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): May 20, 2021

 

GROM SOCIAL ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

 

Florida 000-55585 46-5542401

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

  

2060 NW Boca Raton Blvd. #6
Boca Raton, Florida 33431
(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (561) 287-5776

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:

 

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 Symbols Name of each exchange on which registered
None N/A N/A

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1934 (§240.12b-2 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 Material Definitive Agreement.

 

On May 20, 2021, Grom Social Enterprises, Inc., a Florida corporation (the “Company”), entered into exchange agreements (each, an “Exchange Agreement”) with all of the holders (the “Holders”) of the Company’s Series B 8% Convertible Preferred Stock (“Series B Preferred Stock”), pursuant to which the Holders agreed to exchange all of the issued and outstanding shares of the Company’s Series B Preferred Stock for shares of the Company’s Series C 8% Convertible Preferred Stock (the “Series C Preferred Stock”), on a one for one basis (the “Exchange”). The Exchange will be effective on the date of filing of the Certificate of Designation (as defined in Item 5.03 below) with the Secretary of State of the State of Florida. As a result of the Exchange, all 9,215,059 issued and outstanding shares of the Company’s Series B Preferred Stock (the “Series B Shares”) will be exchanged for 9,215,059 shares of the Company’s newly designated Series C Preferred Stock (the “Series C Shares”), and all of the exchanged Series B Shares will be cancelled.

 

In connection with their entry into the Exchange Agreements, the Holders executed and delivered proxies to Darren Marks and Melvin Leiner, who are both officers and directors of the Company, granting each of them the power to vote all the Holder’s Series C Shares, and all other securities they hold of the Company, for a period of two years. As a result, Mr. Marks and Mr. Leiner control an aggregate of 16,523,631 votes, or 81.3% of the Company’s combined voting power.

 

The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such document, the form of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information contained in Item 1.01 above is incorporated herein by reference.

The Series C Shares described in Item 1.01 above were offered and sold in reliance upon an exemption from registration pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

On May 20, 2021, the Company submitted a Certificate of Designation of Preferences, Rights and Limitations of Series C Preferred Stock (the “Certificate of Designation”) for filing with the Secretary of State of the State of Florida and is currently awaiting confirmation of such filing.

 

The preferences, rights and limitations of the Series C Preferred Stock are as follows:

 

Series C Preferred Stock

 

Designation and Amount. The number of shares constituting the Series C Preferred Stock shall be 10,000,000, with a stated value of $1.00 per share.

 

Ranking. The Series C Preferred Stock ranks senior and prior to all other classes or series of the Company’s preferred stock and common stock.

 

Dividends. Cumulative dividends accrue on each share of Series C Preferred Stock at the rate of 8% per annum of the stated value of $1.00 per share and are payable in common stock in arrears quarterly commencing three months from the date of issuance.

 

Liquidation. Upon a liquidation, dissolution or winding up of the Company, the holders of the Series C Preferred Stock are entitled to $1.00 per share, plus all accrued and unpaid dividends. No distribution may be made to holders of shares of capital stock ranking junior to the Series C Preferred Stock upon a liquidation until the holders of Series C Preferred Stock receive their liquidation preference. The holders of 66 2/3% of the then outstanding shares of Series C Preferred Stock, may elect to deem a merger, reorganization or consolidation of the Company, or other similar transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of in exchange for property, rights or securities distributed to holders thereof by the acquiring person, firm or other entity, or the sale of all or substantially all of the assets of the Company, as a liquidation.

 

 

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Voting. The holders of the Company’s Series C Preferred Stock vote together as a single class with the holders of the Company’s common stock, with each share entitling the holder to 1.5625 votes per share. The consent of the holders of at least 66 2/3% of the shares of Series C Preferred Stock is required for the amendment to any of the terms of the Series C Preferred Stock, to create any additional class of stock unless the stock ranks junior to the Series C Preferred Stock, to make any distribution or dividend on any securities ranking junior to the Series C Preferred Stock, or to merge or sell all or substantially all of the assets of the Company or acquire another business or effectuate any liquidation of the Company.

 

Conversion. The holder may, at any time after the 6-month anniversary of the issuance of the shares of Series C Preferred Stock, convert such shares into common stock at a conversion rate of $1.92 per share. In addition, the Company may, at any time after the issuance of the shares, convert any or all of the outstanding shares of Series C Preferred Stock at a conversion rate of $1.92 per share.

