Document:

Document

Exhibit 4.3

DESCRIPTION OF THE REGISTRANTS SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE 
SECURITIES EXCHANGE ACT OF 1934

General
The following is a summary of the rights of our common and preferred stock and some of the provisions of our amended and restated certificate of incorporation, amended and restated bylaws, and relevant provisions of Delaware General Corporation Law. The descriptions herein are qualified in their entirety by our amended and restated certificate of incorporation and amended and restated bylaws, copies of which have been filed as exhibits to our Annual Report on Form 10-K, as well as the relevant provisions of Delaware General Corporation Law.

Our amended and restated certificate of incorporation provides for two classes of common stock: Class A common stock and Class B common stock and it authorizes shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our board of directors.

Our authorized capital stock consists of the following shares, all with a par value of $0.001 per share, of which:

•      2,000,000,000 shares are designated as Class A common stock;

•      300,000,000 shares are designated as Class B common stock; and

•      200,000,000 shares are designated as preferred stock.

Class A and Class B Common Stock

All issued and outstanding shares of our Class A common stock and Class B common stock are duly authorized, validly issued, fully paid and non-assessable. All authorized but unissued shares of our Class A common stock and Class B common stock are available for issuance by our board of directors without any further stockholder action, except as required by the listing standards of The Nasdaq Stock Market. Our amended and restated certificate of incorporation provides that, except with respect to voting rights and conversion rights, the Class A common stock and Class B common stock are treated equally and identically.

Voting Rights

Holders of Class A common stock are entitled to one vote per share on all matters to be voted upon by the stockholders, and holders of Class B common stock are entitled to 10 votes per share on all matters to be voted upon by the stockholders. The holders of our Class A common stock and Class B common stock generally vote together as a single class on all matters submitted to a vote of our stockholders, unless otherwise required by Delaware law or our amended and restated certificate of incorporation. Delaware law would permit holders of Class A common stock to vote separately, as a single class, if we were to change the par value of the 

common stock or amend our certificate of incorporation to alter the powers, preferences or special rights of the common stock as a whole in a way that would adversely affect the holders of our Class A common stock.

In addition, Delaware law would permit holders of Class A common stock to vote separately, as a single class, if an amendment of our certificate of incorporation would adversely affect them by altering the powers, preferences, or special rights of the Class A common stock, but not the Class B common stock. As a result, in these limited instances, the holders of a majority of the Class A common stock could defeat any amendment to our certificate of incorporation. For example, if a proposed amendment of our certificate of incorporation provided for the Class A common stock to rank junior to the Class B common stock with respect to (i) any dividend or distribution, (ii) the distribution of proceeds were we to be acquired or (iii) any other right, Delaware law would require the vote of the Class A common stock. In this instance, the holders of a majority of Class A common stock could defeat that amendment to our certificate of incorporation.

Our amended and restated certificate of incorporation provides that the number of authorized shares of preferred stock, Class A common stock or Class B common stock, may be increased or decreased (but not below the number of shares of preferred stock, Class A common stock and Class B common stock then outstanding) by the affirmative vote of the holders of a majority of the outstanding voting power of all of our outstanding, voting together as a single class. As a result, the holders of a majority of the outstanding Class B common stock can approve an increase or decrease in the number of authorized shares of Class A common stock without a separate vote of the holders of Class A common stock. This could allow us to increase and issue additional shares of Class A common stock beyond what is currently authorized in our certificate of incorporation without the consent of the holders of our Class A common stock.

Our amended and restated certificate of incorporation does not provide for cumulative voting for the election of directors.

