Exhibit 10.2

 

 

GI DYNAMICS, INC.

 

RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page 1. Definitions 1     2. Agreement Among the Company, the Investors and
the Key Holders 3 2.1 Right of First Refusal 3 2.2 Right of Co-Sale 5 2.3 Effect
of Failure to Comply 7     3. Exempt Transfers 7 3.1 Exempted Transfers 7 3.2
Exempted Offerings 8 3.3 Prohibited Transferees 8     4. Legend 8     5. Lock-Up
9 5.1 Agreement to Lock-Up 9 5.2 Stop Transfer Instructions 9     6.
Miscellaneous 9 6.1 Term 9 6.2 Stock Split 9 6.3 Ownership 9 6.4 Dispute
Resolution 10 6.5 Notices 10 6.6 Entire Agreement 11 6.7 Delays or Omissions 11
6.8 Amendment; Waiver and Termination 11 6.9 Assignment of Rights 12 6.10
Severability 12 6.11 Additional Stockholders 12 6.12 Governing Law 13 6.13
Titles and Subtitles 13 6.14 Counterparts 13 6.15 Aggregation of Stock 13 6.16
Specific Performance 13 6.17 Consent of Spouse 13

 

Schedule A - Investors

 

Schedule B - Key Holders

 

Exhibit A - Consent of Spouse

 

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RIGHT OF FIRST REFUSAL
AND CO-SALE AGREEMENT

 

THIS RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT (this “Agreement”), is made as
of the 4th day of September, 2020, by and among GI Dynamics, Inc., a Delaware
corporation (the “Company”), the Investors (as defined below) listed on
Schedule A and the Key Holders (as defined below) listed on Schedule B.

 

WHEREAS, each Key Holder is the beneficial owner of the number of shares of
Capital Stock set forth opposite the name of such Key Holder on Schedule B;

 

WHEREAS, the Company and the Investors are parties to that certain Series A
Preferred Stock Purchase Agreement, dated as of August 10, 2020 (the “Purchase
Agreement”), pursuant to which the Investors have agreed to purchase shares of
the Series A Preferred Stock of the Company, par value $0.01 per share (“Series
A Preferred Stock”); and

 

WHEREAS, the Key Holders and the Company desire to further induce the Investors
to purchase the Series A Preferred Stock.

 

NOW, THEREFORE, the Company, the Key Holders and the Investors agree as follows:

 

1. Definitions.

 

1.1 “Affiliate” means, with respect to any specified Investor, any other
Investor who directly or indirectly, controls, is controlled by or is under
common control with such Investor, including, without limitation, any general
partner, managing member, officer, director or trustee of such Investor, or any
venture capital fund or registered investment company now or hereafter existing
which is controlled by one or more general partners, managing members or
investment advisers of, or shares the same management company or investment
adviser with, such Investor.

 

1.2 “Board of Directors” means the board of directors of the Company.

 

1.3 “Capital Stock” means (a) shares of Common Stock and Series A Preferred
Stock (whether now outstanding or hereafter issued in any context), (b) shares
of Common Stock issued or issuable upon conversion of Series A Preferred Stock,
and (c) shares of Common Stock issued or issuable upon exercise or conversion,
as applicable, of stock options, warrants or other convertible securities of the
Company, in each case now owned or subsequently acquired by any Key Holder, any
Investor, or their respective successors or permitted transferees or assigns.
For purposes of the number of shares of Capital Stock held by an Investor or Key
Holder (or any other calculation based thereon), all shares of Series A
Preferred Stock shall be deemed to have been converted into Common Stock at the
then-applicable conversion ratio.

 

1.4 “Change of Control” means a transaction or series of related transactions in
which a person, or a group of related persons, acquires from stockholders of the
Company shares representing more than fifty percent (50%) of the outstanding
voting power of the Company.

 

1.5 “Common Stock” means shares of Common Stock of the Company, $0.01 par value
per share.

 

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1.6 “Company Notice” means written notice from the Company notifying the selling
Key Holders and each Investor that the Company intends to exercise its Right of
First Refusal as to some or all of the Transfer Stock with respect to any
Proposed Key Holder Transfer.

 

1.7 “Investor Notice” means written notice from any Investor notifying the
Company and the selling Key Holder(s) that such Investor intends to exercise its
Secondary Refusal Right as to a portion of the Transfer Stock with respect to
any Proposed Key Holder Transfer.

 

1.8 “Investors” means the persons named on Schedule A hereto, each person to
whom the rights of an Investor are assigned pursuant to Subsection 6.9, each
person who hereafter becomes a signatory to this Agreement pursuant to
Subsection 6.11 and any one of them, as the context may require; provided,
however, that any such person shall cease to be considered an Investor for
purposes of this Agreement at any time such person and his, her or its
Affiliates collectively hold fewer than 1,000,000 shares of Common Stock, on an
as converted basis (as adjusted for any stock combination, stock split, stock
dividend, recapitalization or other similar transaction).