 

The foregoing description of the Certificate of Designation does not purport to be complete and is qualified in its entirety by reference to the full text of such document, a copy of which is attached hereto as Exhibit 3.1 and incorporated herein by reference.

 

Item 5.07 Submission of Matters to a Vote of Security Holders.

 

The information contained in Item 1.01 and Item 5.03 above is incorporated herein by reference.

 

On May 20, 2021, the Holders of 9,215,059 Series B Shares, representing 100% of the Company’s issued and outstanding shares of Series B Preferred Stock, consented in writing to the designation of the Series C Preferred Stock and the filing of the Certificate of Designation with Secretary of State of the State of Florida.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.   Description
3.1  

Certificate of Designation of Preferences, Rights and Limitations of Series C 8% Convertible Preferred Stock

 

10.1   Form of Exchange Agreement

 

  3  

 

 

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.

 

 

  GROM SOCIAL ENTERPRISES, INC.

   
Date: May 24, 2021 By:  /s/ Darren Marks
   

Darren Marks

Chief Executive Officer

 

 

 

 

 

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Exhibit 3.1

 

ARTICLES OF AMENDMENT 

TO 

ARTICLES OF INCORPORATION 

OF  

GROM SOCIAL ENTERPRISES, INC. 

  

CERTIFICATE OF DESIGNATION OF PREFERENCES, 

RIGHTS AND LIMITATIONS 

OF  

SERIES C 8% CONVERTIBLE PREFERRED STOCK

 

 

GROM SOCIAL ENTERPRISES, INC., a Florida corporation (the “Corporation”), in accordance with the provisions of Section 607.0602 of the Florida Business Corporation Act (the “FBCA”), DOES HEREBY CERTIFY THAT:

 

FIRST: These Articles of Amendment were adopted by the Board of Directors of the Corporation (the “Board”) on May 20, 2021, in the manner prescribed by Section 607.1002 of the FBCA. Shareholder action was not required.

 

SECOND: That pursuant to the authority vested in the Board in accordance with the provisions of the Articles of Incorporation of the Corporation filed with the Secretary of State of the State of Florida on August 4, 2014, as amended by the amendments filed with the Secretary of State of the State of Florida on each of August 17, 2017, April 8, 2019, June 12, 2019, August 4, 2020 and May 7, 2021 (collectively, the “Articles of Incorporation”), the Board adopted the following resolutions on May 20, 2021, designating Ten Million (10,000,000) shares of the Corporation’s authorized preferred stock, par value $0.001 per share (the “Preferred Stock”), as “Series C 8% Convertible Preferred Stock”:

 

NOW THEREFORE, BE IT RESOLVED, that pursuant to the authority vested in the Board in accordance with the provisions of the Articles of Incorporation, a series of Series C 8% Convertible Preferred Stock of the Corporation is hereby created, and that the designation and number of shares thereof, and the voting and other rights, preferences, restrictions and other matters relating to such series are as follows:

 

********

 

1.                  Designation and Amount.

 

(a)               The shares of such series of Preferred Stock shall be designated Series C 8% Convertible Preferred Stock (the “Series C Preferred Stock”). The number of shares constituting the Series C Preferred Stock shall be Ten Million (10,000,000). No other shares of preferred stock shall be designated as Series C Preferred Stock. The Corporation expressly reserves the right to designate other classes or series of Preferred Stock from time to time that are junior to the Series C Preferred Stock, without the consent of the holders of the Series C Preferred Stock (the “Holders”).

 

(b)               The stated value amount per share of the Series C Preferred Stock shall be $1.00 per share (the “Stated Value”).

 

2.                  Ranking. The Series C Preferred Stock shall rank, as to dividends and upon Liquidation (as defined in Section 4(a) hereof), (a) senior and prior to Junior Securities issued by the Corporation; (b) pari passu and on parity with any other class or series of Preferred Stock hereafter created specifically ranking, by its terms, on parity with the Series C Preferred Stock; and (c) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series C Preferred Stock. All equity securities of the Corporation to which the Series C Preferred Stock ranks prior, with respect to dividends and upon Liquidation, including, without limitation, the Corporation’s Series A 10% Convertible Preferred Stock, Series C 8% Convertible Preferred Stock, and common stock, par value $0.001 per share (the “Common Stock”), are collectively referred to herein as “Junior Securities.”

