Document:

Exhibit
10.1

 

 

 

 

Mrs.
Lilly Deng, Vice President

iFresh,
Inc.

2-39
54th Avenue

Long
Island City, NY 11101

 

Via
email: Lillysa46@gmail.com

 

Dear
Mrs. Deng:

 

Thank
you very much for your interest in retaining the services of Getzler Henrich & Associates LLC (“Getzler Henrich”).
We appreciate the opportunity to work with iFresh, Inc., and its subsidiaries and affiliates, if any (collectively, “iFresh”
or “Company”) to provide financial advisory and management consulting services.

 

We
believe it is important for you to have confidence in our firm and the ability of our professionals to deliver the services you
require. Accordingly, this engagement letter has been structured to explain our primary purpose, qualifications, resources, approach
and standard terms.

 

PRIMARY
PURPOSE

 

The
engagements primary purpose is for Getzler Henrich, through its Chief Restructuring Officer role to oversee the refinancing of
a loan facility (“Loan”) provided by Key Bank National Association (the “Lender”) to NYM Holding, Inc.
(“NYM”). NYM is a first-tier subsidiary of iFresh and the primary obligor under the Loan. iFresh’s role is its
loan guarantor.

 

Our
Firm

 

Getzler
Henrich & Associates is one of the oldest and most respected names in middle- market corporate restructuring, assisting businesses
around the world with an approach that emphasizes rapid, pragmatic, decision making and implementation. Over the course of the
past fifty years, Getzler Henrich has developed a strong track record, assisting both underperforming and healthy businesses in
the middle market. We have a demonstrated ability to generate realistic solutions to challenges confronting for-profit and not-for-profit
entities. Engagements have spanned a broad spectrum of industries and sectors. Executing solutions with speed, competence and
integrity, we adapt our approach to the precise needs of each individual client and make practical proposals to address specific
issues.

 

    	

     

    

 

 

 

Our
People

 

Assignments
are always managed with a proactive, results-oriented approach. We believe that to provide valuable guidance and advice to our
clients, our people must have first-hand experience running a business. Therefore, prior to joining the firm, each team leader
at Getzler Henrich has gained valuable experience managing companies, ranging from top executive positions at middle market companies
to senior management positions at major divisions of multinationals.

 

This
engagement will be led by Bert Weil and Margie Kaufman and may include other Getzler Henrich professionals as appropriate or required.
In this engagement, Mr. Weil and Ms. Kaufman will serve in the capacity as Co-Chief Restructuring Officer of the Company.

 

Bert
Weil, managing director, is an experienced financial and operational advisor with 25 years of consulting experience. He has
served as financial advisor, interim CEO & CFO, chief restructuring officer (CRO), chief restructuring advisor, turnaround
professional, and crisis manager to over 135 entities, including public, private, and not-for-profit entities.

 

In
addition to his numerous advisory roles, Bert has acted as on-site, full-time Interim CRO/CEO/CFO, with full supervisory responsibilities
in approximately 20 different cases. He has helped companies supervise and upgrade administrative functions, lead negotiations
with stressed vendors and lenders, as well as open and upgrade communications between lenders, equity holders, and other key stakeholders.

 

Bert
has worked with companies to build cash flow and liquidity models, budgets and business plans, and supervised the production of
both statutory and managerial performance information for internal and external users. In addition, he has helped businesses create
and lead operational profit improvement programs; identified and helped clients execute exit financing strategies when appropriate
through managed debt and equity transactions; and supervised organization wind down activities.

 

His
industry experience includes not-for-profit, apparel and textile, heavy manufacturing, distribution, retail, trucking and freight,
hospitality, education, professional and non-professional services, food processing, aerospace, and printing.

 

Prior
to joining the restructuring community, Bert learned first-hand the challenges of managing financial responsibilities while serving
as the top financial officer of a public company with approximately 1,000 employees.

 

Bert
was a 13-year member of the board of the Turnaround Management Association’s New York chapter and is a member of the Association
for Corporate Growth. He is a CTP (Certified Turnaround Professional) and a CPA. He holds a BS in Accounting from Lehigh University
and an MBA from the Stern School, New York University. 

 

Marjorie
E. Kaufman, managing director, has provided turnaround and interim management services for companies around the country for
over 30 years, and frequently serves in chief-restructuring-officer and chief-financial-officer positions. Margie has provided
cash-flow management services, conducted business plan viability analyses, designed and steered turnaround action plans, managed
debt and equity placement, and sourced refinancing. Her expertise in forensic accounting is a valuable asset in many engagements.
Ms. Kaufman’s management positions have spanned industries including food and beverage, distribution, retail, catalog companies
and manufacturing.

 

    	2 

     

    

 

 

 

Over
the years, Margie has done a number of due diligence projects as part of acquisitions. She has represented strategic buyers, equity
firms and mezzanine funds in the due diligence process. As part of the due diligence process, Margie has reviewed various business
segments for viability, policies on revenue recognition for contracts, customer profitability, product line profitability and
working capital needs. Margie has also played a role in the financing structures of the acquisitions.

 

Ms.
Kaufman received a bachelor’s degree in accounting from the University of Bridgeport. Margie has been the president and
director of the northeast chapter of the Turnaround Management Association and now is a member of the past president’s council
for the chapter. She is a member and an executive board member of the International Women’s Insolvency and Restructuring Confederation
and a member of the American Bankruptcy Institute. Margie is also a Fellow of the American College of Bankruptcy and frequently
speaks on various topics on restructuring.

 

Our
Services

 

Financial
advisory services include turnarounds and workouts, interim and crisis management, bankruptcy advisory, wind-downs and liquidations,
financial restructuring and forensic/litigation support. We also assist companies in achieving operational excellence through
process improvement/ LeanSigma, supply chain solutions, sales and marketing effectiveness, technology advisory and transaction
advisory services. Albeit not all Getzler Henrich’s capabilities are required in this case, our breadth of services is briefly
summarized on our website www.getzlerhenrich.com.

 

Our
Understanding and Scope of Work

 

At
the recommendation of Key Bank, the senior secured lender to NYM, iFresh wishes to retain a Chief Restructuring Officer(“CRO”)
to oversee the refinancing of the Loan. The Company has underperformed its own performance targets and the Lender has expressed
concern with the quality of the its lender/borrower relationship. The Lender has determined that NYM and iFresh need to find replacement
financing for the Loan and accordingly, have requested iFresh to engage a CRO who will provide leadership, guidance and assistance
in this refinancing process, engage an investment banker to facilitate the refinancing of the Loan, and oversee the payment of
the outstanding balance of the Loan.

 

Upon
execution of this engagement letter and adoption of a resolution by iFresh’s Board of Directors (the “Board”),
Bert Weil and Margie Kaufman will assume the role of Co-CRO. And shall serve in that capacity, subject to the oversight, guidance,
control and direction of the Board, the CEO, and Vice President of iFresh. Getzler Henrich shall also provide such other personnel
and staffing for the Company as the CRO may from time to time determine necessary or appropriate and may furnish additional personnel
and staffing of the Company, subject to the approval of the Company’s CEO and/or Vice President. The CRO and any additional
officers of Getzler Henrich provided to the Company shall be covered by the indemnity provisions of iFresh’s bylaws and
applicable state law and the D&O policy (as described below) and acceptance of terms thereof by Getzler Henrich. Getzler Henrich
regularly appoints Co-CROs. While working together, our objective is to provide additional insight when critical decisions are
evaluated, recommended, and or executed. Getzler Henrich will always maximize its efforts to avoid duplication of services provided.

 

    	3 

     

    

 

 

 

Getzler
Henrich shall also provide such other personnel and staffing for the Company as the CRO may from time to time determine necessary
or appropriate and may furnish additional officers of the Company, subject to the CEO’s and or Vice President’s approval.

 

The
CRO overall will use its best efforts to assist the Company to be in compliance with the terms, covenants, and conditions of the
Forbearance Agreement by and among iFresh (including NYM and all subsidiaries of NYM) during the term of the Forbearance Agreement.
It is contemplated by the Company that the Forbearance Agreement shall be executed contemporaneously with this engagement letter.

 

The
duties of the CRO shall include, but not be limited to:

 

Financial
Reporting

 

		●	13
                                         Week Cash Flow Projection – Direct, oversee, and review the preparation of the
                                         Company’s 13-week cash flow projection. Assist in developing and maintaining a
                                         rolling 13 Week Cash Flow Projection and delivering weekly variance reporting;

 

		●	12
                                         Month Budget - Assist in developing a budget and generating appropriate monthly performance
                                         commentary and budget versus actual variance reporting.