Dividend Rights

Holders of Class A common stock and Class B common stock are entitled to ratably receive dividends if, as and when declared from time to time by our board of directors at its own discretion out of funds legally available for that purpose, after payment of dividends required to be paid on outstanding preferred stock, if any. Under Delaware law, we can only pay dividends either out of “surplus” or out of the current or the immediately preceding year’s net profits. Surplus is defined as the excess, if any, at any given time, of the total assets of a corporation over its total liabilities and statutory capital. The value of a corporation’s assets can be measured in a number of ways and may not necessarily equal their book value. In addition, holders of our Class A common stock would be entitled to vote separately as a class on dividends and distributions if the holders of Class A common stock were treated adversely. As a result, if the holders of Class A common stock were treated adversely in any dividend or distribution, the holders of a majority of Class A common stock could defeat that dividend or distribution.

Right to Receive Liquidation Distributions

Upon our dissolution, liquidation or winding-up or a deemed liquidation, the assets legally available for distribution to our stockholders are distributable ratably among the holders of our Class A common stock and Class B common stock, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock, unless a different treatment is approved by the affirmative vote of the holders of a majority of the outstanding shares of each class of common stock, including the Class A common stock, voting separately as a class. As a result, the holders of a majority of each class of common stock, including the Class A common stock, could defeat a proposed distribution of any assets on our liquidation, dissolution, or winding-up or deemed liquidation if that distribution were not to be shared equally, identically, and ratably. If a change of control transaction is not considered a deemed liquidation, such transaction shall require the approval of the affirmative vote of the holders of a majority of the outstanding shares of each class of common stock, including the Class A common stock, voting separately as a class.

Subdivisions and Combinations

If we subdivide or combine in any manner outstanding shares of Class A common stock or Class B common stock, the outstanding shares of the other class will be subdivided or combined in the same manner, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A common stock and by the affirmative vote of the holders of a majority of the outstanding shares of Class B common stock, each voting separately as a class.

Conversion

Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A common stock. In addition, each share of our Class B common stock will convert automatically into one share of our Class A common stock upon any transfer, whether or not for value, except certain transfers to entities, to the extent the transferor retains sole dispositive power and exclusive voting control with respect to the shares of Class B common stock, and certain other transfers described in our amended and restated certificate of incorporation. All outstanding shares of our Class B common stock will convert into shares of our Class A common stock upon the earliest of (i) the date that is six months following the death or incapacity of Eric S. Yuan, (ii) the date that is six months following the date that Mr. Yuan ceases providing services to us or his employment is terminated by us for cause, (iii) the date specified by the holders of a majority of the then outstanding shares of Class B common stock, voting separately as a class and (iv) the 15-year anniversary of the closing of our initial public offering.

Other Matters

The Class A common stock and Class B common stock have no preemptive rights pursuant to the terms of our amended and restated certificate of incorporation and our amended and restated bylaws. There are no redemption or sinking fund provisions applicable to the Class A 

common stock and Class B common stock. All outstanding shares of our Class A common stock are fully paid and non-assessable.

Preferred Stock

Our board of directors may, without further action by our stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of 200,000,000 shares of preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of our common stock. The issuance of our preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control or other corporate action. No shares of preferred stock are outstanding.

Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws

Some provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions which provide for payment of a premium over the market price for our shares.

These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

Dual Class Stock

As described above, our amended and restated certificate of incorporation provides for a dual class common stock structure, which provides our founders, current investors, executives and employees with significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets.

Stockholder Meetings

Our amended and restated bylaws provide that a special meeting of stockholders may be called only by our chairperson of the board, chief executive officer, or by a resolution adopted by a majority of our board of directors.

Requirements for Advance Notification of Stockholder Nominations and Proposals

Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.

Elimination of Stockholder Action by Written Consent

Our amended and restated certificate of incorporation and amended and restated bylaws eliminate the right of stockholders to act by written consent without a meeting.

Staggered Board

Our board of directors is divided into three classes. The directors in each class serve for a three-year term, one class being elected each year by our stockholders. This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us because it generally makes it more difficult for stockholders to replace a majority of the directors.

Removal of Directors

Our amended and restated certificate of incorporation provides that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of the total voting power of all of our outstanding voting stock then entitled to vote in the election of directors.

Stockholders Not Entitled to Cumulative Voting

Our amended and restated certificate of incorporation does not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose, other than any directors that holders of our preferred stock may be entitled to elect.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person 

became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors.