 

 

     

 

 

3.                  Dividends. Commencing on the date that the Series C Preferred Stock is initially issued to a holder thereof (the “Original Dividend Accrual Date”), cumulative dividends shall accrue on each share of Series C Preferred Stock, at the rate of 8% per annum (the “Dividend Rate”) of the Stated Value, and which shall be payable in arrears quarterly commencing three months after the Original Dividend Accrual Date (each such date, a “Dividend Payment Date”). Any calculation of the amount of such dividends accrued pursuant to the provisions of this Section 3 shall be made based on a 360-day year comprised of twelve 30-day months. The dividend shall be payable in shares of Common Stock (a “PIK Dividend”), provided, however, that any fractional shares of Common Stock payable as a PIK Dividend will be rounded up to the nearest share. All shares of Common Stock issued pursuant to a PIK Dividend will thereupon be duly authorized, validly issued, fully paid and non-assessable. Dividends with respect to such additional shares of Common Stock issued as a PIK Dividend shall (a) be due and payable on each Dividend Payment Date following the payment date on which such PIK Dividend was declared (or accrued, if not declared and paid on a Dividend Payment Date) and (b) accrue at the rate set forth in this Section commencing on the day immediately following the Dividend Payment Date on which such PIK Dividends were due and payable (regardless of whether the PIK Dividend was declared or whether the shares of Common Stock constituting the PIK Dividends were actually issued). The PIK Dividends shall accrue and accumulate whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends.

 

4.                  Liquidation Preference.

 

(a)               Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be paid, in preference and prior to any payment made to the holders of the Junior Securities and any other stock ranking in liquidation junior to the Series C Preferred Stock, an amount per share equal to the Stated Value, plus, with respect to each share, an amount equal to all accrued and unpaid dividends (whether or not declared) thereon, computed to the date that payment thereof is made available (such amount is referred to herein as the “Liquidation Preference”). If upon a Liquidation Event, the assets to be distributed among the Holders shall be insufficient to permit payment in full to the Holders of the Liquidation Preference, then the entire assets of the Corporation shall be distributed ratably among such holders in proportion to the full respective Liquidation Preference to which they are entitled.

 

(b)               The Holders of at least sixty six and two thirds percent (66 2/3%) of the then outstanding shares of Series C Preferred Stock, may elect to deem the merger, reorganization or consolidation of the Corporation into or with another corporation, not affiliated with said majority, or other similar transaction or series of related transactions in which more than 50% of the voting power of the Corporation is disposed of in exchange for property, rights or securities distributed to holders thereof by the acquiring person, firm or other entity, or the sale of all or substantially all the assets of the Corporation, as a Liquidation for purposes of this Section 4.

 

5.       Voting Rights.

 

(a)               Subject to the other provisions contained herein, each Holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation (as in effect at the time in question) and applicable law, and shall be entitled to vote, together with the holders of Common Stock, with respect to any question upon which the holders of Common Stock have the right to vote, except as may be otherwise provided by applicable law. Except as otherwise expressly provided herein or as required by law, the Holders of Series C Preferred Stock and the holders of Common Stock shall vote together and not as separate classes.

 

(b)               On all matters put to a vote to the holders of Common Stock, each share of Series C Preferred Stock shall entitle the Holder thereof to 1.5625 votes per share of Series C Preferred Stock then held by such Holder at the record date for the determination of the stockholders entitled to vote or, if no such record date is established, the date such vote is taken or any written consent of stockholders is solicited.

 

6.       Conversion at the Option of the Holder.

 

(a)        The Holder shall have the right, at any time or from time to time commencing after the 6-month anniversary date of the issuance of the shares of Series C Preferred Stock to the Holder, to convert such shares into Common Stock (each, and “Optional Conversion”) at a conversion rate of $1.92 per share (the “Optional Conversion Rate”).

 

 

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(b)        The Holder may exercise the conversion rights set forth herein by delivering to the Corporation or any transfer agent of the Corporation for the Series C Preferred Stock as may be designated by the Corporation, the certificate or certificates for the shares to be converted, duly endorsed or assigned in blank to the Corporation (if required by it) (or such holder shall notify the Corporation or any transfer agent that such certificate(s) have been lost, stolen or destroyed and shall execute an agreement reasonably satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith), accompanied by written notice stating that the Holder elects to convert such shares, evidence of the Optional Conversion Rate and stating the name or names (with address) in which the certificate or certificates for the shares of Common Stock are to be issued. Each Optional Conversion shall be deemed to have been effected on the date when the aforesaid delivery is made (each, an “Optional Conversion Date”).