 

Bank
Reporting

 

		●	Bank
                                         Deliverables – Provide an ongoing stream of appropriate company deliverables and
                                         communications describing key activities, including financial performance and performance
                                         against key indicators.

 

Operations
Review 

 

		●	Operational
                                         Review - Complete a brief review of operations and provide recommendations to the Company’s
                                         executive officers and senior management to improve profitability where possible.

 

Management
Responsibilities

 

		●	General
                                         Management – Working closely with the CEO and CFO and the senior leadership team,
                                         the CRO will work to enhance the company’s performance against operating goals;

 

    	4 

     

    

 

 

 

		●	Contacts
                                         and Agreements – The company will present for review and approval by the CRO any
                                         new or renewal agreements before they are approved for execution, e.g.

 

		1.	If
                                         the agreements are for standard day to day business transaction but are larger than routine
                                         in size, they will be presented to the CRO for review and approval;

 

		2.	If
                                         the agreements are non-standard or new and material in nature, CRO approval is required
                                         prior to execution. Examples of this category of agreement would include:

 

		a.	A
                                         sale of stock or other ownership in the company;

 

		b.	Any
                                         corporate governance issues, e.g. a change in the Board of Director composition or change
                                         in a senior management role;

 

		c.	Any
                                         purchase or sale of real estate or assets;

 

		d.	Any
                                         business combination

 

Key
Bank Replacement Financing

 

		●	IB
                                         Retention - Work with the company to interview and engage an investment banker (“IB”)
                                         who can provide exit financing for the Key Bank debt;

 

		●	Work
                                         with the IB – Work cooperatively with the IB during all phases of the exit financing
                                         process. The CRO will help establish a milestone calendar of events and track company
                                         performance against the calendar;

 

		●	Lender
                                         Update – Provide Key Bank regular progress reports and comments describing the
                                         achievability of the exit financing goals on a timely basis.

 

Other

 

		●	Perform
                                         such other tasks as appropriate and as may be reasonably requested by Management or their
                                         counsel.

 

		●	Additionally,
                                         the CRO will work with other professionals retained by the Company to ensure that work
                                         is performed efficiently and without duplication of effort.

 

With
respect to all such efforts outlined above, the CRO will interface with and report in a timely manner to the CEO and Vice President
any decisions to be considered and will furnish to the extent possible all financial or other information requested.

 

The
CRO will be permitted to communicate directly and independently with Key Bank regarding all matters related to this engagement.

 

    	5 

     

    

 

 

 

Terms
of Engagement

 

The
Standard Terms and Conditions annexed hereto as Annex I are incorporated by reference herein as if set forth in full herein and
shall govern this engagement, except to the extent inconsistent with or superseded by the express terms of this letter.

 

Fee
structure

 

Getzler
Henrich will bill iFresh weekly for Consulting Fees and reasonable out-of-pocket expenses incurred by Getzler Henrich. iFresh
acknowledges that Getzler Henrich’s invoices are due and payable each week upon presentation. Should payment not be provided
timely by iFresh we reserve the right to cease work until the matter is settled. 

 

Consulting
Fees will be billed on an hourly basis; our standard hourly rates are as follows:

 

	Principal
    / Managing Director	 	$515-650
	Director
    / Specialists	 	$385-585
	Associate
    Professionals	 	$150-385

 

Being
sensitive to iFresh’s profile and present circumstances and demonstrating our strong appreciation of the opportunity to
work with and assist you, Getzler Henrich has provided a discount of approximately 12.5% from the standard hourly
billing rate for Bert Weil and Margie Kaufman, whose hourly rates for this engagement will be $535. You have requested a fixed
fee option, which Getzler Henrich is willing to propose. Margie Kaufman will be the primary Getzler Henrich person on site. For
Margie, based upon a 45 hour estimated work week, we will offer the fixed rate of $19,000 per week, which represents a further
discount above the previously mentioned 12.5 %. We recognize that during the first weeks there will be a learning curve burden.
To that extent, Getzler Henrich is willing to cap Margie Kaufman’s fees during the first four weeks of the engagement at
$60,000. Bert Weil, who will not be regularly on-site, will continue to invoice at his hourly rate above. If there is a material
change in the hours required by this assignment Getzler Henrich will consider altering the fixed fee rate. Any such change must
be agreed to by Getzler Henrich and iFresh and would be negotiated based upon an updating of the facts and circumstances.

 

Getzler
Henrich will strive to perform services in a most expeditious and comprehensive fashion, which will be dependent in part on the
quality, sophistication and availability of iFresh’s existing systems, personnel, processes and reporting procedures and
iFresh’s ability to provide all required financial and operational information and data in a timely fashion and in the required
format. Travel time outside the NY metro area, if required, is billed at 50% of the hourly rate. Hourly rates are revised periodically.
We will notify you of any such changes to our rates. Note that we do not provide assurance regarding the outcome of our work and
our fees will not be contingent on the results of such work.

 

To
the extent that any services outside the scope of this engagement are required or requested (e.g., financial advisory services
to source a transaction to replace Key Bank), the extent of these services, and the additional compensation to be paid to
Getzler Henrich for such services, shall be agreed upon prior to Getzler Henrich beginning to perform such services. These services
will be provided subject to our entering into an appropriate amendment to this letter.

 

    	6 

     

    

 

 

 

iFresh
will, on the signing of this letter, pay Getzler Henrich a retainer in the amount of $35,000 which will be applied to the final
bill. Should this retainer be insufficient because of a change in circumstances, Getzler Henrich reserves the right to request
and the Company agrees to pay a retainer increase. Any amount of this retainer remaining after application to unpaid fees will
be returned to iFresh upon request. Notwithstanding anything to the contrary contained in this paragraph, Getzler Henrich will
be entitled to retain the unused portion of the retainer, if any, to the extent necessary to ensure performance by iFresh of its
indemnification obligations pursuant to this engagement letter.

 

Concurrently
upon the acceptance of the appointment of CRO, the Company shall cause its insurance broker to procure or to add Getzler to any
existing Directors & Officers insurance Policy (“D&O” policy), send copies of all documentation and other
communications regarding iFresh’s D&O policy, including without limitation any renewal or cancellation thereof, to the
attention of Getzler Henrich, and extend the claim period upon any renewal or cancellation of the policy, as provided for in paragraph
6 of Annex I hereto. iFresh shall take all required steps to insure all persons serving as officers of iFresh provided by Getzler
Henrich shall receive the benefit of indemnification and insurance provided to all other senior executive officers or directors
on the same terms as such persons, whether under the corporate bylaws or applicable state law.

 

In
no event shall Getzler Henrich have responsibility or liability for any decisions, actions or failures to act of any officers,
made or taken in that capacity, furnished by it to iFresh hereunder. 

 

All
notices, requests, consents and other communications hereunder to Getzler Henrich shall be deemed to be sufficient if contained
in a written instrument delivered in person or duly sent by certified mail, postage prepaid; by an overnight delivery service,
charges prepaid; or by confirmed telecopy; addressed to Getzler Henrich at the address set forth below or such other address as
may hereafter be designated in writing:

 

Getzler
Henrich & Associates LLC

295
Madison Avenue, 20th Floor

New
York, NY 10017

Attention:
Bert Weil

Facsimile:
212-697-2400

 

This
Engagement Letter contains the entire agreement among the parties relating to the subject herein. Any modification or other changes
to the terms contained herein, including Annex I, must be in writing and signed by the parties hereto to be enforceable.

 

If
the foregoing is in accordance with our understanding, please sign the attached copy and forward it to our office. In addition,
the retainer and future payments may be wired to Getzler Henrich & Associates LLC c/o JP Morgan Chase Bank, account # 621505952665,
routing/ABA # 021 0000 21.

 

    	7 

     

    

 

 

 

We
are very appreciative of the opportunity to help you achieve your goals and to work with you.

 

Sincerest
regards,

 

GETZLER
HENRICH & ASSOCIATES LLC

 

	By:	/s/
    Bert Weil	 	Dated:	May
    10, 2019
	 	Bert
    Weil, Managing Director	 	

 

	AGREED
    TO AND ACCEPTED BY:	 
	 	 
	iFRESH,
    INC. and its subsidiaries and affiliates, including, without limitation, NYM Holding, Inc.
	 	 
	Accepted
    by: 	/s/
    Lilly Deng	 
	 	 
	Dated:
    	5/9/19	 
	 	 
	Print
    Name: 	Lilly
    Deng	 
	 	 
	Title:
    	V.
    P.	 

