EXCHANGE AGREEMENT
Exhibit
10.2
This
Exchange Agreement (this “Agreement”) is made
and entered into as of this 20th day of
October, 2009 by and between JGB Capital LP, JGB Capital Offshore Ltd. and SAMC
LLC (collectively, “JGB”), and such other
entity or entities directly or indirectly controlling or controlled by or under
direct or indirect common control with the foregoing entities (together with
JGB, each a “Holder”,
collectively, the “Holders”), and
TranSwitch Corporation, a Delaware corporation (the “Company”).
RECITALS
WHEREAS,
the Holders in the aggregate currently hold $2,313,000 in aggregate principal
amount (the “Holder
Outstanding Notes”) of the Company’s outstanding 5.45% Convertible Notes
due 2010 (the “Outstanding Notes”)
issued pursuant to that certain Indenture, dated as of July 6, 2007 (the “Outstanding Notes
Indenture”), between the Company and U.S. Bank National Association, as
trustee;
WHEREAS,
each of the Holders desires to exchange the Holder Outstanding Notes for an
equal principal amount of the Company’s 5.45% Convertible Notes due September
30, 2011 (the “New
Notes”) in the amounts set forth on Exhibit C attached
hereto, to be issued pursuant to the Indenture (as defined below) on the terms
and conditions set forth in this Agreement (the “Note
Exchange”);
WHEREAS,
the Company desires to issue to the Holders, upon the terms and conditions set
forth herein, $2,313,000 in aggregate principal amount of New Notes (the “Holder New Notes”) in
the amounts set forth on Exhibit C attached
hereto in exchange for the Holder Outstanding Notes in the Note
Exchange;
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the Company
is entering into one or more agreements substantially identical to this
Agreement (the “Other
Agreements” and, together with this Agreement, the New Notes and the
Indenture, the “Transaction
Documents”), pursuant to which the Company and all of the holders of
Outstanding Notes other than the Holders (the “Other Holders”) shall
on the Closing Date (as defined below) exchange each of the Outstanding Notes
held by the Other Holders for New Notes, upon the same terms and conditions set
forth in this Agreement;
WHEREAS,
the New Notes will be issued pursuant to the Indenture, to be entered into by
the Company and the Trustee named therein (the “Trustee”), in the
form of Exhibit A hereto
(the “Indenture”);
and
WHEREAS,
the Note Exchange is being made in reliance upon the exemption from registration
provided by Section 3(a)(9) of the Securities Act of 1933, as amended, and the
rules and regulations thereunder (the “Securities
Act”).
NOW,
THEREFORE, in consideration of the premises and the agreements set forth below,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE
I
Exchange
Section
1.1 Exchange and Sale of the
Holder New Notes.
Upon the terms and subject to the conditions of this Agreement, at the Closing
(as defined herein), the Company shall issue to and exchange with each of the
Holders, and each of the Holders agrees to accept from the Company, $2,313,000
in aggregate principal amount of New Notes, together with all accrued and unpaid
interest paid in cash on the Holder Outstanding Notes to, but excluding, the
Closing Date, for $2,313,000 in aggregate principal amount of the Holder
Outstanding Notes.
Section
1.2 Closing. Subject to
the terms and conditions hereof, the closing of the transactions contemplated by
this Agreement (the “Closing”) shall take
place on the third business day after the date hereof at the offices of Xxxxx
Xxxxxxx LLP, One Financial
Center, Xxxxxx, Xxxxxxxxxxxxx 00000, or on such other date and at such other
place as the parties may agree in writing (the “Closing Date”). At
the Closing, (i) each of the Holders shall deliver or cause to be delivered
to the Company all of such Holder’s right, title and interest in and to all of
the Holder Outstanding Notes and whatever documents of conveyance or transfer
may be necessary or desirable to transfer to and confirm in the Company all
right, title and interest in and to the Holder Outstanding Notes, (ii) the
Company shall issue to each of the Holders the Holder New Notes and pay to such
Holder in cash by wire transfer or via DTC of immediately available funds an
amount equal to the accrued and unpaid interest on the Holder Outstanding Notes
to, but excluding, the Closing Date, and (iii) to QVT Fund LP (“QVT”), an amount
not to exceed $30,000 as reimbursement for the reasonable fees, costs and
expenses incurred by QVT in connection with the drafting, negotiation,
preparation, execution and performance of this Agreement, pursuant to Section
4.12 hereof; provided, however, that the parties acknowledge that the issuance
of the Holder New Notes to each of the Holders may be delayed due to procedures
and mechanics within the system of The Depository Trust Company (“DTC”) and that such
delay will not be a default under this Agreement so long as (i) the Company is
using its best efforts to effect the issuance of one or more global notes
representing the Holder New Notes, (ii) such delay is no longer than three (3)
business days and (iii) interest shall accrue on the Holder New Notes from the
date of the Indenture.
