EXHIBIT 10.4

THIS SENIOR 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.

SENIOR UNSECURED CONVERTIBLE PROMISSORY NOTE

 

US$3,000,000

 

May 8, 2019

 

 

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”), the
principal sum of Three Million dollars (US$3,000,000), or so much thereof as may
be advanced and outstanding pursuant to Section 1(d), or such greater amount as
shall become due after giving effect to Sections 2(b) or 2(c), with interest on
the outstanding principal amount at the rate of ten percent (10%) per
annum.  Interest (i) shall commence with the date of receipt by Payor of the
first advance of funds as set forth on Schedule A and shall be computed daily as
to the then-outstanding amount until the Full Funding Date (as defined below),
at which time interest shall thenceforth be compounded annually based on a
365-day year, and (ii) shall continue on the outstanding principal until paid in
full or, if permitted by the terms of the Note, converted pursuant to Section 2
below.

1.Payment and Maturity

(a)Reference is hereby made to the Note and Warrant Purchase Agreement (the
“Purchase Agreement”) dated as of even date herewith between Payor and 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 Senior 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(a) below, the entire outstanding
principal balance of this Note and all unpaid accrued interest thereon shall be
due and payable on the date which is the fifth anniversary of the Full Funding
Date (the “Maturity Date”). All payments of interest and principal shall be in
lawful money of the United States of America.  All payments 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

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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.

(c)Upon the occurrence and during the continuance of any Event of Default, the
principal balance of this Note shall bear interest at the rate of sixteen
percent (16%) per annum, including after the commencement of, and during the
pendency of, any bankruptcy or other insolvency proceeding.

(d)Subject to the terms of this Note, Holder shall make advances to the Company
no later than the dates and in amounts no less than those set forth on Schedule
A hereto.  Holder may accelerate any of its advances to the Company in Holder’s
sole discretion. The date indicated for payment of the fourth (4th) and final
advance set forth on Schedule A hereto (regardless of whether funding occurs on
such date) shall be the “Full Funding Date”. Notwithstanding the foregoing, no
advances shall be made during the continuance of any Event of Default.  In such
an event, advances to the Company may resume on the third (3rd) day, and shall
resume no later than the seventh (7th) day, following the Holder’s receipt of
notice delivered by the Company affirming that the Company has cured its Event
of Default. The parties shall cause Schedule A to be updated in accordance with
any revised schedule of advances necessitated by the occurrence or subsequent
cure of an Event of Default.  For the avoidance of doubt, Holder and the Company
may jointly waive any requirement set forth in this Section 1(d).

2.Conversion

(a)Optional Conversion. Subject to Section 2(c) and Section 6(c) of this Note,
the Holder shall have the option (the “Conversion Option”), but not the
obligation, at any time after the date hereof and prior to the Maturity Date,
exercisable upon written notice to the Payor, to (a) convert all (but not less
than 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”) into the number of CDIs equal to the
quotient obtained by dividing (x) the Outstanding Amount by (y) US$0.0127 (such
conversion price, the “Conversion Price”). In lieu of receiving CDIs, upon
exercising the Conversion Option, the Holder may elect to instead receive the
corresponding number of shares of Common Stock for the CDIs to be issued upon
such conversion.

(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 the Note, or (ii) subject to the provisions of Section 2(c)
and Section 6(a) hereof, retain the Note, including, without limitation, the
Conversion Option 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 the
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 the Payor or the Holder or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Payor or the Holder) of beneficial ownership

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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 the Payor’s stockholders, (iii) a merger or
consolidation of the Payor, other than for the purpose of re-domiciling the
Payor, unless following such transaction or series of transactions, the holders
of the 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 the Payor that constitutes or results in a transfer of
more than one-third of the equity interests in the Payor, unless following such
transaction or series of transactions, the holders of the 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 the Payor or its controlling stockholders of an
agreement providing for or reasonably likely to result in any of the foregoing
events.