 

    	8 

     

    

 

 

 

We
are very appreciative of the opportunity to help you achieve your goals and to work with you.

 

Sincerest
regards,

 

GETZLER
HENRICH & ASSOCIATES LLC

 

	By:	/s/
    Bert Weil	 	Dated:	
	 	Bert
    Weil, Managing Director	 	

 

	AGREED
    TO AND ACCEPTED BY:	 
	 	 
	iFRESH,
    INC. and its subsidiaries and affiliates, including, without limitation, NYM Holding, Inc.
	 	 
	Accepted
    by: 	/s/
    Deny Long	 
	 	 
	Dated:
    	5/9/19	 
	 	 
	Print
    Name: 	Deny
    Long	 
	 	 
	Title:
    	C.E.O	 

 

    	9 

     

    

 

 

 

Annex
I

Terms
and Conditions

 

1.
Access to Company Personnel and Information.

 

(a)
The Company agrees to make available to Getzler Henrich all of the Company’s financial and operational information and data as
requested by Getzler Henrich (all such information so furnished being the “Information”) and agrees to permit discussions
with Company personnel that Getzler Henrich reasonably requests in connection with the services performed by Getzler Henrich under
this Agreement. The Company will provide Getzler Henrich with full access to all Company personnel, books, and records, including
those of the Company’s attorneys (subject to such safeguards as may be necessary to preserve applicable attorney client
privileged communications) and other agents and third-party representatives. The Company represents and warrants to Getzler Henrich
that, except as disclosed to Getzler Henrich in writing, all Information provided or made available to Getzler Henrich by the
Company, its directors, officers, employees, representatives, attorneys and agents at any time shall, to the best of the Company’s
knowledge: a) be complete and correct in all material respects; and b) not contain any untrue statement of material fact or omit
to state a material fact necessary in order to make the statements not misleading in light of the circumstances under which such
statements are made. The Company agrees that it shall notify Getzler Henrich if it learns subsequently that any Information provided
or made available to Getzler Henrich in accordance with this Agreement is incorrect, inaccurate, or otherwise should not be relied
upon.

 

(b)
The Company recognizes and confirms that Getzler Henrich (a) will use and rely primarily on the Information and on information
available from generally recognized public sources in performing the services contemplated hereby without having independently
verified any of the same and (b) does not assume responsibility for accurateness or completeness of the Information and such
other information and (c) will not make an appraisal of any of the assets or liabilities of the Company. The Company agrees
that Getzler Henrich shall have no duty to verify independently the reliability, accuracy or completeness of any Information or
other information. The Company also agrees that Getzler Henrich shall incur no liability to the Company or any individual or other
entity that may arise if any Information or other information proves to be unreliable, inaccurate or incomplete.

 

2.
Confidential Information.

 

(a)
Getzler Henrich shall not publicly disclose the Confidential Information. Further, Getzler Henrich will use the Confidential Information
only for the purpose of providing services to the Company pursuant to this Agreement. “Confidential Information” shall
consist only of information that is necessary for Getzler Henrich to perform its services under this Agreement, and that is: (i) disclosed
to Getzler Henrich by the Company, its directors, officers, employees, representatives and agents; (ii) acquired by Getzler
Henrich from any inspection of the Company’s property in connection with this Agreement; or (iii) information produced
by Getzler Henrich, from Confidential Information, in connection with performing services to the Company under this Agreement.

 

(b)
Confidential Information shall not include information that is: (i) now or subsequently becomes generally known or available
by publication, commercial or otherwise, through no fault of Getzler Henrich, its employees, agents, or independent contractors;
(ii) already known by Getzler Henrich at the time of the disclosure, provided that such information did not come from
a source known by Getzler Henrich to be bound by a confidentiality agreement with the Company, or from a source that was otherwise
prohibited from disclosing such information under a contractual, legal or fiduciary obligation; (iii) becomes available to
Getzler Henrich on a non-confidential basis from a source other than the Company, provided that, to Getzler Henrich’s
knowledge, the source was not prohibited from disclosing such information to Getzler Henrich under a contractual, legal or fiduciary
obligation to the Company; (iv) independently developed by Getzler Henrich, its employees, agents, or independent contractors
primarily from information that is not Confidential Information; (v) information that the Company and Getzler Henrich agree,
in writing, may be disclosed; (vi) information that is or should be reasonably expected to be disclosed as part of Getzler
Henrich’s services to the Company; or (vii) information that Getzler Henrich reasonably believes, upon advice of its
attorneys, must be disclosed pursuant to applicable law, or regulatory or administrative process, including stock exchange rules.

 

(c)
Getzler Henrich may disclose Confidential Information: (i) to third parties in connection with the performance of its services
under this Agreement; or (ii) in connection with any dispute between Getzler Henrich and Company under, concerning or arising
out of this Agreement. If Getzler Henrich receives any request by order, subpoena, or other legal process to produce any Confidential
Information, then unless otherwise prohibited by law or process, if practicable Getzler Henrich will seek to provide the Company
with timely notice of such request. At the Company’s request and expense, and unless otherwise prohibited by law or against
a recommendation by Getzler Henrich’s counsel, and without relinquishing or modifying Getzler Henrich’s authority
to disclose information under the terms of this Agreement, Getzler Henrich will cooperate reasonably with the Company in actions
that the Company deems necessary or appropriate under the circumstances to protect the confidentiality of the Confidential Information.

 

(d)
Getzler Henrich may disclose the Company’s name for purposes of internal marketing materials only and will not otherwise
disclose Confidential Information as contemplated under this Section 2.

 

    	10 

     

    

 

 

 

3.
No Third-Party Beneficiaries; Use of Work Product. Except as provided with respect to indemnification and exculpation,
there are no third-party beneficiaries of this Agreement. The Company acknowledges that in connection with its engagement Getzler
Henrich is acting as an independent contractor with duties owing solely to Company. The Company acknowledges that all information,
whether written or oral, created, prepared, or compiled by Getzler Henrich in connection with this Agreement is intended solely
for the benefit and use of the Company provided, however that Getzler Henrich acknowledges and agrees that Company shall utilize
Getzler Henrich’s work in negotiations with Company’s creditors. No other individual or entity shall be entitled to
rely on such information for any purpose. Company agrees that such information shall not be reproduced, disseminated, quoted or
referred to at any time or in any manner other than to the Company’s board of directors or managers, officers, employees,
representatives, attorneys, and other agents who have a need to receive such information, except upon Getzler Henrich’s
prior written consent. Without limiting the foregoing, the Company shall not (and shall not authorize any other individual or
entity to) use Getzler Henrich’s name or to make available to third parties any information created, prepared, or compiled
by Getzler Henrich under this Agreement for any reason, including obtaining or extending credit, offering or selling securities
or other assets, or in any representations to third parties without Getzler Henrich’s prior written consent. It is also
expressly agreed that notwithstanding the above restrictions upon the Company’s dissemination and use of information and
work product, Getzler Henrich shall have no responsibility or liability relating directly or indirectly to such disclosure (whether
authorized or unauthorized) by the Company concerning any information created, prepared, or compiled, in whole or in part, by
Getzler Henrich pursuant to this Agreement, which may be disclosed only after prior written approval by Getzler Henrich or as
required by applicable law, or regulatory or administrative process, including stock exchange rules. The foregoing provisions
shall not be construed or interpreted to prohibit references to Getzler Henrich’s engagement under this Agreement in required
public filings or court documents.

 

4.
Future Performance.

 

(a)
The services to the Company under this Agreement may include the preparation of recommendations, projections, and other forward-looking
statements. The Company acknowledges that numerous factors may affect the Company’s actual financial and operational results,
and that these results may materially and adversely differ from the recommendations and projections prepared, in whole or in part,
by Getzler Henrich.

 

(b)
Getzler Henrich does not provide assurance regarding the outcome of its engagement and its fees are not contingent on the results
of its engagement.

 

5.
Independent Contractor Status. Getzler Henrich is an independent contractor under this Agreement, and accordingly,
this Agreement shall not be an employment agreement. No one on behalf of any Getzler Henrich Party (as defined below), nor any
employees, agents, or independent contractors thereof, shall be considered to be a director, officer, member, manager, partner,
control person, employee, representative, agent, or insider of the Company, unless expressly agreed to in a writing signed by
Company and Getzler Henrich. Getzler Henrich will have exclusive control over the management and operation of Getzler Henrich,
including hiring and paying the wages or other compensation of its personnel. The Getzler Henrich personnel that provide services
to the Company under this Agreement may also provide services to other past, present or future Getzler Henrich clients. In addition,
like other advisory firms, Getzler Henrich may utilize the services of qualified independent project employees, who work under
our direct supervision for us on an ad hoc basis as temporary employees, to assist Getzler Henrich with its performance of its
services pursuant to this Agreement. This arrangement enables us to reduce our overhead and provide cost-effective services to
our clients, who benefit from this saving by our reasonable rate structure.