 

1.9 “Key Holders” means the persons named on Schedule B hereto, each person to
whom the rights of a Key Holder are assigned pursuant to Subsection 3.1, each
person who hereafter becomes a signatory to this Agreement pursuant to
Subsection 6.9 or Subsection 6.17 and any one of them, as the context may
require; provided, however, that any such person shall cease to be considered a
Key Holder for purposes of this Agreement at any time such person and his, her
or its Affiliates collectively hold less than one percent (1%) of the Company’s
then outstanding shares of Common Stock (as adjusted for any stock combination,
stock split, stock dividend, recapitalization or other similar transaction).

 

1.10 “Proposed Key Holder Transfer” means any assignment, sale, offer to sell,
pledge, mortgage, hypothecation, encumbrance, disposition of or any other like
transfer or encumbering of any Transfer Stock (or any interest therein) proposed
by any of the Key Holders.

 

1.11 “Proposed Transfer Notice” means written notice from a Key Holder setting
forth the terms and conditions of a Proposed Key Holder Transfer.

 

1.12 “Prospective Transferee” means any person to whom a Key Holder proposes to
make a Proposed Key Holder Transfer.

 

1.13 “Restated Certificate” means the Company’s Seventh Amended and Restated
Certificate of Incorporation, as amended and/or restated from time to time.

 

1.14 “Right of Co-Sale” means the right, but not an obligation, of an Investor
to participate in a Proposed Key Holder Transfer on the terms and conditions
specified in the Proposed Transfer Notice.

 

1.15 “Right of First Refusal” means the right, but not an obligation, of the
Company, or its permitted transferees or assigns, to purchase some or all of the
Transfer Stock with respect to a Proposed Key Holder Transfer, on the terms and
conditions specified in the Proposed Transfer Notice.

 

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1.16 “Secondary Notice” means written notice from the Company notifying the
Investors and the selling Key Holder that the Company does not intend to
exercise its Right of First Refusal as to all shares of any Transfer Stock with
respect to a Proposed Key Holder Transfer, on the terms and conditions specified
in the Proposed Transfer Notice.

 

1.17 “Secondary Refusal Right” means the right, but not an obligation, of each
Investor to purchase up to its pro rata portion (based upon the total number of
shares of Capital Stock then held by all Investors) of any Transfer Stock not
purchased pursuant to the Right of First Refusal, on the terms and conditions
specified in the Proposed Transfer Notice.

 

1.18 “Transfer Stock” means shares of Capital Stock owned by a Key Holder, or
issued to a Key Holder after the date hereof (including, without limitation, in
connection with any stock split, stock dividend, recapitalization,
reorganization, or the like), but does not include any shares of Series A
Preferred Stock or of Common Stock that are issued or issuable upon conversion
of Series A Preferred Stock.

 

1.19 “Undersubscription Notice” means written notice from an Investor notifying
the Company and the selling Key Holder that such Investor intends to exercise
its option to purchase its pro rata portion of the number of shares of Transfer
Stock not purchased pursuant to the Right of First Refusal or the Secondary
Refusal Right.

 

2. Agreement Among the Company, the Investors and the Key Holders.

 

2.1 Right of First Refusal.

 

(a) Grant. Subject to the terms of Section 3 below, each Key Holder hereby
unconditionally and irrevocably grants to the Company a Right of First Refusal
to purchase all or any portion of Transfer Stock that such Key Holder may
propose to transfer in a Proposed Key Holder Transfer, at the same price and on
the same terms and conditions as those offered to the Prospective Transferee.

 

(b) Notice. Each Key Holder proposing to make a Proposed Key Holder Transfer
must deliver a Proposed Transfer Notice to the Company and each Investor not
later than forty-five (45) days prior to the consummation of such Proposed Key
Holder Transfer. Such Proposed Transfer Notice shall contain the material terms
and conditions (including price and form of consideration) of the Proposed Key
Holder Transfer, the identity of the Prospective Transferee and the intended
date of the Proposed Key Holder Transfer. To exercise its Right of First Refusal
under this Subsection 2.1, the Company must deliver a Company Notice to the
selling Key Holder and the Investors within fifteen (15) days after delivery of
the Proposed Transfer Notice specifying the number of shares of Transfer Stock
to be purchased by the Company. In the event of a conflict between this
Agreement and any other agreement that may have been entered into by a Key
Holder with the Company that contains a preexisting right of first refusal, the
Company and the Key Holder acknowledge and agree that the terms of this
Agreement shall control and the preexisting right of first refusal shall be
deemed satisfied by compliance with Subsection 2.1(a) and this Subsection
2.1(b).