 

(c)       As promptly as practicable thereafter, the Corporation shall issue and deliver to or upon the written order of such Holder, to the place designated by such Holder, a certificate to which such Holder is entitled. The person in whose name the certificate or certificates for Common Stock are to be issued shall be deemed to have become a holder of the Common Stock of record on the applicable Optional Conversion Date. The Corporation shall not close its books against the transfer of shares of Series C Preferred Stock in any manner that would interfere with the timely conversion of any shares of Series C Preferred Stock. Upon conversion of only a portion of the number of shares covered by a certificate representing shares of Series C Preferred Stock surrendered for conversion, the Corporation shall issue and deliver to or upon the written order of the holder of the certificate so surrendered for conversion, at the expense of the Corporation, a new certificate covering the number of shares of the Series C Preferred Stock representing the unconverted portion of the certificate so surrendered.

 

(d)       No fractional shares of Common Stock shall be issued upon conversion of shares of Series C Preferred Stock. If more than one share of Series C Preferred Stock shall be surrendered, or deemed surrendered, pursuant to subsection (c) above, for conversion at any one time by the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of such Series C Preferred Stock so surrendered. Any fractional share which would otherwise be issuable upon conversion of any shares of Series C Preferred Stock (after aggregating all shares of Series C Preferred Stock held by each holder) shall be rounded to the nearest whole number (with one-half being rounded upward).

 

(e)       The Corporation shall reserve, free from preemptive rights, out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series C Preferred Stock sufficient shares to provide for the conversion of all outstanding shares of Series C Preferred Stock. All shares of Common Stock which may be issued in connection with the conversion provisions set forth herein will, upon issuance by the Corporation, be validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and free from all taxes, liens or charges with respect thereto.

 

(f)       All shares of Series C Preferred Stock which have been converted (including pursuant to a Mandatory Conversion as provided below in Section 7), shall no longer be deemed to be outstanding and all rights with respect to such shares including the rights to receive dividends and to vote, shall immediately cease and terminate on the Optional Conversion Date, except only the right of the Holder thereof to receive shares of Common Stock in exchange thereof.

 

7.       Mandatory Conversion.

 

(a)       The Corporation, at its option, may require conversion (each, a “Mandatory Conversion”) of all or any portion of the Series C Preferred Stock then outstanding into Common Stock at a conversion rate of $1.92 per share (the “Mandatory Conversion Rate”). Should the Corporation elect a Mandatory Conversion, it shall give notice thereof to all Holders, stating whether all or, if not, what portion of the Series C Preferred Stock will be converted, and selecting a date (each, a “Mandatory Conversion Date”) and on which date, at the close of business, the conversion shall occur. Any notice which is mailed by the Corporation as herein provided shall be conclusively presumed to have been duly given by the Corporation on the date deposited in the mail, whether or not the Holder receives such notice; and failure properly to give such notice by mail, or any defect in such notice, to the Holders shall not affect the validity of the proceedings for the conversion of any other shares of Series C Preferred Stock.

 

(b)       On or after the Mandatory Conversion Date, each Holder of shares shall surrender the certificate evidencing such shares to the Corporation at the place designated in the notice of such mandatory conversion for conversion. To the extent that only a portion of the shares are being mandatorily converted, the Corporation shall issue new Series C Preferred Stock certificates for the unconverted shares. On or after the Mandatory Conversion Date, notwithstanding that the certificates evidencing any shares to be converted shall not have been surrendered, to the extent that they have been called for Mandatory Conversion, such shares shall no longer be deemed outstanding and all rights whatsoever with respect to the shares to be converted (except the right of the Holder thereof to have such shares converted upon surrender of their certificates, pursuant to this Section 7) shall terminate.

 

 

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8.       Redemption. The Corporation shall not have the right to call or redeem at any time all or any shares of Series C Preferred Stock other than as provided in Section 7 above.

 

9.       Protective Provisions. At any time when shares of Series C Preferred Stock are outstanding, except where the vote or written consent of the holders of a greater number of shares of the Corporation is required by law or by the Articles of Incorporation, and in addition to any other vote required by law or the Articles of Incorporation, without the written consent of at least the Holders of sixty six and two thirds percent (66 2/3%) of the then outstanding shares of Series C Preferred Stock, given in writing or by a vote at a meeting, consenting or voting (as the case may be) separately as one class, the Corporation will not:

 

(i) amend, alter or repeal any of the terms of the Series C Preferred Stock in an adverse manner; or

 

