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): June 18, 2020
 
GI DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware	 	000-55195	 	84-1621425	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
 
320 Congress Street
Boston, MA 02210
(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code: (781) 357-3300

(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant 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: None.
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange 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 a Material Definitive Agreement.
 
On June 18, 2020 (the “Closing Date”), GI Dynamics, Inc. (the “Company”) entered into a Convertible Note Purchase Agreement (the “Purchase Agreement”) by and between the Company, as borrower, and Crystal Amber Fund Limited, as purchaser (the “Purchaser” or “Crystal Amber”). Pursuant to the Purchase Agreement, on the Closing Date, the Company issued and sold to the Purchaser an unsecured convertible promissory note in an aggregate principal amount of $750,000 (the “Note”). The Purchaser is the Company’s largest stockholder.
 
The Note accrues interest at a rate equal to 5% per annum compounded annually, other than during the continuance of an event of default, when the Note accrues interest at a rate of 8% per annum. The entire outstanding principal balance and all unpaid accrued interest thereon is due on demand; provided; however, that such demand cannot be made prior to the six (6) month anniversary of the Closing Date. Following the delisting of the Company from the official list of the Australian Securities Exchange, upon the closing of the next round of equity financing of capital stock of the Company in a single transaction or a series of related transactions involving the issuance of the Company’s securities to one or more investors, from which the Company receives gross proceeds of not less than $8 million (excluding the conversion of the Note and excluding conversion of any other debt that is outstanding as of immediately prior to the issuance of the Note (the “Qualified Equity Financing”), the entire outstanding principal balance under the Note and all unpaid accrued interest thereon (the “Outstanding Amount”) will be automatically converted into a number of shares of capital stock issued in the Qualified Equity Financing in an amount equal to the quotient obtained by dividing the Outstanding Amount by the Conversion Price. The Conversion Price means the product of (i) 80% and (ii) the lowest per share purchase price of the capital stock issued in the Qualified Equity Financing. In the event that the rules of the ASX require the Company to obtain stockholder approval to issue the securities in connection with a conversion, the Company will convene a stockholder meeting to obtain stockholder approval to effect such issuance.
 
In addition, upon a change of control of the Company, the Purchaser may, at its option, demand that the Company prepay all accrued and unpaid interest plus 110% of the remaining outstanding unconverted principal balance. The Company may not prepay the Note without the consent of the Purchaser.
 
The Purchase Agreement contains customary events of default. If a default occurs and is not cured within the applicable cure period or is not waived, any outstanding obligations under the Note may be accelerated. The Purchase Agreement and the Note also contain additional representations and warranties, covenants and conditions, in each case customary for transactions of this type.
 
Pursuant to the terms of the Purchase Agreement, the Purchaser agreed that (i) the Company will purchase a customary “tail” policy under the Company’s existing directors’ and officers’ liability policy, (ii) within 10 days of the Closing Date, the Company will enter into an escrow agreement to deposit funds for the payment of the Company’s severance obligations to its officers and employees, and (iii) the parties will use commercially reasonable efforts to enter into mutual releases of claims between the Purchaser and each current member of the Company’s board of directors and each current executive officer of the Company, effective as of and upon the date a director or an officer ceases to serve on the Company’s board of directors or as an executive officer, as applicable.
 
The foregoing description of the Purchase Agreement and the Note does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the Purchase Agreement and the Note, which are attached hereto as Exhibits 10.1 and 10.2, respectively. A copy of the press release announcing the closing of this financing is attached hereto as Exhibit 99.1. 
 
Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.
 
The disclosure set forth under Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 2.03 by reference.

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Item 3.02 Unregistered Sales of Equity Securities.
 
The disclosure set forth under Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference. The securities issued to the Purchaser were issued in a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended.
 
Forward-Looking Statements
 
This Current Report on Form 8-K and the press release attached as Exhibit 99.1 may contain forward-looking statements. These statements are based on management’s current estimates and expectations of future events as of the date of the Current Report on Form 8-K and the press release, as applicable. Furthermore, the estimates are subject to several risks and uncertainties that could cause actual results to differ materially and adversely from those indicated in or implied by such forward-looking statements.
 
These risks and uncertainties include, but are not limited to, risks associated with the Company’s ability to continue to operate as a going concern; the ability of the Company, its critical vendors, and key regulatory agencies to resume operational capabilities subsequent to the removal of COVID-19 pandemic restrictions; the Company’s ability to continue to operate as a going concern; the Company’s ability to raise sufficient additional funds to continue operations, including the successful closing of a significant financing and a delisting from the ASX, and to conduct the planned pivotal trial of EndoBarrier in the United States (STEP-1); the Company’s ability to execute STEP-1 under the FDA’s Investigational Device Exemption; the Company’s ability to enlist clinical trial sites and enroll patients in accordance with STEP-1; the risk that the FDA stops STEP-1 early as a result of the occurrence of certain safety events; the Company’s ability to enroll patients in accordance with I-STEP; the Company’s ability to secure a CE Mark; the Company’s ability to maintain compliance with its obligations under its existing convertible note and warrant agreements executed with Crystal Amber, including its obligations to make payment on the Note that is now due on June 29, 2020 and its ability to restructure the terms of the Note with Crystal Amber if the Company is unable to raise sufficient funds to enable it to fully repay such convertible note when due; obtaining and maintaining regulatory approvals required to market and sell the Company’s products; the possibility that future clinical trials will not be successful or confirm earlier results; the timing and costs of clinical trials; the timing of regulatory submissions; the timing, receipt and maintenance of regulatory approvals; the timing and amount of other expenses; the timing and extent of third-party reimbursement; intellectual-property risk; risks related to excess inventory; risks related to assumptions regarding the size of the available market; the benefits of the Company’s products; product pricing; timing of product launches; future financial results; and other factors, including those described in the Company’s filings with the SEC.
 
Given these uncertainties, one should not place undue reliance on these forward-looking statements. The Company does not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise, unless it is required to do so by law.
 
Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits
 
Exhibit No.	 	Description	
 	 	 	
10.1	 	Convertible Note Purchase Agreement, dated June 18, 2020, between the Company and Crystal Amber Fund Limited.	
 	 	 	
10.2	 	Unsecured Convertible Promissory Note, dated June 18, 2020, between GI Dynamics, Inc. and Crystal Amber Fund Limited.	
 	 	 	
99.1	 	Press Release of GI Dynamics, Inc. dated June 19, 2020 (Australian Eastern Standard Time)	
 
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SIGNATURES
 
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.
 
 	GI DYNAMICS, INC.	
 	 	
Dated: June 19, 2020	/s/ Charles Carter	
 	Charles Carter	
 	Chief Financial Officer	

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Exhibit 10.1

 

 

 

GI Dynamics, Inc.

 

Convertible Note Purchase Agreement

 

 

 

 

 

  

 
GI Dynamics, Inc.
 