Choice of Forum

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative form, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers or employees to us or our stockholders; (iii) any action asserting a claim against us or any of our directors or officers or other employees arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws; (iv) any action or proceeding to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; (v) any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware, or (vi) any action asserting a claim governed by the internal affairs doctrine. Our amended and restated certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision. Our amended and restated certificate of incorporation also provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to these choice of forum provisions. It is possible that a court of law could rule that either choice of forum provision to be contained in our amended and restated certificate of incorporation is inapplicable or unenforceable if it is challenged in a proceeding or otherwise.

Amendment of Charter Provisions

The amendment of any of the above provisions, except for the provision making it possible for our board of directors to issue preferred stock, would require approval by holders of at least two-thirds of the total voting power of all of our outstanding voting stock.

The provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers, and as a consequence, they may also inhibit temporary fluctuations in the market price of our Class A common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our board and management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Transfer Agent and Registrar

The transfer agent and registrar for our Class A common stock and Class B common stock is Computershare Trust Company, N.A. The transfer agent and registrar’s address is 250 Royall Street, Canton, Massachusetts 02021.

Exchange Listing

Our Class A common stock is listed on The Nasdaq Global Select Market under the symbol “ZM.”Exhibit 4.1

 

THIS NOTE AND THE SECURITIES ISSUABLE
UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AS AMENDED, OR UNDER
THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT
AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER,
SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. 

  

 

GROM SOCIAL ENTERPRISES, INC. 

  

SENIOR SECURED CONVERTIBLE NOTE 

 

  

	$[●] 	 	March 16, 2020 

 

FOR VALUE RECEIVED,
GROM SOCIAL ENTERPRISES, Inc., a Florida corporation (the “Company”), promises to pay to [●] (the “Holder”)
in lawful money of the United States of America or Common Stock, or any combination thereof, the principal sum of $[●], or
such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Senior
Secured Convertible Note (this “Note”) on the unpaid principal balance at a rate equal to 12% per annum computed
on the basis of the actual number of days elapsed and a year of 365 days. All unpaid principal, together with any then unpaid and
accrued interest and other amounts payable hereunder, shall be due and payable on March 16, 2024 (the “Maturity Date”)
or such earlier date as this Note is permitted to be repaid as provided hereunder. This Note is one of the senior secured convertible
notes issued in connection with that certain offering of Notes of the Company on or about March 16, 2020 (the “Offering”)
and pursuant to that certain Subscription Agreement, dated March 16, 2020 (the “Subscription Agreement”), by
and between the Company and the Holder. Capitalized terms not otherwise defined herein shall have the meanings set forth in the
Subscription Agreement.

 

The following is a
statement of the rights of Holder and the conditions to which this Note is subject, and to which Holder, by the acceptance of this
Note, agrees:

 

1.                  
Payments. 

 

(a)               
Principal and Interest. Interest shall accrue on the outstanding principal amount of this Note at an annual rate of twelve
percent (12%). The Company shall cause TD Holdings Limited, a Hong Kong corporation and an indirect wholly-owned subsidiary of
the Company (“TDH”) to pay monthly installments of principal and interest to the Holder, in accordance with
the amortization schedule attached hereto as Annex A, commencing from May 12, 2020, the date which is sixty (60) days from
the Original Issuance Date, through the Maturity Date if not otherwise converted into shares of Common Stock pursuant to Section
2 hereof. Each date upon which a payment of principal and interest is due hereunder shall be referred to as a “Payment
Date”. If any Payment Date is not a Trading Day, the applicable payment shall be due on the next succeeding Trading Day.