 

(c) Grant of Secondary Refusal Right to the Investors. Subject to the terms of
Section 3 below, each Key Holder hereby unconditionally and irrevocably grants
to the Investors a Secondary Refusal Right to purchase all or any portion of the
Transfer Stock not purchased by the Company pursuant to the Right of First
Refusal, as provided in this Subsection 2.1(c). In the event there are two (2)
or more such Investors that choose to exercise the Secondary Refusal Right for a
total number of remaining shares in excess of the number available, the Transfer
Stock available for purchase under this Subsection 2.1(c) shall be allocated to
such Investors pro rata based on the number of shares of Series A Preferred
Stock held by such Investors. If the Company does not provide the Company Notice
exercising its Right of First Refusal with respect to all Transfer Stock subject
to a Proposed Key Holder Transfer, the Company must deliver a Secondary Notice
to the selling Key Holder and to each Investor to that effect no later than
fifteen (15) days after the selling Key Holder delivers the Proposed Transfer
Notice to the Company. To exercise its Secondary Refusal Right, an Investor must
deliver an Investor Notice to the selling Key Holder and the Company within ten
(10) days after the Company’s deadline for its delivery of the Secondary Notice
as provided in the preceding sentence.

 

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(d) Undersubscription of Transfer Stock. If options to purchase have been
exercised by the Company and the Investors pursuant to Subsections 2.1(b) and
(c) with respect to some but not all of the Transfer Stock by the end of the ten
(10) day period specified in the last sentence of Subsection 2.1(c) (the
“Investor Notice Period”), then the Company shall, within five (5) days after
the expiration of the Investor Notice Period, send written notice (the “Company
Undersubscription Notice”) to those Investors who fully exercised their
Secondary Refusal Right within the Investor Notice Period (the “Exercising
Investors”). Each Exercising Investor shall, subject to the provisions of this
Subsection 2.1(d), have an additional option to purchase all or any part of the
balance of any such remaining unsubscribed shares of Transfer Stock on the terms
and conditions set forth in the Proposed Transfer Notice. To exercise such
option, an Exercising Investor must deliver an Undersubscription Notice to the
selling Key Holder and the Company within ten (10) days after the expiration of
the Investor Notice Period. In the event there are two (2) or more such
Exercising Investors that choose to exercise the last-mentioned option for a
total number of remaining shares in excess of the number available, the
remaining shares available for purchase under this Subsection 2.1(d) shall be
allocated to such Exercising Investors pro rata based on the number of shares of
Transfer Stock such Exercising Investors have elected to purchase pursuant to
the Secondary Refusal Right (without giving effect to any shares of Transfer
Stock that any such Exercising Investor has elected to purchase pursuant to the
Company Undersubscription Notice). If the options to purchase the remaining
shares are exercised in full by the Exercising Investors, the Company shall
immediately notify all of the Exercising Investors and the selling Key Holder of
that fact.

 

(e) Consideration; Closing. If the consideration proposed to be paid for the
Transfer Stock is in property, services or other non-cash consideration, the
fair market value of the consideration shall be as determined in good faith by
the Board of Directors and as set forth in the Company Notice. If the Company or
any Investor cannot for any reason pay for the Transfer Stock in the same form
of non-cash consideration, the Company or such Investor may pay the cash value
equivalent thereof, as determined in good faith by the Board of Directors and as
set forth in the Company Notice. The closing of the purchase of Transfer Stock
by the Company and the Investors shall take place, and all payments from the
Company and the Investors shall have been delivered to the selling Key Holder,
by the later of (i) the date specified in the Proposed Transfer Notice as the
intended date of the Proposed Key Holder Transfer and (ii) forty-five (45) days
after delivery of the Proposed Transfer Notice.

 

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2.2 Right of Co-Sale.

 

(a) Exercise of Right. If any Transfer Stock subject to a Proposed Key Holder
Transfer is not purchased pursuant to Subsection 2.1 above and thereafter is to
be sold to a Prospective Transferee, each respective Investor may elect to
exercise its Right of Co-Sale and participate on a pro rata basis in the
Proposed Key Holder Transfer as set forth in Subsection 2.2(b) below and,
subject to Subsection 2.2(d), otherwise on the same terms and conditions
specified in the Proposed Transfer Notice. Each Investor who desires to exercise
its Right of Co-Sale (each, a “Participating Investor”) must give the selling
Key Holder written notice to that effect within fifteen (15) days after the
deadline for delivery of the Secondary Notice described above, and upon giving
such notice such Participating Investor shall be deemed to have effectively
exercised the Right of Co-Sale.

 

(b) Shares Includable. Each Participating Investor may include in the Proposed
Key Holder Transfer all or any part of such Participating Investor’s Capital
Stock equal to the product obtained by multiplying (i) the aggregate number of
shares of Transfer Stock subject to the Proposed Key Holder Transfer (excluding
shares purchased by the Company or the Participating Investors pursuant to the
Right of First Refusal or the Secondary Refusal Right) by (ii) a fraction, the
numerator of which is the number of shares of Capital Stock owned by such
Participating Investor immediately before consummation of the Proposed Key
Holder Transfer (including any shares that such Participating Investor has
agreed to purchase pursuant to the Secondary Refusal Right) and the denominator
of which is the total number of shares of Capital Stock owned, in the aggregate,
by all Participating Investors immediately prior to the consummation of the
Proposed Key Holder Transfer (including any shares that all Participating
Investors have collectively agreed to purchase pursuant to the Secondary Refusal
Right), plus the number of shares of Transfer Stock held by the selling Key
Holder. To the extent one (1) or more of the Participating Investors exercise
such right of participation in accordance with the terms and conditions set
forth herein, the number of shares of Transfer Stock that the selling Key Holder
may sell in the Proposed Key Holder Transfer shall be correspondingly reduced.