Convertible Note Purchase Agreement
 
This Convertible Note Purchase Agreement (this “Agreement”) is made as of the 18th day of June, 2020 (the “Effective Date”) among GI Dynamics, Inc., a Delaware corporation (the “Company”), and the persons and entities (each individually, a “Purchaser,” and collectively, the “Purchasers”) named on the Schedule of Purchasers attached hereto (the “Schedule of Purchasers”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Notes (as defined below).
 
The parties hereby agree as follows:
 
	1.	Terms and Amount of the Notes	
 
1.1 The Notes. Subject to the terms of this Agreement, each Purchaser agrees to purchase from the Company, and the Company agrees to issue and sell to each Purchaser, one or more unsecured convertible promissory notes in the aggregate principal amount of US$750,000, in substantially the form attached hereto as Exhibit A (the “Notes”). Each Purchaser’s Note shall have a principal amount equal to the amount of consideration paid by such Purchaser for such Note, as set forth opposite such Purchaser’s name on the Schedule of Purchasers attached hereto (the “Loan Amount”). Each Note may be converted into any of the current or future authorized class or series of capital stock of the Company issuable upon conversion of the Notes (as defined below) of the Company as provided in such Note.
 
	2.	The Closing	
 
2.1 Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall be held on the Effective Date or at such other time as the Company and the Purchasers shall agree (the “Closing Date”).
 
2.2 Deliveries.
 
(a) At or prior to the Closing, each Purchaser shall, in accordance with the terms of this Agreement, deliver to the Company: (i) this Agreement duly executed by such Purchaser; (ii) a wire transfer of immediately available funds in an amount equal to such Purchaser’s Loan Amount; and (iii) such other documents relating to the transactions contemplated by this Agreement as the Company shall reasonably require.
 
(b)  At or prior to the Closing, the Company shall, in accordance with the terms of this Agreement, deliver to each Purchaser: (i) this Agreement duly executed by the Company; (ii) the Notes required to be issued in connection with the delivery of such Purchaser’s Loan Amounts; and (iii) such other documents relating to the transactions contemplated by this Agreement as the Purchasers shall reasonably require.

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	3.	Representations, Warranties and Covenants of the Company	
 
The Company hereby represents and warrants to the Purchasers, as of the date hereof and as of the Closing Date, as follows:
 
3.1 Organization; Good Standing and Qualification. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own its property and carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in the Commonwealth of Massachusetts and in each jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary.
 
3.2 Corporate Power. The Company has all requisite corporate power to (i) execute and deliver this Agreement and the Notes and any other document provided for herein or by any of the foregoing (collectively, as the same may from to time be amended, modified, supplemented or restated, the “Transaction Documents”) and to carry out and perform its obligations under the terms of the Transaction Documents.
 
(a) Authorization. The execution and delivery of each of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Notes and the issuance of the current or future authorized class or series of capital stock of the Company, when issued, pursuant to the terms and conditions of the Notes (the “Capital Stock,” and, together with the Notes, the “Securities”), was duly authorized by the Company’s board of directors. Other than those consents and authorizations obtained by the Company prior to the date hereof that are in full force and effect on the Closing Date and except for any required stockholder approval of the Company as set forth in this Agreement, no further consent or authorization is required by the Company, its board of directors or its stockholders. Each of the Transaction Documents has been duly executed and delivered by the Company, and constitutes the legal, valid and binding obligations of the Company enforceable in accordance with its terms, subject to laws of general application relating to equitable principles, bankruptcy, insolvency and the relief of debtors. Upon conversion of the Notes into Capital Stock in accordance with the provisions of this Agreement and such Notes, the Capital Stock will be validly issued, fully paid and nonassessable and free of any liens or encumbrances. The issuance of the Notes (and the Capital Stock) pursuant to the provisions of this Agreement will not give rise to any preemptive rights or rights of first refusal granted by the Company, and the Notes (and the Capital Stock) will be issued in compliance with all applicable federal and state securities laws, and will be free of any liens or encumbrances; provided, however, that the Notes may be subject to restrictions on transfer as set out in the Transaction Documents or under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time the transfer is proposed. The issuance of the Notes (and the Capital Stock) does not and will not cause any dilution adjustment in any existing securities of the Company, and each Purchaser hereby waives any dilution adjustment that might otherwise result from the issuance of such Purchaser’s Note (and the Capital Stock) pursuant to the terms of any existing security held by such Purchaser.
 
3.3 Governmental Consents. All consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with, any governmental authority, required on the part of the Company in connection with the valid execution and delivery of the Transaction Documents, the issuance of the Notes or the consummation of any other transaction contemplated hereby shall have been obtained and will be effective at the Closing, except for (i) any stockholder approval described in this Agreement and (ii) any notices required or permitted to be filed with certain foreign, state and/or federal securities commissions or stock exchanges, which notices will be filed on a timely basis.

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3.4 No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the certificate of incorporation or by-laws of the Company or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company is a party or by which the Company is bound, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree including federal and state securities laws and regulations applicable to the Company or by which any property or asset of the Company is bound or affected.
 
3.5 Offering. Assuming the accuracy of the representations and warranties of the Purchasers contained in Section 4 hereof, the issuance of the Notes is and will be exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Act”), and has been registered or qualified (or is exempt from registration and qualification) under the registration, permit, or qualification requirements of all applicable state securities laws.
 
3.6 Use of Proceeds. The Company shall use the proceeds from the sale and issuance of the Notes for general corporate purposes.
 
3.7 Delivery of SEC Filings. The Company has provided each Purchaser with copies of the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and all other reports filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “1934 Act”), since the filing of the Annual Report on Form 10-K and prior to the date hereof (collectively, the “SEC Filings”); which reports represent all filings required of the Company pursuant to the 1934 Act for such period. During the two (2) years prior to the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of 1934 Act (all of the foregoing filed prior to the date hereof or prior to the date of the Closing, and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). As of their respective filing dates, or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing, with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective filing dates, or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

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3.8 Conduct of Business; Regulatory Permits. To the knowledge of the Company, the Company is not in violation of any term of, or in default under, its certificate of incorporation, as amended and as in effect on the date hereof, or any certificate of designation of an outstanding series of stock of the Company or its by-laws, as amended and as in effect on the date hereof. The Company is not in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company, and the Company does not and will not conduct its business in violation of any of the foregoing, except for possible violations which could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company. Without limiting the generality of the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Australian Securities Exchange (“ASX”) and, assuming the Notes are issued, has no knowledge of any facts or circumstances that would reasonably lead to a suspension of its securities by the ASX in the foreseeable future other than a possible delisting from the Official List of the ASX in accordance with ASX Listing Rules. Except as set forth in its SEC Filings, the Company possesses all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct its business, and the Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.
 
3.9 Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by the SEC, the ASX, any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries or affiliates, the Securities or any of the Company’s or its subsidiaries’ officers or directors, whether of a civil or criminal nature or otherwise, which, if adversely determined, would have a material adverse effect on the Company’s business or financial condition.
 
