Item
2.01 Completion of Acquisition or Disposition of Assets.
Agreement
and Plan of Merger
On
the Closing Date, Starco, through its wholly-owned subsidiary Starco Merger Sub I, Inc., a Delaware corporation (“Merger
Sub”), completed its acquisition of Soylent Nutrition, Inc., a Delaware corporation (“Soylent”) through
the merger of Merger Sub with and into Soylent (the “Merger”).
The
Merger was effected pursuant to an Agreement
and Plan of Merger (the “Merger Agreement”) dated February 14, 2023, by and among (i) Starco, (ii) Merger
Sub, (iii) Soylent, and (iv) Hamilton Start, LLC (“Hamilton”) solely in its capacity as the Shareholder
Representative of Soylent stockholders and for purposes of Article IX, Article X, Section 2.08, and Section 6.11 of the Merger
Agreement,. Under the terms of the Merger Agreement, Merger Sub merged with and into Soylent with Soylent being the surviving
company of the Merger. In connection with the Merger and the transactions contemplated by the Merger Agreement, Starco will issue to
the former holders of Soylent Preferred Stock (the “Company Holders “) (a) an aggregate of up to
165,336,430 restricted shares of Class A common stock(“Class A common stock”) of Starco (the “Purchase
Price Shares”), (b) up to 18,571,429 additional restricted shares of Class A common stock based on final determination of
calculations of Soylent’s working capital, cash at closing, indebtedness at closing and certain unpaid transaction expenses in
excess of the amount reimbursed by Starco, and (c) an adjustment to the shares of Class A common stock received by the
Company Holders in the event that the trading price for Starco’s Class A common stock price per share on the first
anniversary of the Closing Date (the “Adjustment Date”) is below $0.35 per share. If, on the Adjustment Date,
Starco’s share are trading below $0.35 per share, Starco shall issue additional shares based on the Closing Merger
Consideration after adjustments divided by the trading price (which must be below $0.35 per share for any additional shares to be
issued) minus the total share issuance after adjustments (which includes the Stock Issuance as defined below). As part of the
transaction, Soylent’s CEO, Vangelov, under his amended letter agreement with Soylent, received a change in control bonus of
12,617,857 restricted shares of Class A common stock (the “Change in Control Bonus Shares”) which were
deducted from the overall Purchase Price Share consideration. 7,254,584 Change in Control Bonus Shares were to be paid as
of the Closing Date with the remaining 5,363,273 Change in Control Bonus Shares to be paid once Vangelov remits the applicable tax
withholdings of his change in control bonus to Soylent in cash promptly following the Closing Date. In addition, Hamilton, a company controlled by Vangelov and acting as Shareholder Representative of the Company Holders, shall receive
compensation for services as the Shareholder Representative, including $10,000 per month from the Shareholder Representative Fund funded
by Starco under the terms of the Merger Agreement.
The
Purchase Price Shares and the Change in Control Bonus Shares,
collectively the “Stock Issuance.”
Under
the terms of the Merger Agreement, all Company Holders are an “accredited investor” defined in Rule 501(a) of Regulation
D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and will be required to complete
an accredited investor questionnaire prior to receiving their consideration.
The
foregoing summary of the terms of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference
to the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K filed with the SEC
on February 21, 2023, and is incorporated herein by reference.
Registration
Rights Agreement
On
the Closing Date, in connection with the closing of the Merger, Starco entered into a Registration Rights Agreement (the “Registration
Rights Agreement”) by and among Starco and Hamilton on behalf of Company Holders, pursuant to which certain stockholders who
received restricted shares of Class A common stock in the Merger and executed the Voting Agreement (the “Investors”)
shall receive certain rights to have such restricted shares of Class A common stock registered for resale to the public on the terms
and subject to the conditions set forth therein. The Registration Rights Agreement provides that, among other things, Starco will file
a registration statement no later than one (1) year after the Closing Date, for an offering to be made on a continuous basis pursuant
to applicable law; provided, that if any registrable securities are issued after the one (1) year period, or the date that the registration
statement is declared effective, Starco shall take commercially reasonable steps to include such registrable securities in the registration
statement or file a new registration statement covering the resale of such registrable securities within 180 days after such registrable
securities are issued. If the SEC informs Starco that all of the registrable securities cannot, as a result of the application law, be
registered for resale as a secondary offering on a single registration statement, Starco to promptly inform each of the Investors thereof
and use its commercially reasonable efforts to file amendments to the initial registration statement as required by the SEC, covering
the maximum number of Registrable Securities permitted to be registered by the SEC; provided, however, that prior to filing such amendment,
Starco shall be obligated to use diligent efforts to advocate with the SEC for the registration of all of the Registrable Securities.
