to the Shareholders for any reason in their sole
discretion;
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by
either the Shareholders acting jointly, or Mr. Conway in the event that the transactions
as set forth in the Purchase Agreement have not closed in accordance with their terms
by August 31, 2019; or
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by
any of (1) the Shareholders acting jointly, (2) the Company or (3) and Mr. Conway, if
the Closing has not occurred by October 31, 2019, provided, however, that the right to
terminate this Agreement under this provision is not available to a party who caused
such failure.
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If
the Exchange Agreement is validly terminated by a party as a result of a default by another party, the defaulting party is obligated
to pay to the other parties such other parties’ respective reasonable out of pocket costs incurred with respect to the transactions
contemplated in the Exchange Agreement.
The
Exchange Agreement includes customary representations, warranties and covenants by the respective parties, and the Company has
agreed to a customary “no-shop” provision while the Exchange Agreement is in effect. Consummation of the transactions
contemplated under the Exchange Agreement is not subject to a financing condition.
Subject
to the conditions set forth in the Exchange Agreement, the Company currently expects that the Closing will occur prior to October
31, 2019.
The foregoing description
of the Exchange Agreement is not a complete description of all of the parties’ rights and obligations under the Exchange
Agreement, and is qualified in its entirety by reference to the Exchange Agreement, a copy of which is filed as Exhibit 10.2 to
this current report on Form 8-K and incorporated herein by reference.