(ii) create or authorize the creation of any additional class or series of Preferred Stock, or otherwise create or authorize the creation of any additional class or series of stock unless the same ranks junior to the Series C Preferred Stock, or increase the authorized amount of such series of Series C Preferred Stock, whether any such creation, authorization or increase shall be by means of amendment to the Articles or by merger, consolidation or otherwise; or

 

(iii) pay or set apart for payment, any dividend on any Junior Securities or make any payment on account of, or set apart for payment, money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Junior Securities or any warrants, rights, calls or options exercisable or exchangeable for or convertible into any Junior Securities, or make any distribution in respect thereof, either directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends in Junior Securities to the holders of Junior Securities); or

 

(iv) (A) merge or consolidate the Corporation with another entity; (B) sell all or substantially all of the assets owned directly or indirectly by the Corporation; (C) acquire, by merger, issuance of securities of the Corporation or otherwise, of the business, stock or assets of another entity; (D) issue securities of the Corporation in connection with or for the purpose of effecting or facilitating any of the foregoing transactions; (E) reclassify or recapitalize any capital stock of the Corporation; and/or (F) execute of any agreement in furtherance of any of the foregoing actions; or

 

(v) effect any Liquidation or execute any agreement to become so obligated.

 

10.       Restriction on Transferability. The shares of the Series C Preferred Stock shall not, directly or indirectly, be sold, hypothecated, transferred, assigned or disposed of in any manner without the prior written consent of the Board and applicable securities laws.

 

11.       Other Preferences and Rights. The shares of the Series C Preferred Stock shall have no other preferences, rights, restrictions or qualifications, except as otherwise provided by law or the Articles.

 

 

 

The remainder of this page is left blank intentional. Signature page follows.

 

 

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IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation as of this 20th day of May, 2021.

 

 

  GROM SOCIAL ENTERPRISES, INC.
   
   
  By: /s/ Darren Marks
  Name: Darren Marks
  Title:  Chief Executive Officer

 

 

 

 

 

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Exhibit 10.1

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (this “Agreement”), dated May 20, 2021, is entered into by and between Grom Social Enterprises, Inc., a Florida corporation (the “Company”), and the holder of the Company’s Series B 8% Convertible Preferred Stock (“Series B Preferred Stock”) set forth on the signature page hereto (the “Holder”).

 

WHEREAS, the Holder is currently the holder of _______________ shares of the Company’s Series B Preferred Stock, par value $0.001 per share, issued by the Company (the “Series B Shares”); and

 

WHEREAS, the Holder desires to exchange all the Series B Shares it owns, including all dividends payable thereon, on a one-for-one basis, into shares of Series C 8% Convertible Preferred Stock of the Company (the “Series C Preferred Stock”), the terms, preferences and rights as described in the Certificate of Designation of the Series C 8% Convertible Preferred Stock (the “Certificate of Designation”), which is annexed hereto as Exhibit A, and the Company agrees to effectuate such exchange, all on the terms and conditions provided for in this Agreement.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

 

1.                  The Exchange.

 

(a)        Issuance of Series C Shares; Cancellation of Series B Shares. Subject to the terms and conditions of this Agreement, at the Closing (as defined below), the Company shall issue to the Holder _______________ shares of Series C Preferred Stock (the “Series C Shares”) in exchange for the cancellation of the Series B Shares owned by the Holder, including without limitation, all accrued dividends thereon (such exchange hereinafter referred to as the “Exchange”).

 

(b) Section 3(a)(9) Transaction. It is the intent of the parties that the Exchange be effectuated pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 3(a)(9) thereunder, and that, therefore, the holding period of the original issuance of the Series B Shares will, for securities law purposes, be tacked to the holding period of the Series C Shares.

 

(c)        Release. Subject to the terms and conditions of this Agreement, at the Closing (as defined below), the Holder hereby releases, waives, discharges and relinquishes any and all rights, claims, demands, contentions and causes of action of every kind, nature, character and description whatsoever, whether known or unknown, suspected or unsuspected, apparent or concealed, fixed or contingent, arising from owning the Series B Shares on or before the Closing Date (as defined below), which it now has or hereafter may be entitled to claim against the Company, its directors, officers, managers, members, agents and employees (the “Released Parties”), including without limiting the generality of foregoing, all claims arising from or in connection with or otherwise resulting from any matter, event, state of facts, claim, contention or cause whatsoever, occurring or existing in connection with or relating to the Series B Shares on or before the Closing Date (collectively, the “Claims”). The Holder agrees that the waiver and release described in this Section 1(c) applies to all Claims, whether or not the Holder currently knows about them or suspects that they exist. Notwithstanding anything to the contrary expressed or implied herein, however, none of the foregoing released Claims shall include any claims against a Released Party arising by reason of such Released Party’s breach of this Agreement. In addition, none of the foregoing releases extend to any breach of this Agreement, and no remedies for any such breach are being released herein.