 

6.
Appointment as Officer and/or Director. Getzler Henrich understands that the Company’s officers and directors
are covered by appropriate D&O insurance policies. Should the Company with the consent of Getzler Henrich elect a Getzler
Henrich Party as an officer or director, the Company shall prior to the effectiveness of such election name such Getzler Henrich
Party and Getzler Henrich as additional insureds under these policies and under all such other policies that the Company may purchase
during Getzler Henrich’s engagement. The Company further agrees to provide evidence of this coverage as soon as it is in
place. It is mutually understood that naming such Getzler Henrich representative as an officer or director of the Company, that
such Getzler Henrich representative will remain at all times an employee of Getzler Henrich and not become an employee of the
Company and will be compensated solely by Getzler Henrich. Upon any cancellation or non-renewal of the D&O policy, then the
Company shall exercise their rights to extend the claim period for a one-year “discovery period” and shall exercise
such rights and pay such premiums required thereunder.

 

7.
No Fiduciary Relationship. Other than with respect to appointment(s) of a Getzler Henrich Party as an officer and/or
director of Company in writing (and then only with respect to such Getzler Henrich Party), nothing in this Agreement is intended
to create, or shall be deemed or construed to create a fiduciary relationship between: (a) the Company, including without
limitation, the Company’s directors, officers, members, managers partners, control persons, shareholders, employees, representatives,
agents, or creditors (collectively, the “Company parties” and each a “Company Party”), on the one hand; and
(b) Getzler Henrich, Getzler Henrich’s affiliates, and the respective directors, officers, members, managers, partners,
control persons, shareholders, employees, representatives, independent contractors, attorneys, agents, successors or assigns of
Getzler Henrich or Getzler Henrich affiliates (collectively, the “Getzler Henrich Parties,” and each a “Getzler
Henrich Party”) on the other hand.

 

    	11 

     

    

 

 

 

8.
Indemnity by Company.

 

(a)
The Company agrees to indemnify and hold harmless Getzler Henrich and each other Getzler Henrich Party from and against, and Company
agrees that no Getzler Henrich Party shall have any liability to the Company or any other Company Party for, any losses, claims,
damages, obligations, penalties, judgments, awards, settlements, liabilities, costs, expenses and disbursements (including reasonable
attorneys’ and consultants’ fees and expenses, investigation fees and expenses and court and litigation costs) of any kind or
nature whatsoever, known or unknown, foreseen or unforeseen, contingent or otherwise arising out of or in any way, directly or
indirectly, related to (i) Company’s actions or failures to act (including statements or omissions made, or information provided,
by it or its agents) or (ii) actions or failures to act by an Getzler Henrich Party with Company’s consent or in reliance
on Company’s actions or failures to act, or (B) otherwise related to or arising out of any services rendered by Getzler Henrich
or any Getzler Henrich Party pursuant to this Agreement or other services rendered at the request of Company (including service
by an Getzler Henrich Party as an officer, director or in any other capacity with Company or any of its affiliates), including
costs arising out of any dispute whether or not Getzler Henrich or any other Getzler Henrich Party is a party to such dispute
and including any claim brought by, on behalf of or in the name of Company (collectively, “Covered Losses”); provided,
however, that this indemnity and exculpation shall not apply where a court of competent jurisdiction has found by a final judgment
(not subject to further appeal) that such Covered Losses resulted primarily from willful misconduct on the part of Getzler Henrich
in the performance of its services under this Agreement. The Company also agrees to pay Getzler Henrich a fee at Getzler Henrich’s
regular hourly rates for it or any other Getzler Henrich Party preparing for, or testifying in, any legal proceedings. If multiple
claims are brought against any Getzler Henrich Party in any action with respect to at least one of which indemnification is permitted
under applicable law and provided for under this agreement, the Company agrees that any judgment, arbitration award or other monetary
award shall be conclusively deemed to be based on claims as to which indemnification is provided for and permitted. The Company’s
obligations hereunder shall be in addition to any rights that any Getzler Henrich Party may have at common law or otherwise. Solely
for the purpose of enforcing this agreement, the Company hereby consents to personal jurisdiction and to service and venue in
any court in which any claim which is subject to this agreement is brought by or against any Getzler Henrich Party.

 

(b)
If any action, suit, proceeding or investigation or similar item is commenced as to which a Getzler Henrich Party is entitled
to indemnification hereunder, it shall notify Company with reasonable promptness; provided, however, that any failure to so notify
Company shall not relieve Company from its obligations hereunder (except to the extent Company is materially and adversely affected
by such failure to be given notice). Getzler Henrich shall have the right to retain counsel of its own choice to represent it,
and Company shall pay the reasonable fees, expenses and disbursements of such counsel; and such counsel shall to the extent consistent
with its professional responsibilities cooperate with Company and any counsel designated by Company. Company shall not without
written prior consent of Getzler Henrich, settle or compromise any claim against Getzler Henrich, or permit a default or consent
to the entry of any judgment in respect thereof, unless such settlement, compromise or consent includes as an unconditional term
thereof, the giving by the claimant to Getzler Henrich of an unconditional release from all liability in respect of such claim.

 

(c)
In order to provide for just and equitable contribution, if a claim for indemnification pursuant to this Indemnification Agreement
is made but is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification
may not be enforced in such case, even though the express provisions hereof provide for the indemnification in such case, then
Company, on the one hand, and Getzler Henrich, on the other hand, shall contribute to the Covered Losses to which the Indemnified
Parties may be subject in accordance with the relative benefits received by Company, on the one hand, and Getzler Henrich, on
the other hand, and also the relative fault of Company, on the one hand, and Getzler Henrich, on the other hand, in connection
with the statements, acts or omissions which resulted in such Covered Losses and the relevant equitable considerations shall also
be considered. Notwithstanding the foregoing, Getzler Henrich shall not be obligated to contribute any amount hereunder that exceeds
that amount of fees previously received by Getzler Henrich from Company.

 

(d)
Neither termination nor completion of the engagement of Getzler Henrich or of this Agreement shall affect these indemnification
provisions which shall remain operative and in full force and effect and shall be binding upon any successors or assigns of Company.
Each Getzler Henrich Party is an express third-party beneficiary of the provisions of this Section 8.

 

9.
Non-Solicitation. For a period of twenty four (24) months after the later of: (a) the completion of all services
to be provided by Getzler Henrich under this Agreement; or (b) termination of this Agreement, the Company, including any
affiliates thereof, shall not, directly or indirectly, hire, employ, retain or utilize (other than through Getzler Henrich) the
services of any current or former employee of Getzler Henrich or independent contractor who provided services under this Agreement
at any time without the prior written consent of Getzler Henrich. The Company agrees and acknowledges that the Getzler Henrich’s
remedy at law for any breach of the provisions of this Section would be inadequate and that for any breach of such provisions
Getzler Henrich will, in addition to such other remedies as may be available to it at law or in equity, be entitled to injunctive
relief and to enforce its rights by an action for specific performance to the extent permitted by law.

 

    	12 

     

    

 

 

 

10.
Joint and Several Liability; Setoff. If the Company consists of one or more entities, then the Company’s obligations
under this Agreement shall be joint and several obligations of each entity comprising the “Company.” Without limiting
any other remedy that may be available to Getzler Henrich under this Agreement or applicable law, where the “Company”
under this Agreement consists of more than one entity, then Getzler Henrich shall have against each such entity a right of setoff
(notwithstanding any lack of mutuality) under which Getzler Henrich may set off against any claim against Getzler Henrich by any
entity comprising the Company group, all of the claims that Getzler Henrich may have against any or all of the other entities
that comprise the Company.

 

11.
Limitation of Liability. No Getzler Henrich Party shall be liable to the Company, or any party asserting claims on
behalf of the Company, except for direct damages found in a final determination to be the direct result of the bad faith, self-dealing,
intentional misconduct or gross negligence of such Getzler Henrich Party. The Getzler Henrich Parties shall not be liable for
incidental or consequential damages under any circumstances, even if they have been advised of the possibility of such damages.
The Getzler Henrich Parties aggregate liability, whether in tort, contract or otherwise, is limited to the amount of fees paid
for services on this engagement (the “Liability Cap”). The Liability Cap is the total limit of the Getzler Henrich
Parties for any and all claims or demands by anyone with respect to this Agreement, or the services provided hereunder, and the
Liability Cap shall be allocated among all such claimants, as appropriate.