3.10 Securities Laws. The Company shall timely make all filings and reports relating to the issuance of the Securities required under applicable securities laws, including filing any notice of sale of securities required by applicable law or regulation and complying with any applicable “blue sky” laws of the states of the United States. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 3.10. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any “security” (as defined in the Act) that could be integrated with the issuance of the Notes in a manner that could require the registration of the Notes under the Act.
 
3.11 Efforts to Obtain Stockholder Approval. The Company shall use its commercially reasonable efforts to obtain any stockholder approval described in Section 2(c) of the Notes.

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	4.	Representations and Warranties of the Purchasers	
 
Each Purchaser, severally and not jointly, hereby represents and warrants to the Company as follows:
 
4.1 Purchase for Own Account. Each Purchaser understands that the Securities have not been registered under the Act and such Purchaser is acquiring the Securities for his or its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted from registration. Each Purchaser represents that its acquisition of any Securities under the Notes will be acquired solely for his or its own account and beneficial interest for investment and not for sale or with a view to distribution of the Securities or any part thereof, has no present intention of selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the same.
 
4.2 Information and Sophistication. Without lessening or obviating the representations and warranties of the Company set forth in Section 3, each Purchaser hereby: (i) acknowledges that he or it has received all the information it has requested from the Company including, but not limited to, the SEC Filings, (ii) represents that he or it has had an opportunity to ask questions and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities and (iii) further represents that he or it has such knowledge and experience in financial and business matters that he or it is capable of evaluating the merits and risk of this investment.
 
4.3 Ability to Bear Economic Risk. Each Purchaser acknowledges that investment in the Securities involves a high degree of risk, and represents that he or it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of his or its investment.
 
4.4 Rule 144. Each Purchaser is aware that none of the Securities may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three (3) month period not exceeding specified limitations.
 
4.5 Accredited Investor Status. Each Purchaser is an “accredited investor” as such term is defined in Rule 501 under the Act.
 
4.6 Regulation S. In issuing and selling the Securities, the Company may be relying upon the “safe harbor” provided by Regulation S and/or on Section 4(2) under the Act; it is a condition to the availability of the Regulation S “safe harbor” that the Securities not be offered or sold in the United States or to a U.S. person until the expiration of a one-year “distribution compliance period” (or a six-month “distribution compliance period,” if the issuer is a “reporting issuer,” as defined in Regulation S) following the closing; and notwithstanding the foregoing, prior to the expiration of the one-year “distribution compliance period” (or six-month “distribution compliance period,” if the issuer is a “reporting issuer,” as defined in Regulation S) after the closing (the “Restricted Period”), the Notes may, subject to any restrictions contained in the Notes be offered and sold by the holder thereof only if such offer and sale is made in compliance with the terms of this Agreement and the Notes, and either: (A) if the offer or sale is within the United States or to or for the account of a U.S. person (as such terms are defined in Regulation S), the securities are offered and sold pursuant to an effective registration statement or pursuant to Rule 144 under the Act or pursuant to an exemption from the registration requirements of the Act; or (B) the offer and sale is outside the United States and to other than a U.S. person. If a Purchaser is not a United States person, such Purchaser hereby represents that he or it is satisfied as to the full observance of the laws of the jurisdiction applicable to such Purchaser in connection with any invitation to subscribe for the Securities, including (i) the legal requirements within such Purchaser’s jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of such Securities. Each Purchaser’s subscription and payment for, and his or its continued beneficial ownership of the Securities, will not violate any applicable securities or other laws of such Purchaser’s jurisdiction that are applicable to such Purchaser.

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4.7 Rule 506(d). If a Purchaser beneficially owns twenty percent (20%) or more of the outstanding voting securities of the Company, calculated in accordance with Rule 506(d) of Regulation D of the Act, or may designate a director of the Company, such Purchaser hereby represents and warrants to the Company that he or it has not been convicted of any of the felonies or misdemeanors or been subject to any of the orders, judgments, decrees or other conditions set forth in Rule 506(d) of Regulation D of the Act.
 
4.8 Further Limitations on Disposition. Without in any way limiting the representations set forth above and subject to any restrictions contained in the Notes, each Purchaser further agrees not to make any disposition of all or any portion of the Securities unless and until:
 
(a) There is then in effect a Registration Statement under the Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or
 
(b) Such Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Act or any applicable state securities laws.
 
(c) Notwithstanding the provisions of paragraphs (a) and (b) above, but subject to the terms of the Notes, no such registration statement or opinion of counsel shall be necessary for a transfer by a Purchaser to (i) any shareholder, partner, retired partner, member or former member of such Purchaser for no additional consideration or (ii) any affiliate, including affiliated funds, for no additional consideration, in each case if all transferees agree in writing to be subject to the terms hereof to the same extent as if they were such Purchaser hereunder.
 
(d) Notwithstanding the provisions of paragraphs (a) and (b) above, the Company acknowledges and agrees that the Securities may be pledged by each Purchaser, and his or its successors and assigns, in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities, provided that any pledge of those Securities does not constitute an offer of those Securities for sale within 12 months after their issue such that it would require disclosure under section 707(3) of the Corporations Act 2001 (Cth). The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Person effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request, at each Purchaser’s expense, in connection with a pledge of the Securities to such pledgee by such Purchaser and any successor or assignee.

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4.9 Legends. Each Purchaser understands that any securities issued upon conversion of the Notes may bear one or all of the following legends:
 
(a)  “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SALE OR DISTRIBUTION OF SUCH SHARES MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.”
 
(b) Any legend set forth in or required by another section of this Agreement or the Notes.
 
(c) Any legend required by the securities laws of any state or country to the extent such laws are applicable to the securities represented by the certificate so legended.
 
4.10 Market Standoff. Each Purchaser agrees not to sell any of his or its Securities during a period specified by the representative of the underwriters of Capital Stock (not to exceed one hundred eighty (180) days) following the effective date of the initial registration statement of the Company filed under the Act, so long as all officers, directors, and 1% stockholders have executed similar agreements and are similarly restricted from selling the Company’s stock.
 
4.11 Foreign Ownership Restrictions. Each Purchaser acknowledges and agrees that in order to ensure that US persons do not purchase any CDIs that may be issued to them, a number of procedures governing the trading and clearing of CDIs, while the Company is listed on the ASX, will be implemented, including the application to any CDIs issued to them of the status of Foreign Ownership Restrictions securities under the ASX Settlement Operating Rules and the addition of the notation “FORUS” to the CDI description on ASX trading screens and elsewhere, which will inform the market of the prohibition of US persons acquiring CDIs.
 
4.12 D&O Tail Policy. Each Purchaser acknowledges and agrees that, on or after the Closing Date, the Company shall purchase a “tail” policy under the Company’s existing directors’ and officers’ liability insurance policy, which (a) has a claims period of six (6) years from its effective date of coverage (the “Claims Period”), (b) provides a level of coverage comparable to the coverage under the Company’s existing directors’ and officers’ liability insurance policy and (c) remains in full force and effect for the duration of the Claims Period.
 