 

2.                  Closing Deliveries

 

(a)                  At or promptly after the Closing (as defined below), the Company shall deliver to the Holder (i) a stock certificate or certificates in the name of the Holder evidencing the Series C Shares, free and clear of all liens and encumbrances, other than those imposed pursuant to the Securities Act, or other evidence that the Series C Shares have been issued in book entry form; and (ii) such other documents, certificates or other information as Holder or its counsel may reasonably request.

 

 

     

 

 

(b)               At the Closing, the Holder shall deliver to the Company:

 

(i)                 a duly executed signature to this Agreement;

 

(ii)              a duly executed irrevocable proxy in the form attached hereto as Exhibit B, granting the person appointed therein as the Holder’s proxy to vote the Series C Shares and other securities of the Company the Holder holds; and

 

(iii)            the stock certificate representing the Series B Shares for cancellation, if applicable.

 

3.                  The Closing. The closing of the Exchange (the “Closing”) shall take place at the offices of the Company, and shall be deemed to have occurred as of the date the Certificate of Designation has been filed with the Secretary of State of the State of Florida (the “Closing Date”).

 

4.                  Representations and Warranties of the Company. As of the date of this Agreement and as of the Closing, the Company hereby represents and warrants to the Holder that the following representations and warranties are true and complete as of each respective date:

 

(a)               Organization and Standing. The Company is a corporation duly organized, validly existing under, and by virtue of, the laws of the State of Florida, and is in good standing under such laws. The Company has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as presently conducted and as proposed to be conducted.

 

(b)               Corporate Power. The Company has all requisite legal and corporate power and authority to execute and deliver this Agreement and the other agreements contemplated hereby, to effectuate the Exchange, to sell and issue the Series C Shares and to carry out and perform its obligations under the terms of this Agreement.

 

(c)               Authorization. All corporate action on the part of the Company and its officers, directors and stockholders necessary for the (i) authorization, execution, delivery and performance of this Agreement, (ii) authorization, sale, issuance and delivery of the Series C Shares and (iii) performance of all of the Company’s obligations hereunder have been taken or will be taken prior to the Closing. This Agreement has been duly executed by the Company and constitutes (or will constitute) the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.

 

(d)               No Conflicts; Consents. The execution, delivery and performance by the Company of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions contemplated hereby, do not and will not: (a) violate or conflict with the articles of incorporation or bylaws of the Company; (b) violate or conflict with any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company; (c) conflict with, or result in (with or without notice or lapse of time or both) any violation of, or default under, or give rise to a right of termination, acceleration or modification of any obligation or loss of any benefit under any agreement or other instrument to which the Company is a party. No consent, approval, waiver or authorization is required to be obtained by the Company from any person in connection with the execution, delivery and performance by the Company of this Agreement or the consummation of the transactions contemplated hereby, other than the filing of a Current Report on Form 8-K with the Securities and Exchange Commission (“SEC”).

 

(e)               Valid Issuance of Stock. The Series C Shares have been duly authorized and, when issued, sold and delivered in compliance with the provisions of this Agreement, will be duly and validly issued, fully paid and nonassessable. The shares of common stock issuable upon due conversion of the Series C Preferred Stock will be duly and validly issued, fully paid and nonassessable. The Series C Shares will be free and clear of any liens or encumbrances; provided, however, that the Series C Shares shall be subject to restrictions on transfer under state and/or federal securities laws. None of the Series C Shares will be subject to any preemptive rights or rights of first refusal.

 

(f)                Exemption. It is the intention of the Company that the Exchange be made pursuant to an exemption from the registration requirements of the Securities Act pursuant to Section 3(a)(9) thereunder.

 

 

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5.                  Representations and Warranties of the Holder. As of the date of this Agreement and as of the Closing, the Holder hereby represents and warrants to the Company that the following representations and warranties are true and complete as of each respective date:

 

(a)               Organization and Standing. If the Holder is an entity, the Holder is duly organized, validly existing under, and by virtue of, the laws of the state of its incorporation or formation, as the case may be, and is in good standing under such laws.