 

(c) Purchase and Sale Agreement. The Participating Investors and the selling Key
Holder agree that the terms and conditions of any Proposed Key Holder Transfer
in accordance with this Subsection 2.2 will be memorialized in, and governed by,
a written purchase and sale agreement with the Prospective Transferee (the
“Purchase and Sale Agreement”) with customary terms and provisions for such a
transaction, and the Participating Investors and the selling Key Holder further
covenant and agree to enter into such Purchase and Sale Agreement as a condition
precedent to any sale or other transfer in accordance with this Subsection 2.2.

 

(d) Allocation of Consideration.

 

(i) Subject to Subsection 2.2(d)(ii), the aggregate consideration payable to the
Participating Investors and the selling Key Holder shall be allocated based on
the number of shares of Capital Stock sold to the Prospective Transferee by each
Participating Investor and the selling Key Holder as provided in Subsection
2.2(b); provided, however, if a Participating Investor wishes to sell Series A
Preferred Stock, the price set forth in the Proposed Transfer Notice shall be
appropriately adjusted based on the conversion ratio of the Series A Preferred
Stock into Common Stock.

 

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(ii) In the event that the Proposed Key Holder Transfer constitutes a Change of
Control, the terms of the Purchase and Sale Agreement shall provide that the
aggregate consideration from such transfer shall be allocated to the
Participating Investors and the selling Key Holder in accordance with Sections
2.1 and 2.2 of Article IV(B) of the Restated Certificate and, if applicable, the
next sentence as if (A) such transfer were a Deemed Liquidation Event (as
defined in the Restated Certificate), and (B) the Capital Stock sold in
accordance with the Purchase and Sale Agreement were the only Capital Stock
outstanding. In the event that a portion of the aggregate consideration payable
to the Participating Investor(s) and selling Key Holder is placed into escrow
and/or is payable only upon satisfaction of contingencies, the Purchase and Sale
Agreement shall provide that (x) the portion of such consideration that is not
placed in escrow and is not subject to contingencies (the “Initial
Consideration”) shall be allocated in accordance with Sections 2.1 and 2.2 of
Article IV(B) of the Restated Certificate as if the Initial Consideration were
the only consideration payable in connection with such transfer, and (y) any
additional consideration which becomes payable to the Participating Investor(s)
and selling Key Holder upon release from escrow or satisfaction of such
contingencies shall be allocated in accordance with Sections 2.1 and 2.2 of
Article IV(B) of the Restated Certificate after taking into account the previous
payment of the Initial Consideration as part of the same transfer.

 

(e) Purchase by Selling Key Holder; Deliveries. Notwithstanding Subsection
2.2(c) above, if any Prospective Transferee or Transferees refuse(s) to purchase
securities subject to the Right of Co-Sale from any Participating Investor or
Investors or upon the failure to negotiate in good faith a Purchase and Sale
Agreement reasonably satisfactory to the Participating Investors, no Key Holder
may sell any Transfer Stock to such Prospective Transferee or Transferees unless
and until, simultaneously with such sale, such Key Holder purchases all
securities subject to the Right of Co-Sale from such Participating Investor or
Investors on the same terms and conditions (including the proposed purchase
price) as set forth in the Proposed Transfer Notice and as provided in
Subsection 2.2(d)(i); provided, however, if such sale constitutes a Change of
Control, the portion of the aggregate consideration paid by the selling Key
Holder to such Participating Investor or Investors shall be made in accordance
with the first sentence of Subsection 2.2(d)(ii). In connection with such
purchase by the selling Key Holder, such Participating Investor or Investors
shall deliver to the selling Key Holder any stock certificate or certificates,
properly endorsed for transfer, representing the Capital Stock being purchased
by the selling Key Holder (or request that the Company effect such transfer in
the name of the selling Key Holder). Any such shares transferred to the selling
Key Holder will be transferred to the Prospective Transferee against payment
therefor in consummation of the sale of the Transfer Stock pursuant to the terms
and conditions specified in the Proposed Transfer Notice, and the selling Key
Holder shall concurrently therewith remit or direct payment to each such
Participating Investor the portion of the aggregate consideration to which each
such Participating Investor is entitled by reason of its participation in such
sale as provided in this Subsection 2.2(e).