Section
1.3 Conditions to
Closing. (i) The obligation of the Holders hereunder to consummate the
transactions contemplated hereby at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions; provided
that these conditions are for each of the Holders’ sole benefit and may be
waived by such Holder at any time in its sole discretion by providing the
Company with prior written notice thereof:
(a) The
Company shall have executed and delivered this Agreement to the
Holders;
(b) The
Company and the Trustee shall have executed and delivered the Indenture and
delivered an executed copy thereof to the Holders;
(c) The
Company shall have executed and delivered to the Holders the Holder New Notes in
the aggregate principal amount set forth in Section 1.1;
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(d) The
transactions contemplated by the Other Agreements, including the exchange of all
of the Outstanding Notes held by the Other Holders for New Notes, shall be
consummated contemporaneously with the Closing;
(e) The
Company shall have submitted an additional share listing notification form (the
“Nasdaq
Application”) (along with any required supporting documentation) for the
shares of the Company’s Common Stock, $.001 par value per share, (“Common Stock”)
issuable upon conversion or redemption of the New Notes, including the Holder
New Notes, with the NASDAQ Capital Market and received acceptance of such Nasdaq
Application from the Nasdaq Listing Department;
(f) The
Company shall have delivered to the Holders a certificate of the Company, dated
the Closing Date, executed by the secretary of the Company certifying in such
capacity and on behalf of the Company (i) as to the incumbency and
signature of the officer of the Company who executed this Agreement and the
Holder New Notes; (ii) as to the adoption of resolutions of the board of
directors of the Company (the “Board of Directors”)
which are in full force and effect on the Closing Date, authorizing (x) the
execution and delivery of this Agreement, the Indenture and the New Notes, and
(y) the performance of the obligations of the Company hereunder and
thereunder; (iii) as to the Company’s Amended and Restated Certificate of
Incorporation, as amended and in effect as of the Closing Date (the “Certificate of
Incorporation”); and (iv) the Company’s Second Amended and Restated
Bylaws, as in effect as of the Closing Date (the “Bylaws”);
(g) The
representations and warranties of the Company in this Agreement shall be true
and correct on and as of the Closing Date with the same effect as if made on the
Closing Date and the Company shall have performed, satisfied and complied with
all of the covenants, agreements and conditions on its part to be performed,
satisfied or complied with at or prior to the Closing Date, and the Company
shall have delivered to the Holders a certificate of the Chief Executive Officer
or Chief Financial Officer of the Company, dated the Closing Date, to the
foregoing effect;
(h) Simultaneously
with the Closing, the Company shall have issued an aggregate principal amount of
New Notes that, including the Holder New Notes together with the other New Notes
issued to the Other Holders, equals $10,013,000;
(i) Subsequent
to the execution and delivery of this Agreement and prior to the Closing Date,
there shall have been no suspension or material limitation of trading in the
Common Stock on the NASDAQ Capital Market;
(j) The
Company shall have obtained a Committee on Uniform Securities Identification
Procedures number (CUSIP number) for the New Notes; and
(k) The
Company shall have delivered to the Holders the opinion of Xxxxx Xxxxxxx LLP,
dated as of the Closing Date, in substantially the form of Exhibit B
attached hereto.
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(ii) The
obligation of the Company hereunder to consummate the transactions contemplated
hereby at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion by providing the Holders with prior written notice
thereof:
(a) The
Holders shall have executed and delivered to the Company this Agreement;
and
(b) The
Holders shall have delivered, or caused to be delivered, to the Company the
Holder Outstanding Notes being exchanged pursuant to this
Agreement.
ARTICLE
II
Representations
and Warranties of the Holder
Each of
the Holders, severally and not jointly, does hereby make the following
representations and warranties, each of which is true and correct on the date
hereof and the Closing Date and shall survive the Closing Date and the
transactions contemplated hereby to the extent set forth herein.
Section
2.1 Existence and
Power.
(a) The
Holder is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has the power, authority and
capacity to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby.