  

12.
Attorneys’ Fees and Expenses. The Company shall pay all costs and expenses, including reasonable attorneys’
fees and expenses, incurred by Getzler Henrich to enforce this Agreement, including, but not limited to any indemnity provision
of this Agreement. This obligation to pay Getzler Henrich’s reasonable attorneys’ fees and expenses shall apply whether
such fees and expenses are incurred during trial or appeal, or in arbitration, a bankruptcy case, or otherwise. If so required,
Getzler Henrich shall additionally be entitled to reimbursement of reasonable legal expenses associated with any required court
approval of this Agreement or enforcement of provisions of this Agreement, including, but not limited to, fee applications and
the defense of any objections thereto. Company shall reimburse Getzler Henrich for all such expenses upon presentation of the
invoice for the same supported by appropriate documentation.

 

13.
Consent; Entire Agreement. In any instance under this Agreement where a party’s consent is permitted or required
to be given, such consent shall not be withheld unreasonably. This Agreement contains the entire Agreement of the parties with
respect to its subject matter and supersedes all prior agreements and understandings between the Company and Getzler Henrich with
respect to such subject matter. The parties agree that all terms of their agreement and understanding are embodied in this Agreement,
and as modified or supplemented from time to time, but only if such modification or supplement is both: (i) in writing, and
(ii) signed by all parties. To the extent that any services outside the scope of this engagement are required or requested,
the extent of these services, and the additional compensation to be paid to Getzler Henrich for such services, shall be agreed
upon prior to Getzler Henrich beginning to perform such services.

 

14.
Choice of Law/Forum. The validity, interpretation and enforcement of this Agreement, matters arising out of or related
to this Agreement or its making, performance or breach, and related matters shall be governed by the internal laws of the State
of New York (without reference to choice of law doctrine). Any legal action or proceeding concerning the validity, interpretation
and enforcement of this Agreement, matters arising out of or related to this Agreement or its making, performance or breach, or
related matters shall be brought exclusively in the courts of the State of New York in the County of New York or of the United
States of America for the Southern District of New York, and all parties consent to the exclusive jurisdiction of those courts,
waiving any objection to the propriety or convenience of such venues. GETZLER HENRICH HEREBY AGREES, AND THE COMPANY HEREBY AGREES
ON ITS OWN BEHALF, AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF EACH OTHER COMPANY PARTY, TO WAIVE ANY RIGHT TO
TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR ACTION IN CONNECTION WITH, RELATING TO OR ARISING OUT OF GETZLER HENRICH’S
ENGAGEMENT, GETZLER HENRICH’S PERFORMANCE THEREOF, OR THIS AGREEMENT.

 

15.
Multiple Originals. This Agreement may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same document. This Agreement may be executed by facsimile signatures
or signatures forwarded via email.

 

16.
Termination. Either the Company or Getzler Henrich can terminate this agreement upon written notice, except for Sections
1 thru 3 and 6 thru 12, which shall survive any termination. Outstanding amounts due Getzler Henrich, if any, will be paid promptly
upon receipt of a final invoice that will be provided immediately upon notice of termination by the Company.

 

 

 13gidyl-ex101_46.htm

Exhibit 10.1

GI Dynamics, Inc.

Note and Warrant Purchase Agreement

This Note and Warrant Purchase Agreement (this “Agreement”) is made as of the 15th day of March, 2019 (the “Effective Date”) by and among GI Dynamics, Inc., a Delaware corporation (the “Company”), and Crystal Amber Fund Limited (the “Purchaser”).  Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Note (as defined below).

The parties hereby agree as follows:

	
1.
	
Terms of the Loan and the Warrant 

1.1The Loan.  Subject to the terms of this Agreement, the Purchaser agrees to purchase from the Company, and the Company agrees to issue and sell to the Purchaser, a senior unsecured convertible promissory note in the aggregate principal amount of One Million dollars (US$1,000,000) (the “Loan Amount”) and in substantially the form attached hereto as Exhibit A (the “Note”).  The Note may be converted into Chess Depositary Interests (“CDIs”) (with each CDI representing 1/50th of a share of the Company’s common stock, $0.01 par value per share (the “Common Stock”)) or Common Stock as provided in such Note.

1.2The Warrant.  In order to induce the Purchaser to enter into this Agreement, to purchase the Note and to make the loan evidenced thereby, the Company agrees to issue to the Purchaser a warrant to purchase CDIs or Common Stock as provided in such warrant and in substantially the form attached hereto as Exhibit B (the “Warrant”). The Warrant shall only be issuable on the date of the Company’s receipt of stockholder approval to issue the Warrant in accordance with the same stockholder approval process described in Section 2(c) of the Note, and if stockholder approval is obtained, shall have a term that expires on the fifth (5th) anniversary of the date of issuance of the Warrant. If stockholder approval for issuance of the Warrant is not obtained, the Warrant will not be capable of being issued and the Purchaser shall be entitled to the remedy described in Section 2(c) of the Note in accordance with the procedures described therein, in full satisfaction of all obligations under the Note and in lieu of issuance of the Warrant. 

	
2.
	
The Closing

2.1Closing Date.  The closing of the purchase and sale of the Note (the “Closing”) shall be held on the Effective Date or at such other time as the Company and the Purchaser shall agree (the “Closing Date”).

2.2Delivery of Note.  At the Closing (i) the Purchaser will deliver to the Company a check or wire transfer funds in an amount equal to the Loan Amount; (ii) the Company shall issue and deliver to the Purchaser the Note; and (iii) the Company shall execute and deliver such other documents as the Purchaser shall reasonably require.

 

 

2.3Issuance and Delivery of Warrant.  The Company shall issue and deliver the Warrant to the Purchaser within five business days of the date of the Company’s receipt of stockholder approval of the issue of the Warrant in accordance with the same stockholder approval process described in Section 2(c) of the Note.

	
3.
	
Representations, Warranties and Covenants of the Company

The Company hereby represents and warrants to the Purchaser, as of the date hereof and as of the Closing Date, as follows:

3.1Organization; 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.

3.2Corporate Power.  The Company has all requisite corporate power to execute and deliver this Agreement, the Note and subject to the abovementioned stockholder approval, the Warrant in favor of the Purchaser 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 “Loan Documents”) and to carry out and perform its obligations under the terms of the Loan Documents and to, subject to the abovementioned stockholder approval,  issue CDIs in accordance with the terms thereof.

(a)Authorization.  The execution and delivery of each of the Loan Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Note, the issuance of the Warrant, the reservation of the Common Stock underlying the CDIs issuable upon conversion of the Note (the “Conversion CDIs”), the reservation of the Common Stock underlying the CDIs issuable upon exercise of the Warrant (the “Warrant CDIs” and, together with the Note, the Warrant, the Conversion CDIs and the Common Stock, “Securities”) and the issuance of the Conversion CDIs and the Warrant CDIs, 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 Section 2(c) of the Note and in this Agreement, no further consent or authorization is required by the Company, its board of directors or its stockholders.  Each of the Loan Documents has been (or in the case of the Warrant, will be) 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 Note into Conversion CDIs in accordance with the provisions of this Agreement and the Note, the Conversion CDIs will be validly issued, fully paid and nonassessable and free of any liens or encumbrances (other than as set out in Section 2(f) of the Note).  Upon the exercise of the Warrant in accordance with the provisions of this Agreement and the Warrant, the Warrant CDIs will be validly issued, fully paid and nonassessable and free of any liens or encumbrances (other than as set out in Section 5(b) of the Warrant). The issuance of the Note (and the Conversion CDIs) and the Warrant (and the 

2

 

 

Warrant CDIs) 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 Note (and the Conversion CDIs) and the Warrant (and the Warrant CDIs) 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 Note and the Warrant (and the underlying securities) may be subject to restrictions on transfer as set out in the Loan 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 and sale of the Note (and the Conversion CDIs) and the Warrant (and the Warrant CDIs) do not and will not cause any dilution adjustment in any existing securities of the Company, and the Purchaser hereby waives any dilution adjustment that might otherwise result from the issuance and sale of the Note (and the Conversion CDIs) or the Warrant (and the Warrant CDIs) pursuant  to the terms of any existing security held by the Purchaser.