 

(f) Additional Compliance. If any Proposed Key Holder Transfer is not
consummated within sixty (60) days after receipt of the Proposed Transfer Notice
by the Company, the Key Holders proposing the Proposed Key Holder Transfer may
not sell any Transfer Stock unless they first comply in full with each provision
of this Section 2. The exercise or election not to exercise any right by any
Investor hereunder shall not adversely affect its right to participate in any
other sales of Transfer Stock subject to this Subsection 2.2.

 

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2.3 Effect of Failure to Comply.

 

(a) Transfer Void; Equitable Relief. Any Proposed Key Holder Transfer not made
in compliance with the requirements of this Agreement shall be null and void ab
initio, shall not be recorded on the books of the Company or its transfer agent
and shall not be recognized by the Company. Each party hereto acknowledges and
agrees that any breach of this Agreement would result in substantial harm to the
other parties hereto for which monetary damages alone could not adequately
compensate. Therefore, the parties hereto unconditionally and irrevocably agree
that any non-breaching party hereto shall be entitled to seek protective orders,
injunctive relief and other remedies available at law or in equity (including,
without limitation, seeking specific performance or the rescission of purchases,
sales and other transfers of Transfer Stock not made in strict compliance with
this Agreement).

 

(b) Violation of First Refusal Right. If any Key Holder becomes obligated to
sell any Transfer Stock to the Company or any Investor under this Agreement and
fails to deliver such Transfer Stock in accordance with the terms of this
Agreement, the Company and/or such Investor may, at its option, in addition to
all other remedies it may have, send to such Key Holder the purchase price for
such Transfer Stock as is herein specified and transfer to the name of the
Company or such Investor (or request that the Company effect such transfer in
the name of an Investor) on the Company’s books any certificates, instruments,
or book entry representing the Transfer Stock to be sold.

 

(c) Violation of Co-Sale Right. If any Key Holder purports to sell any Transfer
Stock in contravention of the Right of Co-Sale (a “Prohibited Transfer”), each
Participating Investor who desires to exercise its Right of Co-Sale under
Subsection 2.2 may, in addition to such remedies as may be available by law, in
equity or hereunder, require such Key Holder to purchase from such Participating
Investor the type and number of shares of Capital Stock that such Participating
Investor would have been entitled to sell to the Prospective Transferee had the
Prohibited Transfer been effected in compliance with the terms of Subsection
2.2. The sale will be made on the same terms, including, without limitation, as
provided in Subsection 2.2(d)(i) and the first sentence of Subsection
2.2(d)(ii), as applicable, and subject to the same conditions as would have
applied had the Key Holder not made the Prohibited Transfer, except that the
sale (including, without limitation, the delivery of the purchase price) must be
made within ninety (90) days after the Participating Investor learns of the
Prohibited Transfer, as opposed to the timeframe proscribed in Subsection 2.2.
Such Key Holder shall also reimburse each Participating Investor for any and all
reasonable and documented out-of-pocket fees and expenses, including reasonable
legal fees and expenses, incurred pursuant to the exercise or the attempted
exercise of the Participating Investor’s rights under Subsection 2.2.

 

3. Exempt Transfers.

 

3.1 Exempted Transfers. Notwithstanding the foregoing or anything to the
contrary herein, the provisions of Subsections 2.1 and 2.2 shall not apply (a)
to a repurchase of Transfer Stock from a Key Holder by the Company at a price no
greater than that originally paid by such Key Holder for such Transfer Stock and
pursuant to an agreement containing vesting and/or repurchase provisions
approved by a majority of the Board of Directors, (b) in the case of a Key
Holder that is a natural person, upon a transfer of Transfer Stock by such Key
Holder made for bona fide estate planning purposes, either during his or her
lifetime or on death by will or intestacy to his or her spouse, child (natural
or adopted), or any other direct lineal descendant of such Key Holder (or his or
her spouse) (all of the foregoing collectively referred to as “family members”),
or any other relative approved by the Board of Directors, or any custodian or
trustee of any trust, partnership or limited liability company for the benefit
of, or the ownership interests of which are owned wholly by such Key Holder or
any such family members, or (c) upon a transfer to a charitable institution for
philanthropic purposes; provided that in the case of clause(s) (b), (c), or (d),
the Key Holder shall deliver prior written notice to the Investors of such
pledge, gift or transfer and such shares of Transfer Stock shall at all times
remain subject to the terms and restrictions set forth in this Agreement and
such transferee shall, as a condition to such Transfer, deliver a counterpart
signature page to this Agreement as confirmation that such transferee shall be
bound by all the terms and conditions of this Agreement as a Key Holder (but
only with respect to the securities so transferred to the transferee), including
the obligations of a Key Holder with respect to Proposed Key Holder Transfers of
such Transfer Stock pursuant to Section 2; and provided further in the case of
any transfer pursuant to clauses (b), (c) or (d) above, that such transfer is
made pursuant to a transaction in which there is no consideration actually paid
for such transfer.