 

(b)               
Voluntary Prepayment. Subject to the provisions of this Section 1(b), at any time after the Original Issuance Date, the
Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice is deemed
delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem some or all
of the then outstanding principal amount of this Note (the “Optional Redemption Amount”) for cash on the fifth
(5th ) Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date”,
such five (5) Trading Day period, the “Optional Redemption Period ” and such redemption, the “Optional
Redemption”). The Optional Redemption Amount is payable in full on the Optional Redemption Date. The Holder’s acceptance
of any Optional Redemption Amount is subject to the Company’s payment on the Optional Redemption Date of a prepayment penalty
(the “Optional Redemption Penalty”) in an amount equal to four (4%) of the Optional Redemption Amount.

 

(c)       Method
of Payment. The Company shall cause TDH to make all payments of principal and interest under this Note by wire transfer of
immediately available funds to the bank account specified by the Holder on Annex B hereto (or to such other bank account specified
by the Holder in writing to the Company from time to time).

 

 

 

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2.                  
Conversion.

 

(a)               
Conversion; Calculation of Conversion Shares. The conversion price on any Conversion Date shall be equal to 75% of the average
sales price of the Common Stock over the sixty (60) day trading period immediately preceding such Conversion Date (subject to adjustment
as described herein (the “Conversion Price”), provided, however, that in no event shall the Conversion Price
be less than $0.15 per share. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient
obtained by dividing (x) the aggregate amount of principal and interest outstanding under the Note by (y) the Conversion Price.

 

(b)               
Holder Voluntary Conversion.

 

(i)                 
At any time until this Note is no longer outstanding, this Note shall be convertible, in whole or in part, into shares of Common
Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 2(j)
hereof). The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached
hereto as Annex B (each, a “Notice of Conversion”), specifying therein the principal amount of this Note
to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).
If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other
type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall
not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued
and unpaid interest thereon, has been so converted in which case the Holder shall surrender this Note as promptly as is reasonably
practicable after such conversion without delaying the Company’s obligation to deliver the Conversion Shares otherwise pursuant
to the terms of this Note. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note
in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount(s)
converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within one (1) Business
Days of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and
agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note may be less than the amount stated on the face hereof. 

 

(ii)              
Mechanics of Conversion. Not later than four (4) Trading Days after each Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder (A) the Conversion Shares which, on or after the six-month anniversary
of the date of this Note shall be free of restrictive legends and trading restrictions (other than those which may then be required
by the Subscription Agreement), represent the number of Conversion Shares being acquired upon the conversion of this Note and (B)
a bank check in the amount of accrued and unpaid interest.

 

(c)               
Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered
to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice
to the Company at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Company
shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company
the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice.

 

(d)               
Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares
upon conversion of this Note in accordance with the terms hereof are absolute and unconditional. In addition to any other rights
available to the Holder, if the Company fails for any reason to deliver to the Holder such Conversion Shares by the Share Delivery
Date pursuant to Section 2(b)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock
to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total
purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual
sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and
(B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount
of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares
of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 2(b)(ii).
For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence,
the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver
Conversion Shares upon conversion of this Note as required pursuant to the terms hereof.

 

 

 

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(e)                
Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Note and payment
of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of
Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common
Stock as shall (subject to the terms and conditions set forth in the Subscription Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and payment
of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid and nonassessable.

   

(f)               
Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this
Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company
shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Conversion Price or round up to the next whole share.

 

(g)               
Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Note shall be made without charge to
the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion
Shares, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holder of this Note
so converted and the Company shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of any
Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar
functions) required for same-day electronic delivery of the Conversion Shares.

 

(h)                 
Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion
of the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by
way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of
a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of
the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after
the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination or re-classification.

 

(i)                 
Notices of Record Date. In the event of:

 

(i)                 
Any taking by the Company of a record of the holders of any class of securities of Company for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to receive any other right; or

 

(ii)              
Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to any other Person or any consolidation or merger involving
the Company; or

 

(iii)            
Any voluntary or involuntary dissolution, liquidation or winding-up of the Company, or

 

(iv)             
the Company shall deliver to Holder at least ten (10) days prior to the earliest date specified therein, a notice specifying (A) the
date on which any such record is to be taken for the purpose of such dividend, distribution or right and the amount and character
of such dividend, distribution or right; and (B) the date on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding-up is expected to become effective and the record date for determining stockholders
entitled to vote thereon.