4.13 Employee Severance Escrow. Each Purchaser acknowledges and agrees that, within 10 days of the Closing Date, the Company shall enter into an escrow agreement with an escrow agent and the Company’s employees and officers, under which the Company will irrevocably transfer to the escrow agent funds in an amount equal to, and for the purposes of securing, the aggregate amount of severance bonuses/benefits payable by the Company to its employees and officers. Such escrow agreement shall provide, among other things, that in the event an employee or officer earns a severance bonus/benefit pursuant to the severance or employment agreement existing at the time such severance bonus/benefit is earned, the escrow agent shall release to such employee or officer, from the escrow account, an amount equal to such employee’s or officer’s severance bonus/benefit.
 
4.14 Mutual Releases. The parties hereby agree to use commercially reasonable efforts to enter into mutual releases of claims between each Purchaser, on the one hand, and each current member of the Company’s board of directors (each, a “Director”) and each current executive officer of the Company (each, an “Officer”), on the other hand, effective as of and upon the date a Director or an Officer ceases to serve on the Company’s board of directors or as an executive officer of the Company, as applicable, such release on market terms for matters of this nature and otherwise in a form of document as may be agreed to by such Purchaser and each such Director or Officer, acting reasonably.

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	5.	Events of Default; Remedies	
 
5.1 Events of Default. Each of the following shall constitute an event of default (each, an “Event of Default”) under this Agreement and the applicable Note:
 
(a) Any default in the payment, when the same becomes due and payable, of principal under, or interest in respect of, the Note, including, but not limited to, the failure by the Company to pay on the Maturity Date or upon a Change of Control pursuant to Section 2(b) of the Note, any and all unpaid principal, accrued interest and all other amounts owing under this Agreement and such Note;
 
(b) The Company files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any general assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;
 
(c) An involuntary petition is filed against the Company (unless such petition is dismissed or discharged within sixty (60) days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of the Company;
 
(d) The Company’s stockholders (other than the Purchasers) or board of directors affirmatively vote to liquidate, dissolve, or wind up the Company or the Company otherwise ceases to carry on its ongoing business operations;
 
(e) If (i) a material portion of the Company’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in thirty (30) days, (ii) the Company is enjoined, restrained, or prevented by a court order or other order of a governmental body from conducting its business, or (iii) notice of lien, levy, or assessment is filed against any material portion of the Company’s assets by any court order or other order of any governmental body and it is not paid within sixty (60) days after the Company received notice thereof; or
 
(f) The Company shall fail in any material respect to observe or perform any covenant, obligation, condition or agreement contained in this Agreement or the Note (other than a failure to pay as specified in Section 5.1(a) hereof) and such failure shall continue for thirty (30) days after the Company’s receipt of written notice thereof.
 
5.2 Remedies. Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Sections 5.1(b) or 5.1(c) hereof) and at any time thereafter during the continuance of such Event of Default, the applicable Purchaser or any holder of such Purchaser’s Note may, by written notice to the Company, declare all outstanding obligations payable by the Company under the Note and this Agreement to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Sections 5.1(b) or 5.1(c) hereof, immediately and without notice, all outstanding obligations payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. In the event of any Event of Default, the Company shall pay all reasonable attorneys’ fees and costs incurred by the applicable Purchaser in enforcing and collecting such Purchaser’s Note and the other Transaction Documents. No right or remedy conferred upon or reserved to any Purchaser under this Agreement is intended to be exclusive of any other right or remedy, and every right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now and hereafter existing under applicable law.
 
	6.	Conditions to Closing	
 
6.1 Conditions to Each Purchaser’s Obligations at the Closing. The obligations of each Purchaser under the Transaction Documents are subject to the fulfillment on or before the Closing of each of the following conditions, which may be waived in writing by such Purchaser:
 
(a) Representations and Warranties. The representations and warranties of the Company contained in Section 3 shall be true on and as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specified date).
 
(b) Performance. The Company shall have performed and complied with all agreements, obligations, and conditions contained in the Transaction Documents that are required to be performed or complied with by it on or before the Closing.
 
(c) Qualifications. All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Notes shall be duly obtained and effective as of the Closing.
 
(d) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to each Purchaser’s counsel, which shall have received all such counterpart original and certified copies of such documents as it may reasonably request.

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6.2 Conditions to Company’s Obligations at the Closing. The obligations of the Company under the Transaction Documents are subject to the fulfillment on or before the Closing of each of the following conditions, which may be waived in writing by the Company:
 
(a) Representations and Warranties. The representations and warranties made by each Purchaser in Section 4 hereof shall be true and correct on the Closing Date.
 
(b) Performance. Each Purchaser shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.
 
	7.	Miscellaneous	
 
7.1 Binding Agreement. 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, expressed or implied, is intended to confer upon any third party any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
 
7.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of New York.
 
7.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
 
7.4 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.
 
7.5 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications to the Company shall be sent to the Company at the addresses set forth below in this Section 7.5 and all communications to any Purchaser shall be sent to such Purchaser at his or its address set forth on the Schedule of Purchasers (or at such other address as the Company or any Purchaser may designate by ten (10) days advance written notice given in accordance with this Section 7.5.
 
If to the Company:
 
GI DYNAMICS, INC.
320 Congress Street
Floor 3
Boston, MA 02205
Attention: Chief Executive Officer
 
With a copy (that shall not constitute notice) to:
 
Blake Baron, Esq.
Mitchell Silberberg & Knupp LLP
437 Madison Avenue, 25th Floor
New York, New York 10022
Email: bjb@msk.com
 
7.6 Amendment; Modification; Waiver. No amendment, modification or waiver of any provision of this Agreement or consent to departure therefrom shall be effective unless in writing and approved by the Company and the Purchasers; provided, that, while the Company is admitted to the Official List of the ASX, any proposed amendment, modification or waiver of any provision of this Agreement must not contravene the ASX Listing Rules.
 
7.7 Entire Agreement. This Agreement, the schedules and exhibits hereto, and the Notes constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other party in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.
 
9

 
In Witness Whereof, the parties have executed this Convertible Note Purchase Agreement as of the date first written above.

	COMPANY:	
 	 	
 	GI Dynamics, Inc.	
 	 	 	
 	By:	/s/ Scott Schorer	
 	Name: 	Scott Schorer	
 	Title:	President & CEO	
 	 	 	
 	PURCHASERS:	
 	 	 	
 	Crystal Amber Fund Limited	
 	 	 	
 	By:	/s/ Mark Huntley	
 	Name:	Mark Huntley	
 	Title:	Executed  by Crystal Amber Asset  Management (Guernsey) Ltd as Investment  Manager of Crystal Amber Fund Limited	
  
[Signature Page to Convertible Note Purchase Agreement]

 
 
SCHEDULE OF PURCHASERS

Purchaser	 	Principal Amount of
Purchaser’s Note	 	Purchaser’s Address	
Crystal Amber Fund Limited	 	US$750,000	 	Crystal Amber Fund Limited
PO Box 286
Floor 2, Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 4LY
 
With a copy (that shall not constitute
notice) to:
 
Estera - GG - Crystal Amber Team
CrystalAmberTeam@estera.com	
TOTAL	 	US$750,000	 	 	

 
 
Exhibit A
 
Form of Unsecured Convertible Promissory Note
 
See Exhibit 10.2 to the Current Report on Form 8-K filed on June 19, 2020.