 

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3.2 Exempted Offerings. Notwithstanding the foregoing or anything to the
contrary herein, the provisions of Section 2 shall not apply to the sale of any
Transfer Stock (a) to the public in an offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (a “Public
Offering”); or (b) pursuant to a Deemed Liquidation Event (as defined in the
Restated Certificate).

 

3.3 Prohibited Transferees. Notwithstanding the foregoing, no Key Holder shall
transfer any Transfer Stock to (a) any entity which, in the determination of the
Board of Directors, directly or indirectly competes with the Company; or (b) any
customer, distributor or supplier of the Company, if the Board of Directors
should determine that such transfer would result in such customer, distributor
or supplier receiving information that would place the Company at a competitive
disadvantage with respect to such customer, distributor or supplier.

 

4. Legend. Each certificate, instrument, or book entry representing shares of
Transfer Stock held by the Key Holders or issued to any permitted transferee in
connection with a transfer permitted by Subsection 3.1 hereof shall be notated
with the following legend:

 

THE SALE, PLEDGE, HYPOTHECATION, OR TRANSFER OF THE SECURITIES REPRESENTED
HEREBY IS SUBJECT TO, AND IN CERTAIN CASES PROHIBITED BY, THE TERMS AND
CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT BY AND
AMONG THE STOCKHOLDER, THE CORPORATION AND CERTAIN OTHER HOLDERS OF STOCK OF THE
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO
THE SECRETARY OF THE CORPORATION.

 

Each Key Holder agrees that the Company may instruct its transfer agent to
impose transfer restrictions on the shares notated with the legend referred to
in this Section 4 above to enforce the provisions of this Agreement, and the
Company agrees to promptly do so. The legend shall be removed upon termination
of this Agreement at the request of the holder.

 

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5. Lock-Up.

 

5.1 Agreement to Lock-Up. Each Key Holder hereby agrees that it will not,
without the prior written consent of the managing underwriter, during the period
commencing on the date of the final prospectus relating to the Company’s initial
public offering resulting in gross proceeds in excess of $100,000,000 (the
“IPO”) and ending on the date specified by the Company and the managing
underwriter (such period not to exceed one hundred eighty (l80) days), or such
other period as may be requested by the Company or an underwriter to accommodate
regulatory restrictions on (1) the publication or other distribution of research
reports; and (2) analyst recommendations and opinions, including, but not
limited to, the restrictions contained in applicable FINRA rules, or any
successor provisions or amendments thereto), (a) lend, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Capital
Stock held immediately prior to the effectiveness of the registration statement
for the IPO; or (b) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Capital Stock, whether any such transaction described in clause (a) or (b)
above is to be settled by delivery of Capital Stock or other securities, in cash
or otherwise. The foregoing provisions of this Section 5 shall not apply to the
sale of any shares to an underwriter pursuant to an underwriting agreement, and
shall only be applicable to the Key Holders if all officers, directors and
holders of more than one percent (1%) of the outstanding Common Stock (after
giving effect to the conversion into Common Stock of all outstanding Series A
Preferred Stock) enter into similar agreements. The underwriters in connection
with the IPO are intended third-party beneficiaries of this Section 5 and shall
have the right, power and authority to enforce the provisions hereof as though
they were a party hereto. Each Key Holder further agrees to execute such
agreements as may be reasonably requested by the underwriters in the IPO that
are consistent with this Section 5 or that are necessary to give further effect
thereto.

 

5.2 Stop Transfer Instructions. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the shares of
Capital Stock of each Key Holder (and transferees and assignees thereof) until
the end of such restricted period.

 

6. Miscellaneous.

 

6.1 Term. This Agreement shall automatically terminate upon the earlier of (a)
immediately prior to the consummation of the Company’s IPO; and (b) the
consummation of a Deemed Liquidation Event (as defined in the Restated
Certificate).

 

6.2 Stock Split. All references to numbers of shares in this Agreement shall be
appropriately adjusted to reflect any stock dividend, split, combination or
other recapitalization affecting the Capital Stock occurring after the date of
this Agreement.

 

6.3 Ownership. Each Key Holder represents and warrants that such Key Holder is
the sole legal and beneficial owner of the shares of Transfer Stock subject to
this Agreement and that no other person or entity has any interest in such
shares (other than a community property interest as to which the holder thereof
has acknowledged and agreed in writing to the restrictions and obligations
hereunder).

 

9

 

 

6.4 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally
submit to the jurisdiction of the state courts of Delaware and to the
jurisdiction of the United States District Court for the District of Delaware
for the purpose of any suit, action or other proceeding arising out of or based
upon this Agreement, (b) agree not to commence any suit, action or other
proceeding arising out of or based upon this Agreement except in the state
courts of Delaware or the United States District Court for the District of
Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court.