(b) The
execution of this Agreement by the Holder and the consummation by the Holder of
the transactions contemplated hereby do not and will not constitute or result in
a breach, violation, conflict or default under any note, bond, mortgage, deed,
indenture, lien, instrument, contract, agreement, lease or license to which the
Holder is a party, whether written or oral, express or implied, or any statute,
law, ordinance, decree, order, injunction, rule, directive, judgment or
regulation of any court, administrative or regulatory body, governmental
authority, arbitrator, mediator or similar body on the part of the Holder or on
the part of any other party thereto or cause the acceleration or termination of
any obligation or right of the Holder, except for such breaches, conflicts,
defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of the Holder to perform its obligations hereunder.
Section
2.2 Valid and Enforceable
Agreement; Authorization. This Agreement has been duly executed and
delivered by the Holder and constitutes a legal, valid and binding obligation of
the Holder, enforceable against the Holder in accordance with its terms, except
that such enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors’ rights generally, and (b) general principles of
equity.
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Section
2.3 Title to Holder Outstanding
Notes. The Holder is a beneficial owner of and has the investment power,
including the power to dispose of, and has good and valid title to, its portion
of the Holder Outstanding Notes being exchanged by such Holder as set forth on
Exhibit C
attached hereto, hereby, free and clear of any mortgage, lien, pledge, charge,
security interest, encumbrance, title retention agreement, option, equity or
other adverse claim thereto. The Holder has not, in whole or in part,
(i) assigned, transferred, hypothecated, pledged or otherwise disposed of
the Holder Outstanding Notes or its rights in the Holder Outstanding Notes being
exchanged by the Holder hereby, or (ii) given any person or entity any
transfer order, power of attorney or other authority of any nature whatsoever
with respect to such Holder Outstanding Notes.
Section
2.4 No Public
Market. The Holder understands that no public market now
exists for the New Notes, and that the Company has made no assurance that a
public market will ever exist for the New Notes.
Section
2.5 History of Holder
Outstanding Notes; Non-Affiliate Status. The Holder purchased the
Holder Outstanding Notes on July 6, 2007 and has held the Holder Outstanding
Notes continuously since such date. The Holder is not, and has not
been during the preceding three months, an “affiliate” of the Company (an “Affiliate”) as such
term is defined in Rule 144 under the Securities Act (or a successor rule
thereto) (“Rule
144”).
ARTICLE
III
Representations,
Warranties and Covenants of the Company
The Company hereby makes the following
representations, warranties and covenants, each of which is true and correct on
the date hereof and the Closing Date and shall survive the Closing Date and the
transactions contemplated hereby to the extent set forth herein.
Section
3.1 Existence and
Power.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power, authority and
capacity to own its properties, to carry on its business as currently conducted
and proposed to be conducted, to execute and deliver this Agreement and the
other Transaction Documents, to perform the Company’s obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and
thereby.
(b) The
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including the issuance of all of the shares of
Common Stock into which the New Notes, including the Holder New Notes, may be
converted upon conversion of the New Notes (the “Underlying Common
Stock”), (i) do not require the consent, approval, authorization,
order, registration or qualification of, or filing with, any governmental or
self-regulatory authority or court, or body or arbitrator having jurisdiction
over the Company other than the Company’s filings with the NASDAQ Capital Market
and DTC expressly contemplated hereby; and (ii) do not and will not
constitute or result in a breach, violation or default under any note, bond,
mortgage, deed, indenture, lien, instrument, contract, agreement, lease or
license, whether written or oral, express or implied, or with the Certificate of
Incorporation or the Bylaws, or any statute, law, ordinance, decree, order,
injunction, rule, directive, judgment or regulation of the NASDAQ Capital Market
(including the stockholder approval requirements thereof), any court,
administrative or regulatory body, governmental or self-regulatory authority,
arbitrator, mediator or similar body on the part of the Company or on the part
of any other party thereto or cause the acceleration or termination of any
obligation or right of the Company or any other party thereto.
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Section
3.2 Valid and Enforceable
Agreement; Authorization. The execution, delivery and
performance of this Agreement and the other Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby, including the issuance of $10,013,000 in principal amount of the New
Notes, and the reservation for issuance and the issuance of the Underlying
Common Stock upon conversion of the New Notes, have been duly authorized by the
Board of Directors, and no further consent, authorization or approval is
required therefor by the Company or the Board of Directors or the Company’s
stockholders under the Certificate of Incorporation, the Bylaws, applicable law,
the rules of the NASDAQ Capital Market or otherwise. This Agreement
has been duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforcement may be subject to
(a) bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors’ rights generally, and
(b) general principles of equity. As of the Closing Date, each
of the other Transaction Documents will have been duly executed and delivered by
the Company and will constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
that such enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors’ rights generally, and (b) general principles of
equity.