 

 

 

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(j)               Holder’s
Conversion Limitations. The Company shall not affect any conversion of this Note, and the Holder shall not have the right to
convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder
or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).
For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining,
unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion
of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, any other Notes or the Warrants) beneficially owned
by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(j), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
To the extent that the limitation contained in this Section 2(j) applies, the determination of whether this Note is convertible
(in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is
convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the
Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together
with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation.
To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice
of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and Company shall have
no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(j), in determining the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as stated in the most recent of the following: (i) Company’s most recent periodic
or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii)
a more recent written notice by Company or Company’s transfer agent setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Company
or the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder
may decrease the Beneficial Ownership Limitation at any time and the Holder, upon not less than 61 days’ prior notice to
the Company, may increase the Beneficial Ownership Limitation provided that the Beneficial Ownership Limitation in no event exceeds
9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 2(j) shall
continue to apply. Any such increase will not be effective until the 61st day after such notice is delivered to the
Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(j) to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary
or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor
holder of this Note.

	 	 	 

3.                  
Security Interest. 

 

(a)               
As collateral security for the Company’s obligations pursuant to this Note, the Company shall cause Grom Holdings, Inc.,
a Delaware corporation which is wholly owned by the Company (“Grom Holdings”), to pledge, assign and transfer
to the Holder a first priority security interest in and collateral assignment of (i) Grom Holdings right, title and interest in
and to all of the shares of stock of TDH and (ii) TDH’s right, title and interest in and to all of the shares of Top Draw
Animation HongKong Limited, a Hong Kong corporation . This Note shall rank equally and ratably on a pari passu basis with (A) the
other Notes sold in this Offering and (B) those secured promissory notes (the “TDH Notes”) issued by Grom Holdings
pursuant to the terms of that certain Share Sale Agreement among the Company and the sellers reflected therein dated as of June
20, 2016. The respective pari passu enforcement rights of the holders of the Notes and the TDH Notes are governed by that certain
intercreditor agreement dated on or about the date hereof, a copy of which was reviewed and executed by the Holder.

 

 

 

    	 	4	 

     

    

 

(b)            
The Company authorizes the Holder to file or cause to be filed one or more deeds, deeds of share charges, financing statements,
amendments to financing statements, continuations to financing statements, in lieu financing statements, and other similar filings
with any filing or recording office for the purpose of perfecting or continuing the perfection of or otherwise establishing Holder’s
security interest in the shares of TDH.

 

(c)               
So long as this Note remains outstanding, the Company agrees to (i) do, observe and perform or cause to be done, observed and performed
all of its obligations and all matters and things necessary to be done, observed and performed for the purpose of maintaining the
Shares and (ii) upon the reasonable request of Holder, execute and deliver such further instruments and do or cause to be done
such further acts as may be necessary or advisable to carry out the intent and purposes of this Note with respect to the Shares.

 

(d)       
In the event the Company sells the animation studio located in Manila, Philippines which is currently owned by TDH (the “TDH
Animation Studio”) for a sales price in excess of $12 million USD, and so long as any amount of principal is outstanding
hereunder, the Company shall pay the Holder from the proceeds of the TDH Animation Studio sale (i) all amounts of principal outstanding
hereunder, (ii) such amount of interest which would be due and payable assuming the Note was held to maturity (minus any amounts
of interest previously paid hereunder) and (iii) an additional 10% of the amount of principal outstanding hereunder on the date
within five (5) business days of the closing of such sale.