 

 

 

 

 

 

 

Exhibit10.2 
 
THIS UNSECURED CONVERTIBLE PROMISSORY NOTE (THIS “NOTE”) AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
 
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR LAWS OF ANY OTHER RELEVANT COUNTRY.
 
UNSECURED CONVERTIBLE PROMISSORY NOTE
 
US$750,000	June 18, 2020	
 	Boston, Massachusetts	
 
For value received, GI Dynamics, Inc., a Delaware corporation (“Payor”), hereby promises to pay to the order of Crystal Amber Fund Limited (the “Holder”), an aggregate principal sum of US$750,000, or such other amount as shall become due after giving effect to Section 2(b) hereof, with interest on the outstanding principal amount at the rate of five percent (5%) per annum. Interest (i) shall commence on the date hereof and shall be compounded annually based on a 365-day year and (ii) shall continue on the outstanding principal until paid in full pursuant to Section 1(b) below or converted pursuant to Section 2 below.
 
1. Payment and Maturity
 
(a) Reference is hereby made to that certain Convertible Note Purchase Agreement (the “Purchase Agreement”), dated as of even date herewith, between Payor and the Holder. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Purchase Agreement.
 
(b) If this Unsecured Convertible Promissory Note (this “Note”) has not already been paid in full or, if permitted by the terms of this Note, converted in accordance with the terms of Section 2 below, the entire outstanding principal balance of this Note and all unpaid accrued interest thereon shall be due and payable on demand; provided; however, that such demand cannot be made prior to the six (6) month anniversary of the date hereof (the “Maturity Date”). All payments shall be in lawful money of the United States of America. All payment shall be applied first to accrued interest, and thereafter to principal. If any payments on this Note become due on a Saturday, Sunday or a public holiday under the laws of the State of New York, such payment shall be made on the next succeeding business day and such extension of time shall be included in computing interest in connection with such payment.
 
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(c) Upon the occurrence and during the continuance of any Event of Default, the unpaid principal balance of this Note shall bear interest at the eight percent (8%) per annum, including after the commencement of, and during the pendency of, any bankruptcy or other insolvency proceeding.
 
2. Conversion
 
(a) Qualified Equity Financing Conversion. Following the delisting of Payor from the Official List of the ASX, upon the closing of a Qualified Equity Financing (as defined below), all of the then outstanding unpaid principal amount of this Note, together with any interest accrued but unpaid thereon (such principal amount and interest, the “Outstanding Amount”) shall be automatically converted into a number of shares of Capital Stock issued in the Qualified Equity Financing (the “Conversion Shares”). The number of Conversion Shares to be issued by Payor upon such conversion shall equal the quotient obtained by dividing (x) the Outstanding Amount by (y) the Conversion Price (defined below). At least five (5) days prior to the closing of the Qualified Equity Financing, Payor will notify the Holder in writing of the terms of the Conversion Shares that are expected to be issued pursuant to the Qualified Equity Financing. As used herein, a “Qualified Equity Financing” means the next round of equity financing of Capital Stock in a single transaction or a series of related transactions involving the issuance, following the date hereof, of the Payor’s securities to one or more investors, from which Payor receives gross proceeds of not less than US$8 million (excluding the conversion of this Note and excluding conversion of any other debt that is outstanding as of immediately prior to the issuance of this Note). “Conversion Price” means the product of (x) eighty percent (80%) and (y) the lowest per share purchase price of the Capital Stock issued in the Qualified Equity Financing.
 
(b) Change of Control. Upon the consummation of a Change of Control prior to the Maturity Date, the Holder may, at its option, (i) receive an amount in cash equal to all unpaid interest that has accrued to date hereunder and 110% of the then outstanding unpaid principal amount of this Note in full satisfaction of all obligations under this Note, or (ii) subject to the provisions of Section 6(a) hereof, retain the Note, including, without limitation, the conversion rights set forth in Section 2(a) hereof. A “Change of Control” means any transaction or series of related transactions that could result in any of the following: (i) the sale of all or substantially all of the assets of Payor to any person or related group of persons (other than the Holder or a person that directly or indirectly controls, is controlled by, or is under common control with, the Holder), (ii) the acquisition, directly or indirectly, by any person or related group of persons (other than Payor or the Holder or a person that directly or indirectly controls, is controlled by, or is under common control with, Payor or the Holder) of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Payor’s outstanding securities pursuant to a tender or exchange offer made directly to Payor’s stockholders, (iii) a merger or consolidation of Payor, other than for the purpose of re-domiciling Payor, unless following such transaction or series of transactions, the holders of Payor’s securities prior to the first such transaction continue to hold more than fifty percent (50% percent) of the voting rights and equity interests in the surviving entity, (iv) a recapitalization, reorganization or other transaction involving Payor that constitutes or results in a transfer of more than one-third of the equity interests in Payor, unless following such transaction or series of transactions, the holders of Payor's securities prior to the first such transaction continue to hold more than fifty percent (50%) of the voting rights and equity interests in the surviving entity or acquirer or (v) the execution by Payor or its controlling stockholders of an agreement providing for or reasonably likely to result in any of the foregoing events. For the avoidance of doubt, the Qualified Equity Financing shall not constitute a Change of Control.
 
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(c) Stockholder Approval. Notwithstanding anything to the contrary contained herein or in the Purchase Agreement, in the event that the rules of the ASX (or any other exchange on which the Payor’s common stock is then traded) require the Payor to obtain stockholder approval to issue the securities pursuant to Section 2(a) hereof, the Payor shall convene a meeting of stockholders to seek approval to issue those securities. For the avoidance of doubt, while the Payor is listed on the ASX and the rules of the ASX require the Payor to obtain stockholder approval to issue any of the securities pursuant to Section 2(a) hereof, no conversion may occur under this Note, unless and until the Payor has obtained stockholder approval pursuant to this Section 2(c).
 
(d) Fractional Shares. No fractional shares of Payor’s Capital Stock will be issued upon conversion of this Note. In lieu of any fractional share to which the Holder would otherwise be entitled, Payor will pay to the Holder in cash the amount of the unconverted principal and interest balance of this Note that would otherwise be converted into such fractional share.
 
(e) Holder Representations and Warranties; Transfer and Assignment. The representations and warranties and rights and obligations of transfer and assignment of Holder that are set forth in Section 4 of the Purchase Agreement with respect to the shares of Capital Stock issuable to Holder are hereby made a part of this Note and incorporated herein by this reference.
 