Section
3.3 Capitalization. At
the Closing, the authorized capital stock of the Company will consist of
300,000,000 shares of Common Stock, par value $0.001 per share, and 1,000,000
shares of Preferred Stock, par value $0.01 per share. As of the close
of business on October 14, 2009, there were 160,051,041 shares of Common Stock
issued and outstanding. All such issued and outstanding shares have
been duly authorized and validly issued, and are fully paid and non-assessable,
and were issued in compliance with all applicable state and federal laws
concerning the issuance of securities and all applicable preemptive,
participation, rights of first refusal and other similar
rights. There are no shares of Preferred Stock of the Company issued
or outstanding. Except as set forth in the SEC Documents (as defined
below), no Person has any right to subscribe for or to purchase (including
conversion and preemptive rights and rights of first refusal and similar
rights), or any options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, any calls, commitments or other claims of
any character relating to, any equity securities or any securities convertible
into or exchangeable for any equity securities of the Company. Except
for 25,196,436 shares of Common Stock reserved for issuance pursuant to the
Company’s stock option, restricted stock and employee stock purchase plans
described in the SEC Documents (the “Company Stock Award
Plans”), including no more than 22,444,558 shares of Common Stock
issuable pursuant to outstanding awards under the Company Stock Award Plans as
of the date of this Agreement, and 200,000 of shares of Series A Junior
Preferred Stock reserved for issuance pursuant to the Rights Agreement, dated as
of October 1, 2001, between TranSwitch Corporation, and Computershare Trust
Company, N.A. (formerly known as Equiserve Trust Company, N.A) and amended by
Amendment No. 1 to Rights Agreement, dated as of February 24, 2006, no shares of
capital stock of the Company are reserved for issuance under any plan, agreement
or arrangement.
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Section
3.4 Valid Issuance of the Holder
New Notes. The New Notes, when issued, sold and delivered in
accordance with the terms and for the consideration set forth in this Agreement
and the Other Agreements, as applicable, and the Indenture, will constitute
legal and binding obligations of the Company, be validly issued and free of
restrictions on transfer other than restrictions on transfer under this
Agreement, applicable state and federal securities laws and liens or
encumbrances created by or imposed by the Holders, and enforceable against the
Company in accordance with their terms, except that such enforcement may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors’ rights
generally, and (b) general principles of equity. Assuming the accuracy of
the representations of each of the Holders in Section 2 of this Agreement
and of the representations of the Other Holders in Section 2 of each of the
Other Agreements, the New Notes will be issued in compliance in all material
respects with all applicable federal and state securities laws. The Underlying
Common Stock has been duly reserved for issuance, and upon issuance in
accordance with the terms of the Certificate of Incorporation, will be validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than liens or encumbrances created by or imposed by the Holders or the Other
Holders (assuming for purposes only of restrictions under applicable securities
laws that neither the Holders nor any of the Other Holders is an Affiliate at
the time of such issuance). Based in part upon the representations of the
Holders in Section 2 of this Agreement and the representations of the Other
Holders in Section 2 of each of the Other Agreements, the Underlying Common
Stock, when issued and delivered in accordance with the terms of the New Notes
and the Indenture, will be issued in compliance in all material respects with
all applicable federal and state securities laws. Neither the Company, nor any
of its subsidiaries or affiliates, nor, to the Company’s knowledge, any Person
acting on its or their behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the New Notes or the Underlying
Common Stock. None of the Company, its subsidiaries, any of their
affiliates and any Persons acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of any of the New
Notes or the Underlying Common Stock under the Securities Act or cause this
offering of the New Notes and the Underlying Common Stock to be integrated with
prior offerings by the Company for purposes of any applicable stockholder
approval provisions, including under the rules and regulations of the NASDAQ
Capital Market. None of the Company, its subsidiaries, their
affiliates and any Persons acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of any of
the New Notes or the Underlying Common Stock under the Securities Act or cause
the offering of the New Notes or the Underlying Common Stock to be integrated
with other offerings for purposes of any applicable stockholder approval
provisions. For purposes hereof, “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization or a government or any department or
agency thereof or any other legal entity. Without limiting the
foregoing, the issuance by the Company of the New Notes is, and the issuance of
the Underlying Common Stock upon conversion of the New Notes will be, exempt
from registration under the Securities Act and state securities laws pursuant to
the exemption from registration set forth in Section 3(a)(9) of the Securities
Act and similar exemptions under state law.
