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Item 1.01
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Entry into a Material Definitive Agreement
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General
On August 22, 2018, Chicken Soup for the
Soul Entertainment Inc. (the “
Company
”), a Delaware corporation, consummated the transactions contemplated by
that certain Stock Purchase Agreement dated as of August 14, 2018 (the “
Agreement
”) by and among the Company,
Pivotshare, Inc., a Delaware corporation (“
Pivotshare
”), Adam Mosam, the principal stockholder of Pivotshare
(“
Mosam
”), Townsgate Media Fund, LLC (“
Townsgate
”), GGW Investment Partnership No. 1, LP
(“
GGW
” and collectively with Mosam and Townsgate, the “
Key Holders
”) and each of the other
stockholders of Pivotshare, all of whom are signatories to this Agreement (the “
Other Stockholders
” and collectively
with the Key Holders, the “
Stockholders
”).
The Company acquired all of the outstanding
common stock and preferred stock of Pivotshare for approximately $4.35 million comprised of: (a) 41,778 shares of the Company’s
9.75% Series A cumulative redeemable perpetual preferred stock, each share having a stated value of $25.00 (“
Series A
Preferred Stock
”), to be issued to Townsgate (the “
Townsgate Preferred Stock
”); (b) 52,222 shares
of Series A Preferred Stock to be issued to GGW (“
GGW Preferred Stock
”); (c) 40,000 shares of Series A Preferred
Stock to be issued to Mosam (the “
Mosam Preferred Stock
”); (d) 74,235 shares of the Company’s Class A
common stock (“
Common Stock
”) to be issued to Mosam (the “
Mosam Common Stock
”) and (d) an
aggregate of $257,758.08 to be paid to certain individuals as set forth in the Agreement (the “
Cash Payment
”).
All of the Mosam Common Stock was deposited
into escrow pursuant to an escrow agreement (the “
Noncompete Escrow Agreement
”) and shall be held in such escrow
as security for the noncompete and nonsolicit obligations of Mosam as further described in the Agreement. Pursuant to the Noncompete
Escrow Agreement, 25% of the shares of the Mosam Common Stock shall be released from escrow and delivered to Mosam after six months,
with the remaining shares to be released from escrow and delivered to Mosam over the next two years and six months as described
in the Noncompete Escrow Agreement.
Additionally, 20,889 shares of the Townsgate
Preferred Stock, 26,111 shares of the GGW Preferred Stock and 20,000 shares of the Mosam Preferred Stock were deposited into escrow
pursuant to a separate escrow agreement (the “
Indemnity Escrow Agreement
”) and shall serve as security for
the indemnification obligations of Pivotshare and Mosam set forth in the Agreement.
The Key Holders shall have the registration
rights with respect to the securities comprising a portion of the purchase price. Additionally, the Key Holders shall not be entitled
to sell any of such securities prior to the first anniversary of the closing. Thereafter, such restriction shall terminate with
respect to 50% of such securities at the end of each three-month period for the next two consecutive three-month periods.
The Company also entered into three-year
employment agreements with each of Mosam, Chris Woolsey, Ken Kaiser and Justin Fujita.
The foregoing summary of the Agreement is
qualified in its entirety by reference to the text of the Agreement, which is attached as an exhibit hereto and is incorporated
herein by reference.
Fees and Expenses
The Company has paid or will pay fees and
expenses for the acquisition of approximately $120,000 in investment advisory fees, plus legal fees and accounting fees.