(f) Restriction on Transfer. Notwithstanding any other provision of this Note or the Purchase Agreement, the Holder may not sell or transfer any shares of capital stock, including, but not limited to, common stock or CHESS Depositary Interests (“CDIs”), issued to the Holder pursuant to Section 2(a) hereof (“Restricted Securities”), or grant, issue or transfer interests in, or options over, any Restricted Securities, at any time within 12 months after the issue of those Restricted Securities (“Restricted Period”) except as permitted by section 708 or any other applicable section of the Corporations Act 2001 (Cth). Before commencement of the Restricted Period, to prevent any such restricted dealings in the Restricted Securities during the Restricted Period, the Holder agrees to (i) the application of a holding lock to the Restricted Securities by Payor’s securities registry for the Restricted Period, and (ii) enter into any other documents reasonably necessary to prevent any such restricted dealings in the Restricted Securities during the Restricted Period.
 
3. Default; Remedies
 
(a) The occurrence of any Event of Default described in Section 5.1 of the Purchase Agreement shall be an Event of Default hereunder.
 
(b) Upon the occurrence and during the continuance of any Event of Default (other than an Event of Default described in Sections 5.1(b) or 5.1(c) of the Purchase Agreement), all unpaid principal on this Note, accrued and unpaid interest thereon and all other amounts owing hereunder shall, at the option of the Holder, and, upon the occurrence of any Event of Default pursuant to Sections 5.1(b) or 5.1(c) of the Purchase Agreement, automatically, be immediately due, payable and collectible by Holder pursuant to applicable law.
 
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(c) Upon the occurrence and during the continuance of any Event of Default, Payor shall pay, on demand, all reasonable attorneys’ fees and court costs incurred by Holder in enforcing and collecting this Note.
 
4. Prepayment. Payor may not prepay this Note prior to the Maturity Date without the consent of the Holder.
 
5. Non-Transferable. The Holder may not sell or transfer this Note, or grant, issue or transfer interests in, or options over, this Note at any time within twelve (12) months after the date hereof except as permitted by section 708 or any other applicable section of the Corporations Act 2001 (Cth).
 
6. Fundamental Transactions; Corporate Events.
 
(a) Fundamental Transactions. If, at any time while this Note is outstanding, (i) Payor effects any merger or consolidation of Payor with or into another person pursuant to which the Conversion Shares are effectively converted and exchanged, (ii) Payor effects any sale of all or substantially all of its assets in one or a series of related transactions pursuant to which the Conversion Shares are effectively converted and exchanged, (iii) any tender offer or exchange offer (whether by Payor or another person) is completed pursuant to which at least a majority of the outstanding common stock of Payor is tendered and exchanged for other securities, cash or property or (iv) Payor effects any reclassification of the Conversion Shares or any compulsory share exchange pursuant to which the Conversion Shares are effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of the Conversion Shares) (in any such case, a “Fundamental Transaction”), then prior to any subsequent conversion of this Note pursuant to Section 2(a) hereof, and subject to the provisions of Section 2(b) hereof, the Holder shall be entitled to require the surviving entity to issue to the Holder an instrument identical to this Note (with an appropriate adjustment to the conversion price(s)) such that the Holder may receive stock (or a beneficial interest in stock) of the surviving company’s stock. Subject to the provisions of Section 2(b) hereof, the terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (a) and insuring that this Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
 
7. Waiver; Payment of Fees and Expenses. Payor waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses. The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the full extent permitted by law. No delay by the Holder shall constitute a waiver, election or acquiescence by it.
 
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8. Cumulative Remedies. The Holder’s rights and remedies under this Note and the Purchase Agreement shall be cumulative. No exercise by the Holder of one right or remedy shall be deemed an election, and no waiver the by Holder of any Event of Default shall be deemed a continuing waiver of such Event of Default or the waiver of any other Event of Default.
 
9. Miscellaneous
 
(a) Governing Law. The terms of this Note shall be construed in accordance with the laws of the State of New York, as applied to contracts entered into by New York residents within the State of New York, and to be performed entirely within the State of New York.
 
(b) Exclusive Jurisdiction. All actions and proceedings arising out of, or relating to, this Agreement shall be heard and determined in any state or federal court sitting in the State of New York, County of New York. The undersigned, by execution and delivery of this Agreement, expressly and irrevocably consent and submit to the personal jurisdiction of any of such courts in any such action or proceeding; and (ii) waive any claim or defense in any such action or proceeding based on any alleged lack of personal jurisdiction, improper venue or forum non conveniens or any similar basis.
 
(c) Successors and Assigns; Assignment. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Payor may not assign this Note or delegate any of its obligations hereunder without the written consent of the Holder. Subject to Section 5 hereof, the Holder may assign this Note and its rights hereunder without the consent of Payor, subject to compliance with Section 4 of the Purchase Agreement.
 
(d) Titles and Subtitles. The titles and subtitles used in this Note are used for convenience only and are not to be considered in construing or interpreting the Note.
 
(e) Notices. All notices required or permitted hereunder by the Holder of this Note to Payor shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the principal offices of Payor, to the attention of the Chief Executive Officer, (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery. Any refusal of delivery of a notice by Payor shall be deemed to have been delivered.
 
(f) Amendment; Modification; Waiver. No term of this Note may be amended, modified or waived without the written consent of Payor and the Holder provided that, while Payor is admitted to the Official List of the ASX, any amendment, modification or waiver must not contravene the ASX Listing Rules.
 
(g) Counterparts. This Note may be executed in two or more counterparts, each of which shall be deemed and original, but all of which together shall constitute one and the same instrument.
 
(h) No Voting Rights. This Note does not carry any voting rights at stockholder meetings of Payor.

(i) Participation Rights. The Holder is not by virtue of holding this Note entitled to participate in any new issue of securities made by Payor to stockholders without first converting the Note.
 
(j) Equal Ranking. The Conversion Shares issued pursuant to a conversion of this Note will rank, from the date of issue, equally with the shares of Capital Stock issued by Payor in the Qualified Equity Financing, in all respects.
 
(k) Reorganizations. While Payor is admitted to the Official List of the ASX, the Note and all its terms shall comply with the ASX Listing Rules.
 
[Signature page follows]
 
5

In Witness Whereof, the parties have executed this Unsecured Convertible Promissory Note as of the date first written above.
 
 	GI Dynamics, Inc.	
 	 	 	