3.3Governmental 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 Loan Documents, the offer, sale or issuance of the Note, the Conversion CDIs, the Warrant and the Warrant CDIs, 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 by Section 2(c) of the Note and 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.

3.4No Conflicts.  The execution, delivery and performance of the Loan Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Note and the Warrant and the reservation for issuance and issuance of the Conversion CDIs and the Warrant CDIs) 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.  For the avoidance of doubt, the Purchaser agrees that the execution, delivery and performance of the Loan Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby shall not conflict with or constitute a default under (x) the Note Purchase Agreement, dated as of June 15, 2017, between the Company and the Purchaser, including, without limitation, the restriction on additional indebtedness set forth in Section 3.14 thereof, or (y) the Note and Warrant Purchase Agreement, dated May 30, 2018, between the Company and the Purchaser.

3.5Offering.  Assuming the accuracy of the representations and warranties of the Purchaser contained in Section 4 hereof, the offer, issue, and sale of the Note and the Warrant 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

 

 

3.6Use of Proceeds.  The Company shall use the proceeds of the sale and issuance of the Note for general corporate purposes.

3.7Delivery of SEC Filings. The Company has provided the Purchaser with copies of the Company's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2018, 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).

3.8Conduct 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 Bylaws, 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 ASX (defined below) and, assuming the Note and Warrant are issued, has no knowledge of any facts or circumstances that would reasonably lead to delisting or suspension of its securities by the ASX in the foreseeable future.  Except as set forth in its SEC Filings, the Company possesses all certificates, authorizations and permits issued by the 

4

 

 

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.

3.9Absence 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. 

3.10Securities 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 Note or the Warrant in a manner that could require the registration of the Note or the Warrant under the Act. 

3.11Efforts to Obtain Stockholder Approval.  The Company shall use its commercially reasonable efforts to obtain any stockholder approval described in Section 2(c) of the Note in respect of the Note and the same form of approval in respect of the Warrant. The Company covenants that its proposal to stockholders in respect of approval of the Warrant issuance will be interconditional with its proposal to stockholders in respect of approval of issuance of CDIs upon conversion of the Note, such that if either proposal is not approved, then neither proposal may be approved.

	
4.
	
Representations and Warranties of the Purchaser

The Purchaser hereby represents and warrants to the Company as follows:

4.1Purchase for Own Account.  The Purchaser understands that the Securities have not been registered under the Act and the Purchaser is acquiring the Securities for 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.  The Purchaser represents that, if it is permitted to acquire any Securities under the Note or the Warrant, it is acquiring the Securities solely for 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.

4.2Information and Sophistication.  Without lessening or obviating the representations and warranties of the Company set forth in Section 3, the Purchaser hereby: (i) acknowledges that it has received all the information it has requested from the Company including, but not limited to, the SEC Filings,  (ii) represents that it has had an opportunity to ask questions 

5

 

 

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 it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risk of this investment.

4.3Ability to Bear Economic Risk.  The Purchaser acknowledges that investment in the Securities involves a high degree of risk, and represents that 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 its investment.

4.4Rule 144.  The 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 month period not exceeding specified limitations.

4.5Accredited Investor Status.  The Purchaser is an “accredited investor” as such term is defined in Rule 501 under the Act.

4.6Regulation 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 Note, the Warrant and the underlying securities may, subject to any restrictions contained in the Note or the Warrant, as applicable, 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 Note or the Warrant, as applicable, 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 the Purchaser is not a United States person, the Purchaser hereby represents that the Purchaser is satisfied as to the full observance of the laws of the Purchaser’s jurisdiction applicable to the Purchaser in connection with any invitation to subscribe for the Securities, including (i) the legal requirements within the 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. The Purchaser’s subscription and payment for, and the Purchaser’s continued beneficial ownership of the Securities, will not violate any applicable securities or other laws of the Purchaser’s jurisdiction that are applicable to the Purchaser.

6

 

 

4.7Rule 506(d).  If the 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, the Purchaser hereby represents and warrants to the Company that the Purchaser 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.

4.8Further Limitations on Disposition.  Without in any way limiting the representations set forth above and subject to any restrictions contained in the Note and the Warrant, as applicable, the 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)The 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, the 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 Note and the Warrant, as applicable, no such registration statement or opinion of counsel shall be necessary for a transfer by the Purchaser to (i) any shareholder, partner, retired partner, member or former member of the 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 the Purchaser hereunder.

(d)Notwithstanding the provisions of paragraphs (a) and (b) above, the Company acknowledges and agrees that the Securities may be pledged by the Purchaser, and 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 Loan Document.  The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request, at the Purchaser’s expense, in connection with a pledge of the Securities to such pledgee by the Purchaser and any successor or assignee.

4.9Legends.  The Purchaser understands that any securities issued upon conversion of the Note or exercise of the Warrant, may bear one or all of the following legends:

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(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, the Note or the Warrant, as applicable.

(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.

4.10Market Standoff.  The Purchaser agrees not to sell any of the Securities during a period specified by the representative of the underwriters of Common 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.

4.11Foreign Ownership Restrictions.  The Purchaser acknowledges and agrees that in order to ensure that US persons do not purchase any CDIs that may be issued to it, 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 it 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.

	
5.
	
Events of Default; Remedies

5.1Events of Default.  Each of the following shall constitute an event of default (each, an “Event of Default”) under this Agreement and the other Loan Documents:

(a)Any default in the payment, when the same becomes due and payable, of principal under or interest in respect of the Note or other amount due and payable under any other Loan Document including, but not limited to, the failure by the Company to pay on the Maturity Date, upon a Change of Control pursuant to Section 2(b) of the Note or to the extent due and payable under Section 2(c) of the Note, any and all unpaid principal, accrued interest and all other amounts owing under any Loan Document;

(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;

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(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 Purchaser) 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 any other Loan Document (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.

5.2Remedies.  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 Purchaser or any holder of the Note may, by written notice to the Company, declare all outstanding obligations payable by the Company under the Note and the other Loan Documents 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 Purchaser in enforcing and collecting the Note and the other Loan Documents.  No right or remedy conferred upon or reserved to the 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  

6.1Conditions to Purchaser’s Obligations at the Closing.  The obligations of the Purchaser under the Loan 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 Purchaser:

9

 

 

(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 Loan 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 Note, the Conversion CDIs, the Warrant and the Warrant CDIs 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 the Purchaser’s counsel, which shall have received all such counterpart original and certified copies of such documents as it may reasonably request.

6.2Conditions to Company’s Obligations at the Closing.  The obligations of the Company under the Loan 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 the Purchaser in Section 4 hereof shall be true and correct on the Closing Date.

(b)Purchase Price. The Purchaser shall have delivered to the Company, in immediately available funds, the Loan Amount.

	
7.
	
Miscellaneous

7.1Binding 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.

7.2Governing Law.  This Agreement shall be governed by and construed under the laws of the State of New York.

7.3Counterparts.  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.

7.4Titles 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.

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7.5Notices. 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 shall be sent to the address set forth in this Section 7.5 or at such other address as the Company or the Purchaser may designate by ten (10) days advance written notice to the other parties hereto.

If to the Purchaser:

 

CRYSTAL AMBER FUND LIMITED

Heritage Hall

PO Box 225

Le Marchant Street 

St. Peter Port

Guernsey

GY1 4HY

 

With a copy (that shall not constitute notice) to:

 

Estera - GG - Crystal Amber Team 

CrystalAmberTeam@estera.com 

 

If to the Company:

 

GI DYNAMICS, INC.

P.O. Box 51915

Boston, MA 02205

Attention:  Chief Executive Officer

 

7.6Amendment; 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 Purchaser 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. 

7.7Entire Agreement.  This Agreement, the Exhibits hereto, and the Loan Documents 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.

 

11

 

 

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

COMPANY:

GI Dynamics, Inc.

By: /s/ Scott Schorer

Name: Scott Schorer

Title: Chief Executive Officer

PURCHASER:

Crystal Amber Fund Limited

By: /s/ Kevin Smith

Name: Kevin Smith

Title: Alternate Director
   Crystal Amber Asset Management (Guernsey) Ltd

 

 

 

 

 

 

 

 

 

[Signature Page to Note Purchase Agreement]

 

 

 

 

 

 

Exhibit A

 

Form of Senior Unsecured Convertible Promissory Note

 

[See Exhibit 10.2 to this Quarterly Report on Form 10-Q.]

 

 

 

 

 

Exhibit B

 

Form of Warrant

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE 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.

