Item
1.01 Entry into a Material Definitive Agreement
The
Exchange Agreement
.
On
May 16, 2016, Solaris Power Cells, Inc. (“Solaris” or the “Company”) entered into a Share Exchange Agreement,
effective as of April 30, 2016 (the “Exchange Agreement”) with Pixel Holdings, Inc., a Delaware corporation (“Holdings”),
Pixel Mags, Inc. a Delaware corporation (“Pixel”) and Leonard Caprino (the “Management Stockholder” or
“Caprino”) regarding the acquisition by the Company from Holdings of 1,000 shares of common stock, $0.001 par value
per share, of Pixel, representing 100% of Pixels outstanding capital stock. .
Pixel
is a digital distribution company engaged in the business of delivering digital versions of magazines and catalogs to mobile devices
and mobile operating systems.
In
exchange for the Pixel shares, the Company agreed to issue to Holdings (a) 1,000,000 shares of Series A convertible voting preferred
stock of the Company (the “Series A Preferred Stock”), (b) a 10% original discount convertible note initially valued
at $5,000,000 (the “Purchase Note”), and (c) a five year warrant to purchase 500 million shares of Company common
stock (the “Warrant”).
Under
the terms of the Exchange Agreement, Holdings has the right to designate three (3) members to the board of directors of the Company
and such additional independent directors as may be required under the listing rules of any national securities exchange. Caprino
has the right to designate one (1) member to the board of directors
The
closing of the transactions under the Exchange Agreement (the “Closing”) will occur on or about May 31, 2016, unless
a later date shall be selected by the parties; provided, that such Closing shall occur prior to the later of (a) the last date
that a corporate action in respect of the reverse stock splits referred to in Item 5.03 below can be taken following the mailing
of a Form 14C Information Statement to the stockholders of the Corporation, or (b) approval of such reverse stock splits by the
Financial Industry Regulatory Authority (“FINRA”).
The
Company has filed a certificate of designations to authorize 1,000,000 shares of Solaris Series B Preferred Stock to be issued
to Holdings. The Series B Preferred Stock
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does
not pay a dividend;
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has
a stated or liquidation value of five ($5.00) dollars per share, or $5,000,000 as to all shares of Company Series A Preferred
Stock;
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upon
liquidation or a sale of control of the Company is senior to the Company Common Stock;
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votes,
together with the Company Common Stock, on an “as converted” basis on all matters requiring the vote or consent
of the Solaris stockholders, and further provides that each of the 1,000,000 shares of the Series A Preferred Stock shall
cast 300 votes on all matters required to be voted upon or consented to by a Solaris stockholder, or an aggregate of 300 million
votes; and
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is
convertible into Solaris Common Stock at a conversion price per share equal to the volume weighted average price of Solaris
Common Stock for the ten (10) trading days immediately prior to the Closing Date (the “Conversion Price”)
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The
Purchase Note is due and payable on March 31, 2019. Unless converted into Company Common Stock a total of $6,000,000 principal
amount (inclusive of an original issue discount) will be due and payable on such maturity date. The Purchase Note is convertible
by the holder at a conversion price equal to the lower of (i) One Cent ($0.01) per share or 70% (30% discount) of the average
of the 3 lowest reported sale prices for the Common Stock for the 10 Trading Days immediately prior to the Issuance Date or (ii)
70% (30% discount) of the average of the 3 lowest reported sale prices for the 10 Trading Days immediately prior to the Conversion
Date.
The
Purchase Note provides that it cannot be converted if the effect would cause the holder to own more than 4.99% of the outstanding
Company Common Stock; provided that such provision may be waived by the holder of the Purchase Note, at its or their election,
upon not less than 61 days’ prior notice to the Company; provided, that such “blocker” provisions of the Purchase
Note 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.
The
Warrant entitles the holder to purchase up to 500,000,000 shares of Company Common Stock at an exercise price equal to $0.01 per
share, or a total of $5,000,000 upon full exercise of the Warrant. The Warrant contains “cashless exercise” provisions
and full rachet anti-dilution adjustments.
For
a more detailed description of the terms of the Exchange Agreement, the Series B Preferred Stock, Purchase Note and Warrant, reference
is made to Exhibit 10.1, Exhibit 10.3, Exhibit 4 and Exhibit 10.5 to this Form 8-K.
The
Option and Separation Agreement
.
Pursuant
to an option and separation agreement, dated as of May 16, 2016 (the “Separation Agreement”) between the Company and
Leonard Caprino, the President of Solaris, Mr. Caprino agreed as of May 31, 2016 (the “Termination Date”) to voluntarily
resign as an executive officer and member of the board of directors of the Company. Under the Separation Agreement, the Company
agreed to pay accrued and unpaid compensation and other obligations to Mr. Caprino valued at $150,000 by the issuance to Mr. Caprino
of (a) 1,000,000 shares of the Company’s Series A Preferred Stock, and (b) a convertible $100,000 Company note due on October
15, 2016 (the “Severance Note’), the payment of which is to be secured by a lien on the Company’s existing assets,
consisting of existing assets, consisting of the Solaris Sun Car Golf Carts, Solaris Sun Car EZ Go Model, Solaris F2 Vapor Mod
and associated PESA Electronics, associated PESA Cell storage arrays, and related technology, as well as domain names relating
to such assets. The Severance Note is convertible into Company Common Stock at a conversion price equal to the volume weighted
average price of Company Common Stock as of the date notice of conversion is given by the holder of the Severance Note. In addition,
the agreement with Mr. Caprino grants him an option, exercisable at any time commencing July 15, 2016 and ending December 31,
2016 (the “Option Period”) to purchase the Existing Solaris Assets for the sum of $60,000; which amount is payable
by Mr. Caprino either in cash or by reducing a like amount of the Severance Note.
The
Series A Preferred stock pays no dividend, is not convertible into Common Stock, and is redeemable at the option of the Company,
for $10,000. The Series A Preferred Stock votes together with the Company’s common stock and each share of Series A Preferred
Stock carries with it 2,000 votes on any matter voted on or consent to by the stockholders of Solaris.
An
aggregate of 2,170,000,000 shares of capital stock of Solaris, $0.001 par value per share (the “Solaris Capital Stock”)
are currently authorized for issuance pursuant to the Solaris Articles of Incorporation, of which (i) 2,160,000,000 shares of
Solaris Capital Stock are designated as common stock (the “Solaris Common Stock”), and (ii) 10,000,000 shares of Solaris
Capital Stock are designated as preferred stock, containing such rights, privileges and designations as the Solaris Board of Directors
may from time to time designate (the “Solaris Preferred Stock”). As of April 30, 2016, an aggregate 1,832,897,782
shares of Solaris Common Stock were issued and outstanding, and 1,000,000 shares of Solaris Series A Preferred Stock, was issued
and outstanding.