(c)Stockholder Approval.  Notwithstanding anything to the contrary contained
herein or in the Purchase Agreement, in the event that the rules of the
Australian Securities Exchange (“ASX”) (or any other exchange on which the CDIs
or Common Stock is then traded) require the Payor to obtain stockholder approval
to issue CDIs pursuant to Section 2(a) or Section 2(b) hereof, the Payor shall
convene a meeting of stockholders to seek approval to issue those CDIs or Common
Stock. If such approval is not obtained at such meeting, the Holder shall
instead become entitled to receive an amount in cash equal to all unpaid (and
unconverted) interest that has accrued to date hereunder and 110% of the then
outstanding unpaid (and unconverted) principal amount of this Note in full
satisfaction of all obligations under the Note, and such amounts shall be due
and payable upon the earlier of (i) the Maturity Date, or (ii) the date that is
six months following the date of the stockholders’ meeting at which such
approval is not obtained. 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 CDIs, no conversion may occur under this Note, and no CDIs or
Common Stock may be issued pursuant to Section 2(a) or Section 2(b) hereof,
unless and until the Payor has obtained stockholder approval pursuant to this
Section 2(c).

(d)Fractional Shares and Conversion Process.  No fractional shares of Payor’s
capital stock will be issued upon conversion of this Note.  In lieu of any
fractional share to which Holder would otherwise be entitled, Payor will pay to
Holder in cash the amount of the unconverted principal and interest balance of
this Note that would otherwise be converted into such fractional share.  Upon
valid conversion of this Note pursuant to Section 2, Holder shall surrender this
Note, duly endorsed, at the principal offices of Payor and the Payor must, if
the CDIs are quoted on the ASX, do the following:

 

(i)

allot and issue to CHESS Depositary Nominees Pty Ltd (“CDN”) the number of
shares of Common Stock underlying the CDIs the subject of the conversion notice
and procure CDN to allot and issue to the Holder the number of CDIs representing
the Common Stock issued to CDN under this provision;

 

(ii)

enter CDN into the Payor’s register of members as the holder of the relevant
number of shares of Common Stock and procure CDN to enter the Holder into the
register of CDI holders as the holder of the relevant number of CDIs;

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(iii)

deliver to the Holder a holding statement showing the Holder as the holder of
the relevant number of CDIs;

 

 

(iv)

apply for, and use its reasonable efforts to obtain, official quotation of the
relevant number of CDIs (and underlying shares of Common Stock) on ASX as soon
as practicable; and

 

(v)

deliver to the Holder a check payable to Holder for any cash amounts payable as
a result of any fractional shares.

If, at the time of conversion, CDIs are no longer quoted on ASX, then on
conversion of the Note the Payor must issue directly to the Holder the number of
shares of Common Stock over which the Note is convertible into and must procure
that those shares be listed for trading on any securities exchange on which the
Payor’s Common Stock is tradeable and deliver to the Holder a check payable to
Holder for any cash amounts payable as a result of any fractional shares.

(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 Common Stock or CDIs 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 Common
Stock or 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 the
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, 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), (c) or (d) of
the Purchase Agreement, automatically, be immediately due, payable and
collectible by Holder pursuant to applicable law.  

(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.

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4.Prepayment.  Payor may not prepay this Note prior to the Maturity Date without
the consent of the Holder, except to the extent permitted pursuant to Section
2(b) and Section 2(c) hereof.

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 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) the Payor effects any merger or consolidation of the Payor with or into
another person pursuant to which the Common Stock is effectively converted and
exchanged, (ii) the Payor effects any sale of all or substantially all of its
assets in one or a series of related transactions pursuant to which the Common
Stock is effectively converted and exchanged, (iii) any tender offer or exchange
offer (whether by the Payor or another person) is completed pursuant to which at
least a majority of the outstanding Common Stock is tendered and exchanged for
other securities, cash or property or (iv) the Payor effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a subdivision or
combination of shares of Common Stock) (in any such case, a “Fundamental
Transaction”), then prior to any subsequent conversion of this Note, 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.