 

(b)               Corporate Power. The Holder has all power and authority to execute and deliver this Agreement, purchase the Series C Shares, effectuate the Exchange, and carry out and perform its obligations under the terms of this Agreement and the transactions contemplated hereby.

 

(c)               Authorization. All action on the part of the Holder necessary for the authorization, execution, delivery and performance of this Agreement, the purchase of the Series C Shares, and the performance of all of the Holder’s obligations hereunder have been taken or will be taken prior to the Closing. This Agreement has been duly executed by the Holder and constitutes the valid and legally binding obligation of the Holder, enforceable against it in accordance with its terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.

 

(d)               For Holder’s Account. The Holder represents and confirms that the Series C Shares to be issued to the Holder in the Exchange are being and will be acquired for the Holder’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof.

 

(e)               Accredited Investor and Investment Experience. The Holder is an accredited investor, as such term is defined in Regulation D promulgated under the Securities Act. The Holder represents that is and its representatives are experienced in evaluating and investing in securities of companies similar as the Company and that the Holder can bear the economic risk of an investment in the Series C Shares and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Series C Shares in exchange for the Series B Shares.

 

(f)                Ownership of the Series B Shares. The Holder is the exclusive beneficial and record owner of the Series B Shares. The Holder has good, valid and marketable title to the Series B Shares, free and clear of all liens, hypothecations, pledges, charges or other encumbrances and any preemptive or subscription rights, and has not assigned or otherwise transferred or granted any interest in any of the Series B Shares to any person.

 

(g)               No Consents. The Holder is not required to obtain any order, consent, approval or authorization of any person or entity in connection with the execution and delivery of this Agreement or the Exchange.

 

(h)               Information on Company. The Holder has been furnished with all information it has requested from the Company and considered all factors the Holder deems material in deciding on the advisability of converting its Series B Shares to the Series C Shares. The Holder has been afforded the opportunity to ask questions of and receive answers from duly authorized officers and/or other representatives of the Company and any additional information which the Holder had requested. The Holder has also reviewed all information including the terms hereof and of the Preferred Stock, with their counsel and professional tax or economic advisers and understands the risks relating hereto.

 

The Holder understands that the auditors of the Company have expressed their concern as to the viability of the Company and issued a going concern opinion with respect to the Company.

 

(i)                 Compliance with Securities Act. The Holder understands and agrees that the Series C Shares have not been registered under the Securities Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the Securities Act (based in part on the accuracy of the representations and warranties of Holder contained herein), and that such Series C Shares must be held indefinitely unless a subsequent disposition is registered under the Securities Act or any applicable state securities laws or is exempt from such registration.

 

(j)       No other representations. The Holder is not relying on the Company, or its affiliates or agents with respect to economic considerations involved in this investment. The Holder has relied solely on its own advisors. No representations or warranties have been made to the Holder by the Company, or any officer, employee, agent, affiliate or subsidiary of the Company, other than the representations of the Company contained herein, and in effectuating the Exchange the Holder is not relying upon any representations other than those contained herein.

 

 

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(k)       Series C Shares Legend. The Series C Shares shall bear the following or similar legend:

 

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO [THE COMPANY] THAT SUCH REGISTRATION IS NOT REQUIRED."

 

(l)       Communication of Offer. The offer for the Exchange was directly communicated to the Holder by the Company. At no time was the Holder presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.

 

(m)       Restricted Securities. The Holder understands that the Series C Shares have not been registered under the Securities Act and such Holder will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the Series C Shares unless pursuant to an effective registration statement under the Securities Act, or unless an exemption from registration is available. Notwithstanding anything to the contrary contained in this Agreement, such Holder may transfer (with an opinion of counsel satisfactory to the Company and its counsel) the Series C Shares to its Affiliates (as defined below), provided that each such Affiliate is an “accredited investor” under Regulation D and such Affiliate agrees to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity. Affiliate includes each subsidiary of the Company. For purposes of this definition, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

 

(n)       No Governmental Review. The Holder understands that no United States federal or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the Exchange or the Series C Shares or the suitability of the Exchange nor have such authorities passed upon or endorsed the merits of the Exchange.