 	By:	/s/ Scott Schorer 	
 	Name:	Scott Schorer	
 	Title:	President & CEO	
 
Agreed to and Accepted:
 
Crystal Amber Fund Limited

By:	/s/ Mark Huntley	 	
Name:	Mark Huntley	 	
Title:	Executed by Crystal Amber Asset	 	
 	Management (Guernsey) Ltd as Investment	 	
 	Manager of Crystal Amber Fund Limited	 	

6

 

Exhibit 99.1

 

 
Boston, United States
Sydney, Australia
19 June 2020 AEST

 

 

 

 

 

 
 
Chief Financial Officer / Secretary
United States:
Charles Carter
+1 (781) 357-3263
ccarter@gidynamics.com

Investor Relations
United States:
Janell Shields
+1 (781) 357-3280
investor@gidynamics.com

Placement of $750,000 Unsecured Convertible Promissory Note
 
Update on Potential Financing and Special Meeting

BOSTON and SYDNEY — 19 June 2020 — GI Dynamics® Inc. (ASX:GID) (“GID” or the “Company”), a medical device company that is developing EndoBarrier® for patients with type 2 diabetes and obesity, is pleased to announce that it has issued a US$750,000 Unsecured Convertible Promissory Note to Crystal Amber Fund Limited (“Crystal Amber”), the Company’s largest stockholder and a Related Party for Australian Securities Exchange (“ASX”) purposes.
 
Issuance of an Unsecured Convertible Promissory Note
 
The Company confirms that it has issued and sold an Unsecured Convertible Promissory Note in the principal amount of US$750,000 to Crystal Amber (the “Bridge Note”).
 
The Bridge Note will accrue annually compounded interest at a rate of 5 percent (5%), except under a state of default which would increase the rate to 8 percent (8%). The Bridge Note principal and all unpaid accrued interest will become due and payable, at Crystal Amber’s discretion, on or after the six-month anniversary of its issuance.
 
Subject to the Company’s delisting from the ASX, at the close of the next equity financing totaling more than US$8 million by the Company (the “Qualified Financing”), the Bridge Note principal and all unpaid accrued interest will automatically convert into shares of capital stock issued in the Qualified Financing at a conversion price equal to eighty percent (80%) of the price paid per share of such capital stock in the Qualified Financing. If the delisting proposal is not approved and the Company remains listed on the ASX at the close of the Qualified Financing, Crystal Amber will not be permitted to convert the outstanding balance into CDIs or common stock of the Company unless and until such conversion feature has been approved by stockholders of the Company (this feature is similar to the terms of the previous convertible notes that have been issued to Crystal Amber).

 

 

 
Boston, United States
Sydney, Australia
19 June 2020 AEST

 

 

 

 

 

 
 
Chief Financial Officer / Secretary
United States:
Charles Carter
+1 (781) 357-3263
ccarter@gidynamics.com

Investor Relations
United States:
Janell Shields
+1 (781) 357-3280
investor@gidynamics.com
 
If a Change of Control (as defined in the Bridge Note) occurs prior to the maturity date of the Bridge Note, Crystal Amber will have the right to exercise an option to receive a cash payment of all accrued unpaid interest plus 110 percent (110%) of the outstanding principal in full satisfaction of the Bridge Note.
 
The Company will use the funds raised from the issuance of the Bridge Note will be used for general corporate purposes.
 
The material terms of the Bridge Note are outlined in Attachment 1.
 
Confirmation of Special Meeting and Status of further Potential Fundraising
 
The Company’s Special Meeting to consider the proposed delisting of the Company from the Official List of the ASX was originally scheduled to be held on 7 June 2020 at 6:00 pm (EDT), which was 8 June 2020 at 8:00 am (AEST), as announced on 27 May 2020 (AEST).
 
Due to the lack of certainty in relation to a financing that would allow the Company to maintain operations for the foreseeable future, the Special Meeting was initially postponed to 16 June 2020 (17 June 2020 (AEST) and on 15 June 2020 (AEST) the Special Meeting was further postponed to 20 June 2020 at 6:00 pm (EDT), which is 21 June 2020 at 8:00 am (AEST).
 
As detailed above, the Company has now secured short term funding under the Bridge Note.
 
In relation to a longer term financing beyond the Bridge Note, at this stage the Company confirms that it has not been able to agree to terms of a “Potential Fundraising” (as defined in the proxy statement and notice of special meeting that was announced on ASX on 26 May 2020 (AEST) (“Proxy Statement”)). The Company confirms, however, that it is continuing negotiations with various parties in this regard (including Crystal Amber). As detailed in the Proxy Statement, the investors that the Company continues to negotiate with would require the Company to be unlisted as a condition of any investment.

2

 

 
Boston, United States
Sydney, Australia
19 June 2020 AEST

 

 

 

 

 

 
 
Chief Financial Officer / Secretary
United States:
Charles Carter
+1 (781) 357-3263
ccarter@gidynamics.com

Investor Relations
United States:
Janell Shields
+1 (781) 357-3280
investor@gidynamics.com
 
The Company wishes to confirm, however, that there is no guarantee that additional funding will be able to be secured from Crystal Amber or any other third party.
 
With the Bridge Note now secured, and negotiations continuing with potential investors who are only interested in potentially investing in the Company if it is unlisted, the Company is proposing to proceed with the Special Meeting as currently scheduled.
 
Updated details of how to attend and vote at the Special Meeting are set out below. If you have any questions on this process, please contact the Company Secretary.
 
Meeting Details and Voting Details
 
The Special Meeting will be held as a webcast via the online platform at https://agmlive.link/GID20 and details on how to access the meeting can be found on the Company’s website or within the Proxy Statement that was attached to the Company’s announcement on 27 May 2020 AEST.
 
If you have already voted your shares of common stock or directed CHESS Depositary Nominees Pty Ltd (“CDN”) to vote your CHESS Depositary Interests (“CDIs”) by completing the CDI Voting Instruction Form, your prior vote will remain voted without the need for you to take any additional action. The polls have now closed for CDI holders to change their vote or cast additional votes.
 
If you held shares of common stock on the Record Date and have not yet voted, you may do so now using the directions provided in the Proxy Statement. If you held shares of common stock on the Record Date and have already voted, you may change your vote or revoke your proxy at any time before the Special Meeting in any one of the following ways:
 
	●	if you received a proxy card, by signing a new proxy card with a date later than your previously delivered proxy and submitting it as instructed in the Proxy Statement;	

 

3

 

 
Boston, United States
Sydney, Australia
19 June 2020 AEST

 

 

 

 

 

 
 
Chief Financial Officer / Secretary
United States:
Charles Carter
+1 (781) 357-3263
ccarter@gidynamics.com

Investor Relations
United States:
Janell Shields
+1 (781) 357-3280
investor@gidynamics.com

	●	by re-voting by Internet as instructed in the Proxy Statement;	
 	 	 	
	●	by notifying the Company’s corporate secretary in writing at GI Dynamics, Inc., 320 Congress Street, Boston, MA 02210, U.S.A., Attention: Corporate Secretary, before the Special Meeting that you have revoked your proxy; or	
 	 	 	
	●	by virtually attending the Special Meeting, revoking your proxy and voting via the online platform at https://agmlive.link/GID20. Virtual attendance at the Special Meeting will not in and of itself revoke a previously submitted proxy. You must specifically request during the Special Meeting that it be revoked.	
 
Your most current vote, whether by Internet or proxy card, is the one that will be counted.
 