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Section
3.5 SEC Documents; Financial
Statements. The Company timely filed with the Securities and
Exchange Commission (the “SEC”) each of the
Company’s Annual Report on Form 10-K filed on March 13, 2009, the Company’s
Quarterly Reports on Form 10-Q filed on May 11, 2009 and August 10, 2009, the
Company’s Definitive Proxy Statement filed on April 20, 2009, and the Company’s
Current Reports on Form 8-K filed on February 20, 2009, March 6, 2009, March 24,
2009, April 8, 2009, April 9, 2009, May 18, 2009, May 27, 2009 and August 12,
2009 (all of such filings currently filed with the SEC referred to,
collectively, as the “SEC Documents”), and
since October 20, 2008, has timely filed all other reports, schedules, forms,
statements and other documents required to be filed by with the SEC pursuant to
the reporting requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder (the “Exchange Act”). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such SEC
Documents. As of their respective dates, the SEC Documents did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and
unaudited interim financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The financial statements and schedules included in
the SEC Documents: have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto); present fairly, in all material respects, the
consolidated financial position of the Company and its subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flow for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments and any other adjustments
described therein and the fact that certain information and notes have been
condensed or omitted in accordance with the Exchange Act; and are in all
material respects, in accordance with the books of account and records of the
Company. The Company is eligible to use SEC Form S-3 for a primary
issuance of Common Stock.
Section
3.6 Legal
Proceedings. No legal or governmental proceedings or
investigations are pending or, to the knowledge of the Company, threatened to
which the Company or any of its subsidiaries is a party or to which the property
of the Company or any of its subsidiaries is subject that are not described in
the SEC Documents, except for such proceedings or investigations which would not
reasonably be expected to, singly or in the aggregate, result in a Material
Adverse Effect. As used in this Agreement, the term “Material Adverse
Effect” shall mean, when used in respect of any matter relating to the
Company, a material adverse effect (i) on the business, condition (financial or
otherwise), properties or results of operations of the Company and its
subsidiaries, considered as one enterprise, (ii) on the transactions
contemplated by this Agreement or the other Transaction Documents or
(iii) on the authority or ability of the Company to enter into and
perform its obligations under this Agreement and the other Transaction
Documents.
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Section
3.7 Compliance with Laws;
Permits. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to have such certificates, authorizations
and permits would not reasonably be expected to have a Material Adverse Effect,
and none of the Company and its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which would reasonably be expected to, singly or in the
aggregate, result in a Material Adverse Effect. The Company and its subsidiaries
are and have been in compliance with all applicable laws, statutes, ordinances,
rules, regulations, orders, judgments, decisions, decrees, standards, and
requirements relating to their respective businesses, except where any such
non-compliance would not reasonably be expected to have a Material Adverse
Effect. Except as described in the SEC Documents, without limiting
the generality of the foregoing, the Company is not in violation of any of the
material rules, regulations or requirements of the NASDAQ Capital Market and has
no knowledge of any facts or circumstances that would reasonably lead to
delisting or suspension of the Common Stock by the NASDAQ Capital Market in the
foreseeable future. Except as described in the SEC Documents, the
Company has not received any communication, written or oral, from the SEC or the
NASDAQ Capital Market regarding the suspension or delisting of the Common Stock
from the NASDAQ Capital Market.
Section
3.8 No Material Adverse
Effect. Since the respective dates as of which information is
given in the SEC Documents, there has not been any event, development or
occurrence having a Material Adverse Effect on the Company or its subsidiaries,
except as reflected or disclosed in a subsequent SEC Document.
Section
3.9 Disclosure. On
or before the first business day following the date of this Agreement, the
Company shall issue a press release and file a Form 8-K with the SEC disclosing
all material terms of the transactions contemplated hereby (and, in the case of
such Form 8-K, including the Transaction Documents as exhibits thereto) and any
other material nonpublic information delivered by the Company or its agents or
counsel to the Holders or any agent acting on such Holder’s
behalf. Upon the filing of such press release and Form 8-K, no Holder
shall be in possession of any information that constitutes or could reasonably
be expected to constitute material, nonpublic information provided to the
Holders by the Company or any agent acting on its behalf. The Company
shall not, and shall cause each of its subsidiaries and its and each of their
respective officers, directors, employees and agents not to, provide the Holders
with any material, nonpublic information regarding the Company or any of its
subsidiaries from and after the filing of such Form 8-K with the SEC without the
express written consent of the Holders. The Company understands and confirms
that the Holders will rely on the foregoing representations in effecting the
transactions contemplated hereby.