 

Waiver of Jury Trial: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER
TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF
THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS
(INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES
HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY
HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

6.5 Notices.

 

(a) All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given upon the
earlier of actual receipt or (a) personal delivery to the party to be notified,
(b) when sent, if sent by electronic mail or facsimile during normal business
hours of the recipient, and if not sent during normal business hours, then on
the recipient’s next business day, (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d)
one (1) business day after deposit with a nationally recognized overnight
courier, freight prepaid, specifying next business day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at their address as set forth on Schedule A or Schedule B hereof, as the
case may be, or to such email address, facsimile number or address as
subsequently modified by written notice given in accordance with this Section
6.5. If notice is given to the Company, it shall be sent to GI Dynamics, Inc.,
320 Congress Avenue, Floor 3, Boston, MA 02205, Attention: Chief Executive
Officer; and a copy (which shall not constitute notice) shall also be sent to
Mitchell Silberberg & Knupp, LLP, 437 Madison Avenue, 25th Floor, New York, NY
10022, Attention: Blake Baron, Esq., email: bjb@msk.com; and if notice is given
to the Investors, a copy shall also be given to Wilson Sonsini Goodrich & Rosati
PC, 650 Page Mill Road, Palo Alto, CA 94304, Attention: Elton Satusky, Esq.,
email: esatusky@wsgr.com.

 

10

 

 

(b) Consent to Electronic Notice. Each Investor and Key Holder consents to the
delivery of any stockholder notice pursuant to the Delaware General Corporation
Law (the “DGCL”), as amended or superseded from time to time, by electronic
transmission pursuant to Section 232 of the DGCL (or any successor thereto) at
the electronic mail address or the facsimile number set forth below such
Investor’s or Key Holder’s name on the Schedules hereto, as updated from time to
time by notice to the Company, or as on the books of the Company. Each Investor
and Key Holder agrees to promptly notify the Company of any change in its
electronic mail address, and that failure to do so shall not affect the
foregoing.

 

6.6 Entire Agreement. This Agreement (including, the Exhibits and Schedules
hereto) constitutes the full and entire understanding and agreement between the
parties with respect to the subject matter hereof, and any other written or oral
agreement relating to the subject matter hereof existing between the parties are
expressly canceled.

 

6.7 Delays or Omissions. No delay or omission to exercise any right, power or
remedy accruing to any party under this Agreement, upon any breach or default of
any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.

 

6.8 Amendment; Waiver and Termination. This Agreement may be amended, modified
or terminated (other than pursuant to Section 6.1 above) and the observance of
any term hereof may be waived (either generally or in a particular instance and
either retroactively or prospectively) only by a written instrument executed by
(a) the Company, (b) the Key Holders holding a majority of the shares of
Transfer Stock then held by all of the Key Holders provided that such consent
shall not be required if the Key Holders do not then own shares of Capital Stock
representing at least 1% of the outstanding Capital Stock of the Company, and
(c) the holders of a majority of the shares of Common Stock issued or issuable
upon conversion of the then outstanding shares of Series A Preferred Stock held
by the Investors (voting as a single separate class and on an as-converted
basis). Any amendment, modification, termination or waiver so effected shall be
binding upon the Company, the Investors, the Key Holders and all of their
respective successors and permitted assigns whether or not such party, assignee
or other shareholder entered into or approved such amendment, modification,
termination or waiver. The Company shall give prompt written notice of any
amendment, modification or termination hereof or waiver hereunder to any party
hereto that did not consent in writing to such amendment, modification,
termination or waiver. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.

 

11

 

 

6.9 Assignment of Rights.

 

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

 

(b) Any successor or permitted assignee of any Key Holder, including any
Prospective Transferee who purchases shares of Transfer Stock in accordance with
the terms hereof, shall deliver to the Company and the Investors, as a condition
to any transfer or assignment, a counterpart signature page hereto pursuant to
which such successor or permitted assignee shall confirm their agreement to be
subject to and bound by all of the provisions set forth in this Agreement that
were applicable to the predecessor or assignor of such successor or permitted
assignee.

 

(c) The rights of the Investors hereunder are not assignable without the
Company’s written consent (which shall not be unreasonably withheld, delayed or
conditioned), except (i) by an Investor to any Affiliate, or (ii) to an assignee
or transferee who acquires at least 500,000 shares of Capital Stock (as adjusted
for any stock combination, stock split, stock dividend, recapitalization or
other similar transaction), it being acknowledged and agreed that any such
assignment, including an assignment contemplated by the preceding clauses (i) or
(ii) shall be subject to and conditioned upon any such assignee’s delivery to
the Company and the other Investors of a counterpart signature page hereto
pursuant to which such assignee shall confirm their agreement to be subject to
and bound by all of the provisions set forth in this Agreement that were
applicable to the assignor of such assignee.

 

(d) Except in connection with an assignment by the Company by operation of law
to the acquirer of the Company, the rights and obligations of the Company
hereunder may not be assigned under any circumstances.

 

6.10 Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.