If the SEC or any SEC guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular
Registration Statement as a secondary, the number of Registrable Securities to be registered on such Registration Statement will be reduced
as follows: (i) first, Starco shall reduce or eliminate any securities to be included other than Registrable Securities; and (ii) second,
Starco shall reduce Registrable Securities to be registered for each Investor on a pro rata basis based on the total number of Registrable
Securities held by such Investor. If Starco proposes to register any of its capital stock in connection with the public offering of such
securities solely for cash, subject to certain standard exceptions, Starco has granted Investors a “piggyback right” to include
Investor Registrable Securities in such offerings.
The
foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference
to the full text of the Registration Rights Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K filed with the
SEC on February 21, 2023 and is incorporated herein by reference.
Restricted
Covenant Agreement
Also
in connection with the Merger, on February 14, 2023, Vangelov and Kevin Zaccardi (collectively, the “Restricted Parties”),
each entered into restrictive covenants agreements with Starco (the “RCAs”). The RCAs subject the Restricted Parties
to a two year (i) non-competition restrictive covenant, (ii) non-solicitation/non-hire of employees restrictive covenant, (iii) non-solicitation
of business relationships restrictive covenant and (iv) a non-disparagement restrictive covenant. Additionally, the RCAs include confidentiality
obligations for the Restricted Parties with respect to Starco’s confidential information.
The
foregoing description of the RCAs does not purport to be complete and is qualified in its entirety by reference to the full text of the
“form of” RCAs, which is filed as Exhibit 10.3 to this Current Report on Form 8-K filed with the SEC on February 21, 2023
and is incorporated herein by reference.
Voting
Agreement
On
the Closing Date, in connection with the closing of the Merger, Starco entered into a Voting Agreement (the “Voting Agreement”)
with Sklar and certain former Company Holders, and now current stockholders of Starco, which such stockholders upon the closing of the
Merger collectively own approximately 35.3% percent of Starco’s issued and outstanding Class A common stock (the “Voting
Agreement Stockholders”). Including this Voting Agreement, Sklar, Starco’s chief executive officer and largest shareholder,
now effectively controls approximately 82.6% of the total voting power of Starco. The Voting Agreement generally requires that the Voting
Agreement Stockholders for a period of one year vote or cause to be voted their shares of Class A common stock, and execute and deliver
written consents and otherwise exercise all voting rights with respect to their shares of Class A common stock in the same manner as
Sklar votes or gives his consent, provided that such vote or action does not disproportionately or adversely affect the Voting Agreement
Stockholders in a manner different from the effect on other holders of Starco Class A common stock. In addition, in connection with the
Voting Agreement, the Voting Agreement Stockholders delivered irrevocable proxies to Sklar for one year. The Voting Agreement also requires
the Voting Agreement Stockholders and Sklar for a period of two years to vote all shares such person has voting control over in favor
of the election of (i) a Soylent stockholder director which shall initially be Vangelov, (ii) Sklar and (iii) such other person as may
be designated by Sklar from time to time. The Voting Agreement contemplates standard preemptive rights to ensure anti-dilution protections
for the Voting Agreement parties for three (3) years. The Voting Agreement shall be effective for three (3) years from February 15,
2023 but terminates (a) automatically upon the listing of the Class A common stock on the Nasdaq Stock Market or New York Stock Exchange,
(b) with the written consent of each of the parties signatories thereto, (c) automatically in the event that both of the following conditions
are met: (i) Sklar is no longer Starco’s chief executive officer and (ii) Sklar owns less than 20% of the issued and outstanding
Class A Common stock of Starco, or (d) automatically in the event Starco voluntarily commences any bankruptcy or similar proceedings
or has commenced against it any bankruptcy or similar proceedings that are not dismissed within 60 days of such commencement.
The
foregoing description of the Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the full
text of the Voting Agreement, which is filed as Exhibit 10.4 to this Current Report on Form 8-K filed with the SEC on February 21, 2023
and is incorporated herein by reference.