Section
3.10 Dilution. The
Company hereby acknowledges that (a) the Holders or one or more of the Other
Holders may engage in hedging and/or trading activities at various times during
the period that the New Notes and the Underlying Common Stock are outstanding,
including during the periods that the value of the shares of Underlying Common
Stock deliverable with respect to Securities are being determined and (b) such
hedging and/or trading activities, if any, can reduce the value of the existing
stockholders’ equity interests in the Company both at and after the times the
hedging and/or trading activities are being conducted. The Company
acknowledges that such aforementioned hedging and/or trading activities do not
constitute a breach of this Agreement, the New Notes or any of the documents
executed in connection herewith. Notwithstanding the forgoing, the
Company assumes that all such activity by the Holders and each of the Other
Holders shall be in compliance with all applicable federal and state securities
laws and disclaims any liability for actions by the Holders or any of the Other
Holders that fail to comply with all applicable laws.
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Section
3.11 Outstanding
Obligations. As of the date hereof, there are $10,013,000 in
aggregate principal amount of Outstanding Notes, including the Holder
Outstanding Notes. Upon the consummation of the transactions
contemplated hereby and by the Other Agreements, there will be no Outstanding
Notes outstanding. Immediately following the Closing, $10,013,000 in
aggregate principal amount of New Notes, including the Holder New Notes, will be
outstanding.
Section
3.12 Legend. The
Company acknowledges and agrees that, based on each of the Holders’
representation made in Section 2 of this Agreement, as of the Closing Date none
of the Holder New Notes, nor any shares of Underlying Common Stock issuable upon
conversion of the Holder New Notes, shall bear any legend regarding registration
under the Securities Act or restrictions on transfer.
Section
3.13 Rule
144. Assuming each of the Holders does not become an affiliate
of the Company, the Company shall not, directly or indirectly, dispute or
otherwise interfere with any claim by the Holders that the holding period of any
Holder New Notes and Underlying Common Stock issued upon conversion of any
Holder New Notes (including any Underlying Common Stock issued to the Holders
pursuant to an Installment Conversion (as defined in the Indenture)) for
purposes of Rule 144 relates back (i.e., tacks) to the holding period for the
Holder Outstanding Notes. The Company agrees and acknowledges that,
assuming as provided in this Section 3.13, under Rule 144, as currently in
effect, such tacking is permitted.
Section
3.14 Additional
Securities-Related Covenants. The Company shall
use all reasonable efforts to cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, and the rules and regulations
thereunder (the “TIA”), in a timely
manner and, in connection therewith, cooperate with the Trustee and the Holders
of the New Notes or the Underlying Common Stock to effect such changes to the
Indenture, if any, as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA, and execute, and use all reasonable
efforts to cause the Trustee to execute, all customary documents as may be
required to effect such changes, and all other forms and documents (including
Form T-1) required to be filed with the SEC to enable the Indenture to be so
qualified. The Company shall (a) list the Underlying Common Stock on
any securities exchange on which the Common Stock is then listed, (b) use its
reasonable efforts to maintain the listing of the Common Stock on the NASDAQ
Capital Market or another national securities exchange (including by using
reasonable efforts to comply with the rules and regulations thereof), and (c)
use its reasonable efforts to file with the SEC in a timely manner all annual
reports on Form 10-K and quarterly reports on Form 10-Q required of the Company
under the Exchange Act so long as the Company remains subject to such
requirements.
Section
3.15 No Violation of Outstanding
Notes or Outstanding Notes Indenture. The Company has not
breached or violated any of the provisions of, nor is there any continuing
Default or Event of Default (each as defined in the Outstanding Notes Indenture)
under, any of the Outstanding Notes or the Outstanding Notes
Indenture.
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Section
3.16 Acknowledgments. The
Company hereby irrevocably and unconditionally acknowledges, affirms and
covenants to the Holders that:
(a) the
Holders are not in default under the Holder Outstanding Notes, the Outstanding
Notes Indenture or any of the agreements, arrangements or understandings entered
into or agreed upon by the Holders in connection with, or otherwise relating to,
the acquisition of the Holder Outstanding Notes by the Holders (the “Outstanding Notes
Documents”), as applicable, and has not otherwise breached any
obligations to the Company or any of its subsidiaries.
