<PAGE>
As filed with the Securities and Exchange Commission on November 21, 1997
Registration No. 333-
------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TRANSWITCH CORPORATION
(Exact name of Registrant as specified in its charter)
-----------------------------
DELAWARE 3674 06-1236189
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
Three Enterprise Drive
Shelton, Connecticut 06484
(203) 929-8810
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
DR. SANTANU DAS, President and Chief Executive Officer
TranSwitch Corporation
Three Enterprise Drive
Shelton, Connecticut 06484
(203) 929-8810
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Timothy C. Maguire, Esq.
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
(617) 248-7000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
-----------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-----------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
In accordance with Rule 416 under the Securities Act, this Registration
Statement also covers such indeterminate number of additional shares of the
Registrant's Common Stock, $.001 par value, as may become issuable upon
conversion of the Registrant's Series A Convertible Preferred Stock, $.01 par
value per share (the "Series A Stock"), to prevent dilution resulting from stock
splits, stock dividends or similar transactions or by reason of changes in
conversion price of the Series A Stock in accordance with the terms thereof.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share Price Fee
<S> <C> <C> <C> <C>
Common Stock, 1,600,000 $10.25 $16,400,000 $4,970
$.001 par value shares (1) (2) (2)
==========================================================================================================
</TABLE>
(1) In accordance with Rule 416, the amount to be registered includes a
presently indeterminate number of shares issued or issuable upon conversion
of the Series A Stock to prevent dilution by changes in the conversion
price of the Series A Stock in accordance with the terms thereof.
(2) The price of $10.25 per share, which is the closing bid price reported on
the Nasdaq National Market on November 18, 1997, is set forth solely for
purposes of calculating the filing fee pursuant to Rule 457(c).
<PAGE>
PROSPECTUS
- ----------
TRANSWITCH CORPORATION
1,600,000 Shares of Common Stock
($.001 par value)
All of the shares of Common Stock, par value $.001 per share ("Common
Stock"), of TranSwitch Corporation (the "Company") offered hereby (the "Shares")
will be sold from time to time by certain stockholders of the Company (the
"Selling Stockholders"). The Shares consist of 1,600,000 of Common Stock
issuable upon the conversion of 14,500 shares of the Company's Series A
Convertible Preferred Stock, $.01 par value per share (the "Series A Stock").
The Company will not receive any of the proceeds from the sale of the Shares
offered hereby. All brokerage commissions and other similar expenses incurred
by the Selling Stockholders will be borne by the Selling Stockholders. Other
expenses of the offering, estimated at $25,000, will be borne by the Company.
The sale of the Shares by the Selling Stockholders may be effected from
time to time in one or more transactions (which may involve block transactions)
on the Nasdaq National Market (the "Nasdaq") or in the over-the-counter market,
in negotiated transactions or by a combination of such methods of sale, at fixed
prices, at market prices prevailing at the time of the sale, at prices related
to the prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions with or through one or more broker-
dealers, which may act as agent or principal. The Selling Stockholders and/or
any broker-dealer effecting the sales may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act of 1933, as amended
(the "Securities Act"), and any commissions received by the broker-dealer and
any profit on the resale of shares as principal may be deemed to be underwriting
discounts and commissions under the Securities Act. The Selling Stockholders
may transfer the Shares and the Series A Stock to other persons who may, in
turn, resell Shares in the manner described above. Additionally, the Selling
Stockholders may pledge or make gifts of the Shares, and the Shares may also be
sold by the pledgees or transferees. The Selling Stockholders may also transfer
the Shares pursuant to Rule 144 under the Securities Act, whether or not the
Registration Statement of which this Prospectus forms a part is effective at the
time of any such transfer. The Company has agreed to indemnify the Selling
Stockholders against certain liabilities, including certain liabilities under
the Securities Act, and to the extent any indemnification by an indemnifying
party is prohibited or limited by law, the Company has agreed to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under such indemnification provision to the fullest extent permitted by
law. See "Plan of Distribution."
The Common Stock is currently traded on the Nasdaq National Market under
the symbol "TXCC." On November 18, 1997, the closing bid price of the Common
Stock, as reported by the Nasdaq National Market, was $10.25 per share.
<PAGE>
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------
The date of this Prospectus is November 24, 1997
AVAILABLE INFORMATION
TranSwitch Corporation, a Delaware corporation, is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith, files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports and other information filed by the Company with the Commission pursuant
to the informational requirements of the Exchange Act may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following Regional Offices of the Commission: Seven World Trade Center,
Suite 1300, New York, New York 10048; and 500 West Madison Avenue, Suite 1400,
Chicago, Illinois 60661. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
Web site (at http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding the Company. The Company's Common
Stock is traded on the Nasdaq National Market, and such reports and other
information can be inspected at the offices of Nasdaq Operations, 1735 K Street,
N.W., Washington, D.C. 20006.