Warrant to purchase Chess Depositary Interests 

Issue Date: [______________], 2019

This Warrant to Purchase CHESS Depositary Interests (the “Warrant”) certifies that, for good and valuable consideration, Crystal Amber Fund Limited (along with its permitted assignees, the “Holder”) is entitled to, and GI Dynamics, Inc., a Delaware corporation (the “Company”), hereby grants the Holder the right to, purchase, as of the date of issuance set forth above (the “Issue Date”), up to such number of fully paid and non-assessable CHESS Depositary Interests (with each CDI representing 1/50th of a share of the Company’s common stock, par value $0.01 per share (the “Common Stock”)) (the “CDIs”) as determined pursuant to Section 1(a) below, at a price per CDI equal to the Exercise Price (as defined below), subject to the provisions and upon the terms and conditions set forth in this Warrant. This Warrant is issued pursuant to the Note and Warrant Purchase Agreement (the “Purchase Agreement”) dated as of March 15, 2019 by and between the Company and the Holder. 

	
1.
	
Number of CDIs; Exercise Price

(a)Number of CDIs.  With effect from the Issue Date, this Warrant automatically shall become exercisable for 78,984,823 CDIs (representing 1,579,696 shares of Common Stock).  All CDIs for which this Warrant becomes exercisable from time to time pursuant to this Paragraph 1(a), and as may be adjusted from time to time in accordance with the provisions of this Warrant, are referred to herein cumulatively and collectively as the “Warrant CDIs.” 

(b)Exercise Price.  With respect to each Warrant CDI for which this Warrant becomes exercisable pursuant to Paragraph 1(a) above, the purchase price therefor (the “Exercise Price”) shall be US$0.0127.  

 

 

	
2.
	
Exercise; Payment. 

(a)Method of Exercise.  This Warrant may be exercised by the Holder at any time during the term (as set forth in Section 8) and in compliance with the provisions of this Warrant for all or any part of the Warrant CDIs, by the surrender of this Warrant together with the duly executed notice of exercise form attached hereto as Exhibit A (the “Notice of Exercise”) at the principal office address of the Company.  If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the Holding Statement or the book entry notice pursuant to Section 2(e), deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the then unpurchased Warrant CDIs, which new Warrant shall in all other respects be identical to this Warrant, or at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder.

(b)Cash Exercise.  Upon exercise of this Warrant, the Holder shall pay the Company an amount (“Exercise Payment”) equal to the product of the Exercise Price multiplied by the total number of Warrant CDIs purchased pursuant to such exercise of this Warrant, by wire transfer of immediately available funds or check payable to the order of the Company.  In the manner set out in Paragraph (e) below, the Holder shall be deemed to have become the holder of record of, and shall be treated for all purposes as the record holder of, the Warrant CDIs represented by such exercise (and such Warrant CDIs shall be deemed to have been issued) immediately prior to the close of business on the date upon which the Exercise Payment is paid to the Company.

(c)Net Exercise.  The Exercise Payment also may be paid at the Holder’s election by surrender of all or a portion of the Warrant for the Warrant CDIs to be exercised under this Warrant (“Net Exercise”).  If the Holder elects the Net Exercise method, the Company will issue Warrant CDIs in accordance with the following formula:

X = Y(A-B)
A

Where:

	
 
	
X = 
	
the number of Warrant CDIs to be issued upon the Net Exercise of the Warrant

	
 
	
Y = 
	
the number of Warrant CDIs to be surrendered

	
 
	
A = 
	
the fair market value of one (1) CDI on the date of exercise of this Warrant

	
 
	
B = 
	
the Exercise Price

For purposes of the above calculation, fair market value of CDIs shall mean the following (“Fair Market Value”): 

(i)if CDIs are then quoted on the Australian Securities Exchange (“ASX”), then the Fair Market Value per share of one (1) CDI shall be equal to the volume 

2

 

weighted average closing price of the Company’s CDIs on the ASX for the five (5) trading days ending immediately prior to the business day on which the Company receives the Holder’s written Notice of Exercise (regardless if received during the trading hours or after);

(ii)if CDIs are not then quoted on the ASX, then if the Company’s Common Stock is traded on another national securities exchange, the Fair Market Value of the CDIs shall be equal to the result obtained by dividing (A) the volume weighted average closing price of the Company’s Common Stock on such securities exchange for the five (5) trading days ending immediately prior to the business day on which the Company receives the Holder’s written Notice of Exercise (regardless if received during the trading hours or after), by (B) the number of CDIs (or fraction thereof) which equal an interest in exactly one share of Common Stock on such dates; 

(iii)if CDIs are not then quoted on the ASX and the Common Stock is not then traded on another securities exchange, then if the Common Stock is traded over-the-counter, the Fair Market Value of the CDIs shall be equal to the result obtained by dividing (A) the volume weighted average closing price of the Company’s Common Stock quoted on the principal market on which or through which the Common Stock is traded over the five (5) consecutive trading days ending immediately prior to the business day on which the Company receives the Holder’s written Notice of Exercise (regardless if received during the trading hours or after), by (B) the number of CDIs (or fraction thereof) which equal an interest in exactly one share of Common Stock on such dates; or

(iv)if CDIs are not then quoted on the ASX and the Common Stock is not then listed on any securities exchange or traded in the over-the-counter market, the Fair Market Value of the CDIs shall be as determined by its Board of Directors in its reasonable good faith judgment (which determination shall take into consideration any available appraisals).

If any of the amounts used to calculate the Fair Market Value are expressed in Australian dollars and not the United States dollar, then each such amount shall be converted into United States dollars based on the closing exchange rate published by the Reserve Bank of Australia in their Official Bulletin at 4 pm for the applicable date. The amounts used to calculate the Fair Market Value shall be equitably adjusted for the occurrence of any of the events for which an adjustment would be made pursuant to Section 4 but which is not otherwise fully reflected in the Fair Market Value calculation.

(d)Election to receive Common Stock.  The Holder may include in their Notice of Exercise, the election to receive the corresponding number of shares of Common Stock for the Warrant CDIs to be purchased.

(e)Exercise Process including Holding Statement.  In the event of the valid exercise of this Warrant, the Company 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 Notice of 

3

 

Exercise 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 Company’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;

(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 in accordance with Section 6 to the Holder a check payable to the Holder for any cash amounts payable as a result of any fractional shares. 

If, at the time of exercise, CDIs are no longer quoted on ASX, then on exercise of the Warrant the Company must issue directly to the Holder the number of shares of Common Stock over which the Warrant is exercised and must procure that those shares be listed for trading on any securities exchange on which the Company’s Common Stock is tradeable and in accordance with Section 6 deliver to the Holder a check payable to Holder for any cash amounts payable as a result of any fractional shares.

	
3.
	
Stock Fully Paid; Reservation of Shares.  All of the Warrant CDIs or Common Stock issuable upon the exercise of this Warrant, upon issuance and receipt by the Company of the Exercise Price therefor (or upon Net Exercise thereof, as provided in Section 2(c)), shall be fully paid and nonassessable, and free from all preemptive rights, rights of first refusal or first offer, taxes, liens and charges with respect to the issuance thereof except as noted in Section 5.  During the period within which the rights represented by this Warrant may be exercised, the Company shall at all times have authorized and reserved for issuance a sufficient number of shares of its Common Stock to provide for the exercise of this Warrant.

	
4.
	
Adjustment of Exercise Price and Number of Shares.  The number and kind of Warrant CDIs to be issued upon the exercise of this Warrant and the Exercise Price payable therefor shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

(a)Reclassification, Consolidation or Reorganization.  Subject to Section 10, in case of any reclassification of the CDIs (other than as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation or sale of all or substantially all of the Company’s assets (any of which is a “Reorganization Transaction”), the Company, or such successor corporation as the case may be, shall execute a new warrant, providing that the Holder shall have the right to exercise such new warrant, and procure upon such exercise and payment of the same aggregate Exercise Price, in lieu of the Warrant CDIs then issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property as would be received by the Holder for such 

4

 

Warrant CDIs as if such Warrant CDIs were outstanding immediately prior to the consummation of the Reorganization Transaction. 

(b)Stock Splits, Dividends and Combinations.  Subject to Section 10, in the event that the Company shall at any time subdivide the outstanding shares of Common Stock, or shall issue a stock dividend on its outstanding shares of Common Stock, the number of Warrant CDIs issuable upon exercise of this Warrant immediately prior to such subdivision or to the issuance of such stock dividend shall be proportionately increased and the Exercise Price shall be proportionately decreased, and in the event that the Company shall at any time combine the outstanding shares of Common Stock, the number of Warrant CDIs issuable upon exercise of this Warrant immediately prior to such combination shall be proportionately decreased and the Exercise Price shall be proportionately increased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be such that in each case, the result obtained by multiplying the Exercise Price by the number of Warrant CDIs shall be the same immediately prior to, and immediately after, such event.