 

4.                  
Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under
this Note:

 

(a)               
Failure to Pay. The Company shall fail to pay (i) when due any principal payment on the due date hereunder or (ii)
any interest payment or other payment required under the terms of this Note on the date due and such payment shall not have been
made within thirty (30) days of the Company’s receipt of written notice by the Required Holders of such failure to pay; or

 

(b)               
Breaches of Covenants. The Company shall fail to observe or perform any other covenant, obligation, condition or
agreement contained in this Note (other than those specified in Section 4(a) hereof) the failure of which would have
a material adverse effect on the Company and such failure shall continue for thirty (30) days after the Company’s receipt
of written notice by the Required Holders to the Company of such failure; or

 

(c)               
Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) admit in writing
its inability to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of
its creditors, (iv) be dissolved or liquidated, (v) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official
in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any
of the foregoing; or

 

(d)               
Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator
or custodian of the Company, or of all or a substantial part of the property thereof, or an involuntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to the Company or any of its subsidiaries, if any, or the debts
thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief
entered or such proceeding shall not be dismissed or discharged within forty-five (45) days of commencement.

 

5.                  
Rights of Holder upon Default. Upon the occurrence of any Event of Default (other than an Event of Default described in
Section 4(c) or Section 4(d) ) hereof and at any time thereafter during the continuance of such Event of Default,
Holder may, with the written consent of the Required Holders, by written notice to the Company, declare all outstanding obligations
payable by the Company hereunder to be immediately due and payable, and take possession of and exercise control over, to the fullest
extent permitted by law, any Shares, without presentment, demand, protest or any other notice of any kind, all of which are hereby
expressly waived. Upon the occurrence of any Event of Default described in Section 4(c) and Section 4(d) hereof,
immediately and without notice, all principal and accrued and unpaid interest hereunder shall automatically become immediately
due and payable, and the Holder may take possession of and exercise control over, to the fullest extent permitted by law, any Shares,
without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. In addition to
the foregoing remedies, upon the occurrence and during the continuance of any Event of Default, Holder may exercise any other right
power or remedy permitted to it by law, either by suit in equity or by action at law, or both.

 

 

 

    	 	5	 

     

    

 

6.                  
Definitions. As used in this Note, the following capitalized terms shall have the following meanings:

 

“Common Stock”
means the Common stock of the Company, par value $0.001 per share.

 

“Conversion
Shares” means the shares of Common Stock issuable upon conversion of this Note.

 

“Event
of Default” has the meaning given in Section 4 hereof.

 

“Holders”
means the Holder and the other holders of a Note issued in connection with the Offering.

 

“Maturity
Date” has the meaning given in the preamble to this Note.

 

 “Note”
has the meaning given in the preamble of this Note.

 

“Notes”
means this Note and the other notes issued by the Company to those investors in connection with the Offering.

 

“Optional Redemption”
has the meaning given in Section 1(b) hereof.

 

“Optional Redemption
Date” has the meaning given in Section 1(b) hereof.

 

“Optional Redemption
Notice Date” has the meaning given in Section 1(b) hereof.

 

“Optional Redemption
Period” has the meaning given in Section 1(b) hereof.

 

“Optional Redemption
Penalty” has the meaning given in Section 1(b) hereof.

 

“Original Issuance Date”
means the date of the first issuance of the Note, regardless of any transfers of such Note and regardless of the number of instruments
which may be issued to evidence such Note.

 

“Payment Date” has the
meaning given in Section 1(b) hereof.

 

“Required Holders”
means the Holders holding a majority of the aggregate outstanding principal due under the Notes.

 

“Subscription
Agreement” has the meaning given in the preamble of this Note.

 

7.                  
Miscellaneous.

 

(a)               
Successors and Assigns; Transfer of this Note or Securities Issuable on Conversion Hereof.

  (i)                 
Subject to the restrictions on transfer described in this Section 7(a), the rights and obligations of the Company and
Holder shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the Company and Holder.