(b)Notice of Corporate Events.  If the Payor (i) declares a dividend or any
other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any shares of the Payor or any subsidiary, (ii)
authorizes and publicly approves, or enters into any agreement contemplating or
solicits stockholder approval for any Fundamental Transaction or (iii) publicly
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Payor, then the Payor shall deliver to the Holder a notice describing the
material terms and conditions of such transaction, at least ten (10) business
days prior to the applicable record or effective date on which a person would
need to hold Common Stock or CDIs in order to participate in or vote with
respect to such transaction, and the Payor will take all steps reasonably
necessary in order to insure that the Holder is given the practical opportunity
to convert this Note prior to such time so as to participate in or vote with
respect to such transaction; provided, however, that the failure to deliver such
notice or any defect therein shall not affect the validity of the corporate
action required to be described in such notice.

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(c)Subsequent Equity Sales.  Notwithstanding any provision of this Note to the
contrary, in the event that the Payor issues any CDIs or Common Stock or any
security that is exchangeable or convertible into CDIs or Common Stock
(“Additional Securities”) after the date hereof at a price per CDI (or the
equivalent for shares of Common Stock) that is less than the Conversion Price
(or the equivalent for shares of Common Stock) in an equity financing, then the
Conversion Price shall be reduced to the lowest price per CDI (or the equivalent
for shares of Common Stock) at which any Additional Security was issued or sold
or deemed to be issued or sold. The Payor agrees that it will provide a notice
to the Holder describing the material terms and conditions of any issuance of
Additional Securities promptly after the issuance thereof. For the avoidance of
doubt, the price per CDI (or the equivalent for shares of Common Stock) at which
any Additional Securities are issued by the Payor to the Holder after the date
hereof, including, without limitation, upon conversion into CDIs or Common Stock
of (i) the Senior Secured Convertible Promissory Note, dated June 15, 2017, and
amended December 31, 2018, March 29, 2019 and April 30, 2019, (ii) the Senior
Unsecured Convertible Promissory Note dated May 30, 2018, or (iii) the Senior
Unsecured Convertible Promissory Note dated March 15, 2019, each issued to the
Holder by the Payor, will have no effect on the Conversion Price.

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 Holder shall constitute
a waiver, election or acquiescence by it.

8.Cumulative Remedies.  Holder’s rights and remedies under this Note and the
Purchase Agreement shall be cumulative.  No exercise by Holder of one right or
remedy shall be deemed an election, and no waiver 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.  The 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

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and its rights hereunder without the consent of the 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 the 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 the Payor and Holder provided
that, while the 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)Voting Rights. This Note does not carry any voting rights at stockholder
meetings of the Payor unless and until the Note is converted.

(i)Participation Rights. The Holder is not by virtue of holding this Note
entitled to participate in any new issue of securities made by the Payor to
stockholders without first converting the Note.

(j)Equal Ranking.  The Common Stock and CDIs issued pursuant to a conversion of
this Note will rank, from the date of issue, equally with the existing shares of
Common Stock and CDIs of the Payor in all respects.

(k)Reorganisations. While the Payor is admitted to the Official List of the ASX,
the rights of the Holder will be changed to the extent necessary to comply with
the ASX Listing Rules applying to a reorganization of the Payor’s capital at the
time of the reorganization.

 

[Signature page follows]

 

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

 

GI Dynamics, Inc.

 

 

 

By:

 

/s/ Scott Schorer

Name:

 

Scott Schorer

Title:

 

Chief Executive Officer

 

Agreed to and Accepted:

Crystal Amber Fund Limited

 

By:

 

/s/ Laurence McNairn

Name:

 

Laurence McNairn

Title:

 

Director

 

Executed By Crystal Amber Asset Management (Guernsey) Limited As Investment
Manager Of Crystal Amber Fund Limited

 

 

[SIGNATURE PAGE]

 

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SCHEDULE A

 

ADVANCES

 

Advance No.

Date

Amount

1

5/10/2019

USD 500,000.00

2

On or before 5/25/2019

USD 500,000.00

3

On or before 6/11/2019

USD 1,000,000.00

4

On or before 7/11/2019

USD 1,000,000.00

 

Total

USD 3,000,000.00