(c)Notice of Corporate Action.  If the Company (i) declares a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right; (ii)authorizes and publicly approves, or enters into any agreement contemplating or solicits stockholder approval for any Reorganization Transaction; or (iii) publicly authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company 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 Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of the Holder appearing on the books of the Company and delivered in accordance with Section 11(d); 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.

(d)Subsequent Equity Sales.  Notwithstanding any provision of this Warrant to the contrary, in the event that the Company 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 Exercise Price (or the equivalent for shares of Common Stock) in an equity financing, then the Exercise 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 Company 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 

5

 

Company 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 as of December 31, 2018 and on or about the date of the Purchase Agreement, or (ii) the Senior Unsecured Promissory Note dated May 30, 2018, each issued to the Holder by the Company, will have no effect on the Exercise Price.

	
5.
	
Holder Representations and Warranties; Transfer and Assignment.  

(a)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 Warrant CDIs issuable to Holder are hereby made a part of this Warrant and incorporated herein by this reference 

(b)Notwithstanding any other provision of this Warrant or the Purchase Agreement, the Holder may not sell or transfer any shares of Common Stock or CDIs issued to the Holder pursuant to this Warrant (“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 Company’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.

(c)The Holder may not sell or transfer this Warrant, or grant, issue or transfer interests in, or options over, this Warrant at any time within 12 months after the Issue Date except as permitted by section 708 or any other applicable section of the Corporations Act 2001 (Cth).

	
6.
	
Fractional Shares.  No fractional shares of the Company’s capital stock will be issued in connection with any exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.

	
7.
	
Rights of Stockholders.  The Holder shall not be entitled to vote or receive dividends or subscription rights or be deemed the holder of the CDIs, Common Stock or any other securities of the Company which may at any time be issuable on the exercise of this Warrant for any purpose, nor shall anything contained herein be construed to confer upon the Holder any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) with respect to the Warrant CDIs until this Warrant shall have been exercised and the Warrant CDIs purchasable upon the exercise of this Warrant shall have become deliverable, as provided in Section 2(a).

6

 

	
8.
	
Term of Warrant.  This Warrant shall become exercisable on the Issue Date and shall terminate and no longer be exercisable from and after 5:00 p.m., Eastern Time, on the date that is the fifth (5th) anniversary of the Issue Date.

	
9.
	
Registry of Warrants.  The Company shall maintain a registry showing the name and address of the registered holder of this Warrant.  Holder’s initial address, for purposes of such registry, is set forth below Holder’s signature on this Warrant.  Holder may change such address by giving written notice of such changed address to the Company.

	
10.
	
ASX Listing Rules. Until such time as the Company is removed from the Official List of the ASX, the following additional provisions will apply to the Warrant notwithstanding any other provision of this Warrant:

(a)Voting Rights. The Warrant does not carry any voting rights at stockholder meetings of the Company unless and until the Warrant is exercised.

(b)Participation Rights. There are no participating rights or entitlements inherent in the Warrant and the Holder is not by virtue of holding the Warrant entitled to participate in any new issue of capital that may be offered to stockholders (except upon exercise of the Warrant). 

(c)Reorganisations. The rights of the Holder will be changed to the extent necessary to comply with the ASX Listing Rules applying to a reorganization (including a reconstruction, consolidation, subdivision or reduction or return of capital) of the Company’s capital at the time of the reorganization.

(d)Bonus Issues. If there is a bonus issue to the holders of CDIs, the number of CDIs representing shares of Common Stock over which the Warrant is exercisable will be increased by the number of CDIs which the Holder would have received if it had exercised the Warrant before the record date for the bonus issue.

(e)Pro Rata Issue. If the Company proceeds with a pro rata issue (except a bonus issue) of securities to stockholders after the date of issue of the Warrant, the Exercise Price of the Warrant will be reduced in accordance with the formula set out in ASX Listing Rule 6.22.2.

(f)Not Quoted. The Warrant will not be quoted on ASX or on any other securities exchange.

(g)Equal Ranking. The Common Stock and CDIs issued pursuant to an exercise of the Warrant will rank, from the date of issue, equally with the existing shares of Common Stock and CDIs of the Company in all respects. 

(h)Changes. Other than as set out in this Warrant or the ASX Listing Rules, this Warrant does not confer the right to a change in the Exercise Price or a change in the underlying securities over which this Warrant can be exercised.

	
11.
	
Miscellaneous.

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(a)This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of New York, without giving effect to principles of conflicts of laws. 

(b)The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

(c)The terms of this Warrant shall be binding upon and shall inure to the benefit of any successors or assigns of the Company and of the Holder and of the Warrant CDIs issued or issuable upon the exercise hereof.

(d)Any notice provided for or permitted under this Warrant shall be treated as having been given (i) upon receipt, when delivered personally, (ii) one day after sending, when sent by commercial overnight courier with written verification of receipt, (iii) upon confirmed transmission when sent via facsimile on a business day prior to 5:00 pm local time or, if sent after 5:00 pm local time, the next business day after confirmed transmission, or (iv) three business days after deposit with the United States Postal Service, when mailed postage prepaid by certified or registered mail, return receipt requested, in each case, addressed to the address or facsimile number set forth on the signature pages hereof or as otherwise furnished in writing. 

(e)This Warrant, the Note and the Purchase Agreement constitute the full and entire understanding and agreement between the parties with regard to the matters contained herein.

(f)Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company at the Holder’s expense will execute and deliver to the holder of record, in lieu thereof, a new Warrant of like date and tenor.

(g)This Warrant and any provision hereof may be amended, waived or terminated only by an instrument in writing signed by the Company and the Holder provided that, while the Company is admitted to the Official List of the ASX, any proposed amendment, waiver or termination must not contravene the ASX Listing Rules.

 [continued and to be signed on following page]

 

8

 

IN WITNESS WHEREOF, each of the Company and the Holder has caused this Warrant to be signed by its duly authorized officer, all as of the day and year first above written.  

COMPANY:GI DYNAMICS, INC.

a Delaware corporation 

 

 

By:

Name: Scott Schorer

Title:   Chief Executive Officer

 

 

Notice Address:PO Box 51915

Boston, MA 02205

U.S.A.

Attention: Chief Executive Officer

 

 

HOLDER: CRYSTAL AMBER FUND LIMITED

 

 

 

By:

Name: Kevin Smith

Title:   Alternate Director

Crystal Amber Asset Management (Guernsey) Ltd

 

 

	
 
	
Notice Address:
	
PO Box 286

Floor 2

Trafalgar Court

St. Peter Port

Guernsey

GY1 4LY

 

With a copy (which shall not constitute notice) to:

 

Estera - GG - Crystal Amber Team CrystalAmberTeam@estera.com

 

 

 

 

 

 

                                                           

[SIGNATURE PAGE TO WARRANT]

 

Exhibit a

Notice of Exercise

TO:GI DYNAMICS, INC.

_________________________

_________________________

1.  Cash Exercise.The undersigned hereby elects to purchase ____________ CHESS Depositary Interests (with each CHESS Depositary Interest representing 1/[50th] of a share of the Company’s common stock, par value $0.01 per share (the “Common Stock”)) (“CDIs”) of GI DYNAMICS, INC., a Delaware corporation (the “Company”), pursuant to the terms of Section 2(b) of the Warrant to Purchase CHESS Depositary Interests dated [_________], 2019 (the “Warrant”), and tenders herewith payment of the Exercise Price (as such term is defined in the Warrant) therefor.

2.  Net Exercise.  The undersigned hereby elects to effect a Net Exercise for _____________ CDIs pursuant to Section 2(c) of the Warrant.  

Please issue a Holding Statement certifying said _________ CDIs have been issued in the name of the undersigned or in such other name as is specified below:

Name:_________________________________

Address:_________________________________

_________________________________

3.  Common Stock Election.  By initialing here, the undersigned hereby elects to receive the number of shares of Common Stock corresponding to the CDIs noted above in lieu of the CDIs otherwise issuable: ______________

The undersigned hereby represents and warrants that the aforesaid shares of Common Stock or CDIs, as the case may be, are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.

Holder Name: _______________________

By:  

Name:  

Title:  

Date:  

87738560v.1

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