 

(o)       Correctness of Representations. Each Holder represents that the foregoing representations and warranties are true and accurate as of the date hereof and shall survive the issuance and delivery of the Series C Shares. If, in any respect, those representations and warranties shall not be true and accurate prior to the Closing Date, the undersigned shall immediately give written notice to the Company specifying which representations and warranties are not true and accurate and the reason therefor. It is specifically understood and agreed by the Holder that neither the Company nor its officers or directors has made, nor by this Agreement shall be construed to make, directly or indirectly, explicitly or by implication, any representation, warranty, projection, assumption, promise, covenant, opinion, recommendation or other statement of any kind or nature with respect to the anticipated operations, investment returns, cash flows, profits or losses of the Company.

 

(p)       Survival. The foregoing representations and warranties shall survive the Closing Date for a period of three years.

 

6.                  Miscellaneous.

 

(a)               Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

(b)               Governing Law. This Agreement is to be construed in accordance with and governed by the internal laws of the State of Florida without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Florida.

 

(c)               Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. Signatures received by pdf or email shall be deemed to be original signatures.

 

 

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(d)               Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

(e)               Notices. Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and shall be conclusively deemed to have been duly given (a) if delivered personally, when received, (b) if transmitted by facsimile or email, on the date of transmission with receipt of a transmittal confirmation or (c) if by courier service, on the second (2nd) business day following the date of deposit with such courier service, or such earlier delivery date as may be confirmed in writing to the sender by such courier service. A party may change or supplement the addresses given in the signature pages hereto, or designate additional addresses, for purposes of this Section by giving the other party written notice of the new address in the manner set forth above.

 

(f)                Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

(g)               Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.

 

 

 

 

 

[Remainder of Page Intentionally Omitted; Signature Page Follows]

 

 

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IN WITNESS WHEREOF, the undersigned, being the duly authorized representatives of the parties, have executed this Agreement as of the date set forth above.

 

 

GROM SOCIAL ENTERPRISES, INC.

 

 

 

By: ___________________________________
Name: Darren Marks
Title: Chief Executive Officer

 

 

ACCEPTED AND AGREED:

 

 

HOLDER (individual)   HOLDER (entity)
     
     
     
Signature   Name of Entity
     
     
Print Name   Signature of Authorized Person
     
     
Address   Print Name
     
     
    Title
Taxpayer ID#    
     
    Address
     
     
     
    Taxpayer ID#

 

 

  6  

 

 

EXHIBIT A

 

 

Certificate of Designation of the Series C 8% Convertible Preferred Stock

 

 

  7  

 

 

EXHIBIT B

 

IRREVOCABLE PROXY

 

The undersigned, being the legal and beneficial holder of _______________ shares of Series C 8% Convertible Preferred Stock (the “Series C Shares”) of Grom Social Enterprises, Inc., a Florida corporation (the “Company”), hereby irrevocably (to the fullest extent permitted by law) appoints and constitutes Darren Marks and Melvin Leiner, the attorney and proxy of the undersigned with full power of substitution, to the fullest extent of the undersigned’s rights with respect to the Series C Shares, and any and all other securities of the Company owned of record and beneficially by the undersigned, and any and all other interests or securities issued or issuable in respect thereof on or after the date hereof, or which the undersigned may acquire after the date hereof (collectively, the “Securities”). Upon the execution hereof, the undersigned agrees that no subsequent proxies will be given with respect to any of the Securities.

 

This proxy is irrevocable and coupled with an interest. This proxy shall remain in full force and effect for two years after the date hereof.

 

The attorney and proxy named above shall be empowered at any time to exercise all voting and other rights (including, without limitation, the power to execute and deliver written consents with respect to the Securities) of the undersigned in his own discretion at every annual or special meeting of the shareholders of the Company and at every continuation or adjournment thereof, and on every action or approval by written consent of the shareholders of the Company in lieu of any such meeting.

 

This proxy shall be binding upon the heirs, estates, executors, personal representatives, successors and assigns of the undersigned. If any provision of this proxy or any part of any such provision is held under any circumstance to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof shall, with respect to such circumstances and jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction shall not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction and (c) the invalidity or unenforceability of such provision or part thereof shall not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this proxy. Upon any such determination, the undersigned agrees with the attorney and proxy named above to negotiate in good faith to modify this proxy so as to effect the original intent of the parties.

 

Each provision of this proxy is separable from every other provision of this proxy, and each part of each provision of this proxy is separable from every other part of such provision.

 

IN WITNESS WHEREOF, the undersigned has executed this irrevocable proxy as of the _______ day of ____________, 2021.

 

 

 

(Individual)   (Entity)
     
     
     
Signature   Name of Entity
     
     
Print Name   Signature of Authorized Person
     
     
    Name
     
     
    Title
     
     

 

 

 

 

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