(b) there
are no offsets, counterclaims or defenses to the obligations, liabilities and
indebtedness of every nature of the Company owed under or in respect of the
Holder Outstanding Notes or the Holder New Notes (the “Obligations”),
including the liabilities and obligations of the Company under the Holder
Outstanding Notes or the Holder New Notes or to the rights,
remedies or powers of the Holders in respect of any of the Obligations, any of
the Holder Outstanding Notes Documents, the Outstanding Notes Indenture or any
of the Transaction Documents, as applicable, and the Company agrees
not to, and to cause each of its subsidiaries not to, interpose (and each does
hereby waive and release) any such defense, set-off or counterclaim in any
action brought by the Holders with respect thereto.
ARTICLE
IV
Miscellaneous
Provisions
Section
4.1 Notice. Any
notice provided for in this Agreement shall be in writing and shall be either
personally delivered, or mailed first class mail (postage prepaid) with return
receipt requested or sent by reputable overnight courier service (charges
prepaid) to such address and to the attention of such person as the recipient
party has specified by prior written notice to the sending party. Notices will
be deemed to have been given hereunder when delivered personally, three (3)
business days after deposit in the U.S. mail postage prepaid with return receipt
requested and two (2) business days after deposit postage prepaid with a
reputable overnight courier service for delivery on the next business
day.
Section
4.2 Entire
Agreement. This Agreement, the Holder New Notes, the Indenture
and the other documents and agreements executed in connection with the
transactions contemplated hereby embody the entire agreement and understanding
of the parties hereto with respect to the subject matter hereof and supersede
all prior and contemporaneous oral or written agreements, representations,
warranties, contracts, correspondence, conversations, memoranda and
understandings between or among the parties or any of their agents,
representatives or affiliates relative to such subject matter, including the
Outstanding Notes Documents, the Outstanding Notes Indenture and any term
sheets, emails or draft documents.
Section
4.3 Assignment; Binding
Agreement. This Agreement and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the parties hereto and their successors and assigns.
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Section
4.4 Counterparts. This
Agreement may be executed in multiple counterparts, and on separate
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Any counterpart or other
signature hereupon delivered by facsimile or other electronic transmission shall
be deemed for all purposes as constituting good and valid execution and delivery
of this Agreement by such party.
Section
4.5 Remedies
Cumulative. All rights and remedies of the parties under this
Agreement are cumulative and without prejudice to any other rights or remedies
available under this Agreement or at law or in equity (including a decree of
specific performance and/or other injunctive relief), and no remedy contained
herein shall be deemed a waiver of compliance with the provisions giving rise to
such remedy, and nothing herein shall limit each of the Holders’ right to pursue
actual damages for any failure by the Company to comply with the terms of this
Agreement. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders and that the
remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Holders shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
Section
4.6 Governing
Law. This Agreement shall in all respects be construed in
accordance with and governed by the substantive laws of the State of New York,
without reference to its choice of law rules. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.
Section
4.7 No Third Party Beneficiaries
or Other Rights. Except as provided in Section 4.16, nothing
herein shall grant to or create in any person not a party hereto, or any such
person’s dependents or heirs, any right to any benefits hereunder, and no such
party shall be entitled to xxx any party to this Agreement with respect
thereto.
Section
4.8 Waiver;
Consent. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than in accordance with
its terms), in whole or in part, except by a writing executed by the parties
hereto. No waiver of any of the provisions or conditions of this Agreement or
any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent otherwise agreed in writing, no waiver
of any term, condition or other provision of this Agreement, or any breach
thereof shall be deemed to be a waiver of any other term, condition or provision
or any breach thereof, or any subsequent breach of the same term, condition or
provision, nor shall any forbearance to seek a remedy for any noncompliance or
breach be deemed to be a waiver of a party’s rights and remedies with respect to
such noncompliance or breach.
Section
4.9 Word
Meanings. The words such as “herein,” “hereinafter,” “hereof,”
and “hereunder” refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
The singular shall include the plural, and vice versa, unless the context
otherwise requires. The masculine shall include the feminine and neuter, and
vice versa, unless the context otherwise requires. The use of the
word “including” in this Agreement shall be by way of example rather than
limitation.
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Section
4.10 No
Broker. Each party represents and warrants that it has not
engaged any third party as broker or finder or incurred or become obligated to
pay any broker’s commission or finder’s fee in connection with the transactions
contemplated by this Agreement other than such fees and expenses for which it
shall be solely responsible.