If you are a beneficial owner and hold shares of common stock through a broker, bank or other nominee, you may submit new voting instructions by contacting your broker, bank or other nominee.
 
If you held CDIs on the Record Date, the polls have closed, and your vote will be recorded as you instructed CHESS Depositary Nominees Pty Ltd (“CDN”).
 
This announcement is being made in accordance with Rule 135c of the Securities Act of 1933, as amended, and is not intended to and does not constitute an offer to sell nor a solicitation for an offer to purchase any securities of the Company.
 
This announcement has been authorized for release by Charles Carter, chief financial officer and corporate secretary of GI Dynamics.
 
About GI Dynamics
 
GI Dynamics®, Inc. (ASX:GID) is the developer of EndoBarrier®, the first endoscopically delivered medical device for the treatment of type 2 diabetes and the reduction of obesity. EndoBarrier is not approved for sale and is limited by federal law to investigational use only. EndoBarrier is subject to an Investigational Device Exemption by the FDA in the United States and is entering concurrent pivotal trials in the United States and India.
 
Founded in 2003, GI Dynamics is headquartered in Boston, Massachusetts. For more information please visit the Company website at www.gidynamics.com.

4

 

 
Boston, United States
Sydney, Australia
19 June 2020 AEST

 

 

 

 

 

 
 
Chief Financial Officer / Secretary
United States:
Charles Carter
+1 (781) 357-3263
ccarter@gidynamics.com

Investor Relations
United States:
Janell Shields
+1 (781) 357-3280
investor@gidynamics.com

 
Forward Looking Statements
 
This announcement may contain forward-looking statements. These statements are based on management’s current estimates and expectations of future events as of the date of this announcement. Furthermore, the estimates are subject to several risks and uncertainties that could cause actual results to differ materially and adversely from those indicated in or implied by such forward-looking statements.
 
These risks and uncertainties include, but are not limited to, risks associated with the Company’s ability to continue to operate as a going concern; the ability of the Company, its critical vendors, and key regulatory agencies to resume operational capabilities subsequent to the removal of COVID-19 pandemic restrictions; the Company’s ability to raise sufficient additional funds to continue operations, including the successful closing of the Potential Financing and a delisting from the ASX; the Company’s ability to execute STEP-1 under the FDA’s Investigational Device Exemption; the Company’s ability to enlist clinical trial sites and enroll patients in accordance with STEP-1; the risk that the FDA stops STEP-1 early as a result of the occurrence of certain safety events; the Company’s ability to enroll patients in accordance with I-STEP; the Company’s ability to secure a CE Mark; the Company’s ability to maintain compliance with its obligations under its existing convertible note and warrant agreements executed with Crystal Amber, including its obligations to make payment on the convertible note that is now due on 29 June 2020 and its ability to further restructure the terms of such convertible note with Crystal Amber if the Company is unable to raise sufficient funds to enable it to fully repay such convertible note when due; obtaining and maintaining regulatory approvals required to market and sell the Company’s products; the possibility that future clinical trials will not be successful or confirm earlier results; the timing and costs of clinical trials; the timing of regulatory submissions; the timing, receipt and maintenance of regulatory approvals; the timing and amount of other expenses; the timing and extent of third-party reimbursement; intellectual-property risk; risks related to excess inventory; risks related to assumptions regarding the size of the available market; the benefits of the Company’s products; product pricing; timing of product launches; future financial results; and other factors, including those described in the Company’s filings with the SEC.
 
Given these uncertainties, one should not place undue reliance on these forward-looking statements. The Company does not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise, unless it is required to do so by law.

###

5

 

 
Boston, United States
Sydney, Australia
19 June 2020 AEST

 

 

 

 

 

 
 
Chief Financial Officer / Secretary
United States:
Charles Carter
+1 (781) 357-3263
ccarter@gidynamics.com

Investor Relations
United States:
Janell Shields
+1 (781) 357-3280
investor@gidynamics.com

ATTACHMENT 1
 
Financing Terms
 
The key terms of the Financing are as follows:
 
	(a)	Stockholder Approval: The US$750,000 Note will be issued immediately; For as long as the Company remains on the Official List of ASX, the conversion features of the Bridge Note are subject to stockholder approval, which will be sought at a Special Meeting of Stockholders	
 	 	 	
	(b)	Borrower: GI Dynamics, Inc.	
 	 	 	
	(c)	Lender: Crystal Amber Fund Limited	
 	 	 	
	(d)	Principal Amount / Face Value of Note: US$750,000	
 	 	 	
	(e)	Funding Date: 18 June 2020.	
 	 	 	
	(f)	Interest: 5% per annum, compounded annually (increasing to 8% per annum in the event of default).	
 	 	 	
	(g)	Note Conversion: Following the delisting of the Company from the Official List of the ASX, upon closing of a Qualified Financing, the Bridge Note will automatically convert into shares of capital stock of the Company issued in the Qualified Financing at a conversion price equal to eighty percent (80%) of the price per share of such capital stock issued in the Qualified Financing. Should the Company remain on the Official List of the ASX through the maturity date, the Principal Amount plus accrued and unpaid interest thereon will be convertible at the option of the Lender into the Borrower’s CHESS Depositary Interests (CDIs) at a conversion price equal to A$0.02 per CDI, subject to the conversion features of the Bridge Note being approved by stockholders.	
 	 	 	
	(h)	Maturity / Repayment: The Principal Amount and unpaid accrued interest becomes due and payable, upon the Lender’s demand, on or after the 6-month anniversary of the Funding Date, unless it is repaid in full or converted at an earlier date in accordance with its terms.	

6

 

 
Boston, United States
Sydney, Australia
19 June 2020 AEST

 

 

 

 

 

 
 
Chief Financial Officer / Secretary
United States:
Charles Carter
+1 (781) 357-3263
ccarter@gidynamics.com

Investor Relations
United States:
Janell Shields
+1 (781) 357-3280
investor@gidynamics.com
 
	(i)	Change of Control: Upon a change of control of the Borrower, the Lender may, at its option, demand to receive a cash payment equal to all accrued and unpaid interest plus equal to 110% of the unpaid Principal Amount in full satisfaction of the Bridge Note.	
 	 	 	
	(j)	Prepayments: Not permitted at the Borrower’s option without the Lender’s consent.	
 	 	 	
	(k)	Events of Default: Upon the occurrence of an event of a default, the unpaid Principal Amount plus accrued and unpaid interest generally becomes immediately due and payable.	
 	 	 	
	(l)	Use of Funds: For general corporate purposes.	
 	 	 	
	(m)	Transferability / Assignability: The Bridge Note is not transferable or assignable within 12 months after its issuance, except as permitted by the Corporations Act 2001 (Cth).	
 	 	 	
	(n)	Transfer of CDIs Issued on Conversion: Any CDIs issued on a conversion of the Bridge Note are not transferrable within 12 months after their issuance (and the CDIs will be subject to a holding lock), except as permitted by the Corporations Act 2001 (Cth).	

 
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