 

(ii)              
With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, Holder shall
give advance written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion
of Holder’s counsel or other evidence reasonably satisfactory to the Company, to the effect that such offer, sale or other
distribution may be effected without registration or qualification (under any federal or state law then in effect). Upon receiving
such written notice and reasonably satisfactory opinion or other evidence if so requested, the Company, as promptly as practicable,
shall notify Holder that Holder may sell or otherwise dispose of this Note or such securities, all in accordance with the terms
of the notice delivered to the Company. If a determination has been made pursuant to this Section 7(a) that the opinion
of counsel for Holder, or other evidence, is not reasonably satisfactory to the Company, the Company shall so notify Holder promptly
after such determination has been made. Each Note thus transferred and each certificate representing the securities thus transferred
shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act,
unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities
Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the
foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the
Company. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof
as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other
purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary.

 

 

 

    	 	6	 

     

    

 

(iii)            
Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise,
in whole or in part, by the Company without the prior written consent of Holder.

 

(b)               
Waiver and Amendment. Any provision of this Note may be amended, waived or modified only upon the written consent
of the Company and the Required Holders.

 

(c)               
Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder
shall be made in accordance with:

 

	If to the Company:	Grom Social Enterprises, Inc.
	 	
        2060 NW Boca Raton Blvd., Suite #6

        Boca Raton, FL 33431

	 	Facsimile No:
	 	
        Email:

        Attention:

	With copies to (which shall	 
	not constitute notice):	The Crone Legal Group, P.C.
	 	500 Fifth Avenue, Suite 938
	 	New York, NY 10110
	 	Facsimile No.: (917) 438-6137
	 	Email: mcrone@cronelegalgroup.com
	 	Attn: Mark Crone

 

	If to the Holder: 	
        Name: [●]

        Address: [●]

        Email: [●]

 

(d)               
Payment. Unless converted into Common Stock, all payments shall be made in United States dollars.

 

(e)                
Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate,
then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment
of principal and applied against the principal of this Note.

 

(f)               
Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be
deemed to limit or affect any of the provisions hereof.

 

(g)               
Governing Law. This Note and all actions arising out of or in connection with this Note shall be governed by and
construed in accordance with the laws of the State of Florida, without regard to its internal rules governing the conflict of laws.

  

 

 

 

[Remainder of page
intentionally left blank.] 

  

  

 

 

 

    	 	7	 

     

    

  

	 	 	 

The Company has caused this Note to be issued as of the
date first written above.

 

	 	GROM SOCIAL ENTERPRISES, inc. 
	 	 
	 	
        By:                                      

        Name: Melvin Leiner

        Title: Executive Vice President

         

	 	 

 

 

 

 

    	 	8	 

     

    

 

ANNEX A

 

[Amortization Schedule]

 

 

 

 

 

 

 

 

 

 

    	 	9	 

     

    

 

ANNEX B

  

Notice of Conversion 

  

The undersigned hereby
elects to convert principal under the Senior Secured Convertible Note due March 16, 2024 of Grom Social Enterprises, Inc., a Florida
corporation (the “Company”), into shares of common stock (the “ Common Stock ”), of the Company
according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder
for any conversion, except for such transfer taxes, if any.

 

By the delivery of
this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts specified under Section 2 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

 

The undersigned agrees
to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock.

 

Conversion calculations:

 

	 	Date to Effect Conversion: ____________________________ 
	 	 
	 	Principal Amount of Note to be Converted: $__________________ 
	 	 
	 	Accrued Interest to be Converted, if any: $______________ 
	 	 
	 	 
	 	Number of shares of Common Stock to be issued: ______________ 
	 	 
	 	Signature: _________________________________________ 
	 	 
	 	Name: ____________________________________________ 
	 	 
	 	Address for Delivery of Common Stock Certificates: __________ 
	 	_____________________________________________________  
	 	_____________________________________________________ 
	 	 
	 	Or 
	 	 
	 	DWAC Instructions: _________________________________ 
	 	 
	 	
        Broker No:_____________

         

         

         

         

         

         

         

         

         

        

 

 

 

    	 	10	 

     

    

 

 

ANNEX C 

 

 Bank Account of Holder 

 

 

 

Name of Account Holder:

Name of Bank:

Account No.:  Routing
No.

Address:

Phone:

 

 

 

 

 

 

    	 	11

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