 

6.11 Additional Stockholders.

 

(a) Additional Investors. Notwithstanding anything to the contrary contained
herein, if the Company issues additional shares of the Company’s Series A
Preferred Stock after the date hereof, any purchaser of such shares of Series A
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and thereafter shall
be deemed an “Investor” for all purposes hereunder.

 

(b) Additional Key Holders. Notwithstanding anything to the contrary contained
herein, if the Company issues additional shares of Common Stock to a purchaser
after the date hereof, which shares (together with any other shares of Common
Stock held by such purchaser) would constitute with respect to such purchaser
more than one percent (1%) of the Company’s then outstanding shares of Common
Stock, then such purchaser may become a party to this Agreement by executing and
delivering an additional counterpart signature page to this Agreement and
thereafter shall be deemed a “Key Holder” for all purposes hereunder.

 

12

 

 

(c) The Company shall use its commercially reasonable efforts to obtain any
additional counterpart signature pages in the case of clauses (a) and (b) above.

 

6.12 Governing Law. This Agreement shall be governed by the internal law of the
State of Delaware, without regard to conflict of law principles that would
result in the application of any law other than the law of the State of
Delaware.

 

6.13 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.

 

6.14 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature complying with the U.S. federal ESIGN Act of 2000, e.g.,
www.docusign.com) or other transmission method and any counterpart so delivered
shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes.

 

6.15 Aggregation of Stock. All shares of Capital Stock held or acquired by
Affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement and such
Affiliated persons may apportion such rights as among themselves in any manner
they deem appropriate.

 

6.16 Specific Performance. In addition to any and all other remedies that may be
available at law in the event of any breach of this Agreement, each Investor
shall be entitled to specific performance of the agreements and obligations of
the Company and the Key Holders hereunder and to such other injunction or other
equitable relief as may be granted by a court of competent jurisdiction.

 

6.17 Consent of Spouse. If any Key Holder is married on the date of this
Agreement, such Key Holder’s spouse shall execute and deliver to the Company a
Consent of Spouse in the form of Exhibit A hereto (“Consent of Spouse”),
effective on the date hereof. Notwithstanding the execution and delivery
thereof, such consent shall not be deemed to confer or convey to the spouse any
rights in such Key Holder’s shares of Transfer Stock that do not otherwise exist
by operation of law or the agreement of the parties. If any Key Holder should
marry or remarry subsequent to the date of this Agreement, such Key Holder shall
within thirty (30) days thereafter obtain his/her new spouse’s acknowledgement
of and consent to the existence and binding effect of all restrictions contained
in this Agreement by causing such spouse to execute and deliver a Consent of
Spouse acknowledging the restrictions and obligations contained in this
Agreement and agreeing and consenting to the same.

 

[Remainder of Page Intentionally Left Blank]

 

13

 

 

IN WITNESS WHEREOF, the parties have executed this Right of First Refusal and
Co-Sale Agreement as of the date first written above.

 

  GI DYNAMICS, INC.         By: /s/ Scott Schorer    Name: Scott Schorer  
Title: Chief Executive Officer         KEY HOLDERS:         Signature: 

/s/ Richard Cashin

        Name:

Richard Cashin

        INVESTORS:         CRYSTAL AMBER FUND LIMITED         By:

/s/ Mark Huntley

  Name:  

Mark Huntley

  Title:

Director

 

Executed by Crystal Amber Asset Management (Guernsey) Ltd. as Investment Manager
of Crystal Amber Fund Limited

  

Signature Page To Right Of First Refusal And Co-Sale Agreement

 

 

 

SCHEDULE A

 

INVESTORS

 

Name and Address  

Crystal Amber Fund Limited

PO Box 286, Floor 2 

Trafalgar Court 

St.Peter Port 

GY1 4LY 

Guernsey 

 

 

 

SCHEDULE B

 

KEY HOLDERS

  

Name and Address     Richard Cashin   

 

 

 

EXHIBIT A

CONSENT OF SPOUSE

 

I, [____________________], spouse of [______________], acknowledge that I have
read the Right of First Refusal and Co-Sale Agreement, dated as of [_____ __,]
2020, to which this Consent is attached as Exhibit A (the “Agreement”), and that
I know the contents of the Agreement. I am aware that the Agreement contains
provisions regarding certain rights to certain other holders of Capital Stock of
the Company upon a Proposed Key Holder Transfer of shares of Transfer Stock of
the Company which my spouse may own including any interest I might have therein.

 

I hereby agree that my interest, if any, in any shares of Transfer Stock of the
Company subject to the Agreement shall be irrevocably bound by the Agreement and
further understand and agree that any community property interest I may have in
such shares of Transfer Stock of the Company shall be similarly bound by the
Agreement.

 

I am aware that the legal, financial and related matters contained in the
Agreement are complex and that I am free to seek independent professional
guidance or counsel with respect to this Consent. I have either sought such
guidance or counsel or determined after reviewing the Agreement carefully that I
will waive such right.

 

Dated as of the [__] day of [__________, _____].

 

      Signature           Print Name