Section
4.11 Further
Assurances. Each of the Holders and the Company hereby agree
to execute and deliver, or cause to be executed and delivered, such other
documents, instruments and agreements, and take such other actions, as either
party may reasonably request in connection with the transactions contemplated by
this Agreement.
Section
4.12 Costs and
Expenses. On the Closing Date, the Company shall reimburse QVT
for an amount not to exceed $30,000 as reimbursement for the reasonable fees,
costs and expenses incurred thereby in connection with the drafting,
negotiation, preparation, execution and performance of this Agreement, including
reasonable attorneys’ fees, against delivery to the Company of invoices or other
appropriate documentation in reasonable detail. The Company shall pay
its own fees, costs and expenses incurred in connection with the drafting,
negotiation, preparation, execution and performance of this Agreement, including
attorneys’ fees.
Section
4.13 Headings. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
Section
4.14 Severability. If
any one or more of the provisions contained herein, or the application thereof
in any circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.
Section
4.15 Reasonable Best
Efforts. Each party shall use its reasonable best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Section 1.3 of this Agreement.
Section
4.16 Indemnification. In
consideration of each of the Holders’ execution and delivery of this Agreement
and acquiring the Holder New Notes in exchange for the Holder Outstanding Notes
hereunder and in addition to all of the Company’s other obligations under this
Agreement and the other Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless the Holders and all of each of the Holders’
stockholders, partners, members, managers, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons’ agents or other
representatives (including those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnitees”, who are
third party beneficiaries of this Section 4.16), as incurred, from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out
of, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement or any of the other Transaction
Documents, or (b) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement or any of the other Transaction
Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
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Section
4.17 Independent Nature of
Obligations and Rights. The obligations of each of the Holders
and the Other Holders under any Transaction Documents are several and not joint
with the obligations of any other such Person, and the Holder shall not be
responsible in any way for the performance of the obligations of any Other
Holder under any of the Transaction Documents. Nothing contained
herein or in any other Transaction Document, and no action taken by any of the
Holders or any of the Other Holders pursuant hereto or thereto, shall be deemed
to constitute the Holders and any of the Other Holders as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that they are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents, and the Company acknowledges that they are not acting in concert or
as a group, and the Company will not assert any such claim with respect to such
obligations or the transactions contemplated by the Transaction
Documents. Each of the Holders and the Other Holders shall be
entitled to independently protect and enforce its rights, including the rights
arising out of this Agreement or out of any other Transaction Document, and it
shall not be necessary for any other Person to be joined as an additional party
in any proceeding for such purpose.
* * * * * *
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IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first above written.
|
HOLDERS:
|
|
|
JGB
CAPITAL LP
|
|
|
By:
|
/s/ Xxxxx Xxxxx
|
|
Name: Xxxxx
Xxxxx
|
|
|
Title: Chief
Executive Officer
|
|
|
JGB
CAPITAL OFFSHORE LTD.
|
|
|
By:
|
/s/ Xxxxx Xxxxx
|
|
Name: Xxxxx
Xxxxx
|
|
|
Title: Director
|
|
|
SAMC
LLC
|
|
|
By:
|
/s/ Xxxxx Xxxxx
|
|
Name: Xxxxx
Xxxxx
|
|
|
Title: Inv.
Advisor
|
|
|
THE
COMPANY:
|
|
|
TRANSWITCH
CORPORATION
|
|
|
By:
|
/s/ Xxxxxxx Xxx
|
|
Name:
Xxxxxxx Xxx
|
|
|
Title:
President and Chief Executive
Officer
|
|
[Signature
Page to Exchange Agreement]
Exhibit A
Form
of Indenture
Exhibit B
Form
of Opinion of Xxxxx Xxxxxxx LLP
Exhibit C
|
ENTITY
|
AMOUNT OF
OUTSTANDING NOTES TO
BE EXCHANGED
|
AMOUNT OF HOLDER
NEW NOTES TO BE
ISSUED
|
||||||
|
JGB
Capital LP
|
$ | 289,000 | $ | 289,000 | ||||
|
JGB
Capital Offshore Ltd
|
$ | 1,157,000 | $ | 1,157,000 | ||||
|
SAMC
LLC
|
$ | 867,000 | $ | 867,000 | ||||
|
Total
|
$ | 2,313,000 | $ | 2,313,000 | ||||