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-3 under the Securities Act with respect to the
securities offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information contained in the
Registration Statement. For further information with respect to the Company and
the securities offered hereby, reference is hereby made to the Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any documents filed with,
or incorporated by reference in, the Registration Statement as exhibits are not
necessarily complete, and each such statement is qualified in all respects by
reference to the copy of the applicable documents filed with the Commission.
The Registration Statement, including the exhibits and schedules thereto, may be
-2-
<PAGE>
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part
thereof may be obtained from such office upon payment of the prescribed fees.
INFORMATION INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 0-25996) pursuant to the Exchange Act are incorporated by reference in
this Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended December 31, 1996;
(2) Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1997, June 30, 1997 and September 30, 1997;
(3) The Company's Proxy Statement for its Annual Meeting of Stockholders,
which was held on May 29, 1997;
(4) All other documents filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by the Annual
Report referred to in (1) above; and
(5) The "Description of Capital Stock" contained in the Company's
Registration Statement No. 33-91694 on Form S-1, as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Copies of the documents incorporated herein by reference (excluding exhibits
unless such exhibits are specifically incorporated by reference into such
documents) may be obtained upon written or oral request without charge by
persons, including beneficial owners, to whom this Prospectus is delivered.
Request should be made to Mr. Michael C. McCoy, Controller, TranSwitch
Corporation, Three Enterprise Drive, Shelton, Connecticut 06484 (Telephone 203-
929-8810).
-3-
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
The Company............... TranSwitch Corporation (the "Company") develops and
markets high-speed semiconductor solutions to
telecommunications and data communications original
equipment manufacturers.
Risk Factors.............. The offering involves substantial risk. See "Risk
Factors."
Securities Offered........ 1,600,000 shares of the Company's Common Stock, par
value $.001 per share.
Offering Price............ All or part of the Shares offered hereby may be sold
from time to time in amounts and on terms to be
determined by the Selling Stockholders at the time
of sale.
Use of Proceeds........... The Company will receive no part of the proceeds
from the sale of any of the Shares by the Selling
Stockholders.
Selling Stockholders...... The Shares being offered hereby are being offered
for the account of the Selling Stockholders
specified under the caption "Selling Stockholders."
Stock Market Symbols: Nasdaq National Market
----------------------
Common Stock TXCC
-4-
<PAGE>
RISK FACTORS
OPERATING LOSSES
The Company has largely not been profitable since its inception. As of
September 30, 1997, the Company had an accumulated deficit of $30.4 million.
For 1996 and the first three quarters of 1997, the Company incurred net losses
of approximately $10.1 million and $2.3 million, respectively. The Company
expects to continue to incur losses at least through 1997, and there can be no
assurance that the Company will achieve or maintain profitability in the future.
FACTORS AFFECTING OPERATING RESULTS
The Company's quarterly and annual operating results are affected by a wide
variety of factors that could materially and adversely affect revenues and
profitability, including competitive pressures on selling prices; the timing and
cancellation of customer orders; the timing and provision of pricing protections
and returns from certain distributors; availability of foundry capacity and raw
materials; fluctuations in yields; changes in product mix; the Company's ability
to introduce new products and technologies on a timely basis; introduction of
products and technologies by the Company's competitors; market acceptance of the
Company's and its customers' products; the level of orders received which can be
shipped in a quarter; the amount and timing of recognition of non-recurring
engineering revenue; the timing of investments in research and development,
including tooling expenses associated with product development and pre-
production; and whether the Company's customers buy from a distributor or
directly from the Company. Sudden shortages of raw materials or production
capacity constraints can lead producers to allocate available supplies or
capacity to customers with resources greater than those of the Company, which
could interrupt the Company's ability to meet its production obligations.
Historically, average selling prices in the semiconductor industry have
decreased over the life of a product, and as a result, the average selling
prices of the Company's products may be subject to significant pricing pressures
in the future. The Company's business is characterized by short-term orders and
shipment schedules, and customer orders typically can be canceled or rescheduled
without significant penalty to the customer. Due to the absence of substantial
noncancellable backlog, the Company typically plans its production and inventory
levels based on internal forecasts of customer demand, which are highly
unpredictable and can fluctuate substantially. Because the Company is
continuing to increase its operating expenses for personnel and new product
development and for inventory in anticipation of increasing sales levels,
operating results would be adversely affected if increased sales are not
achieved. In addition, the Company is limited in its ability to reduce costs
quickly in response to any revenue shortfalls. From time to time, in response
to anticipated long lead times to obtain inventory and materials from its
foundries, the Company may order in advance of anticipated customer demand,
which might result in excess inventory levels if expected orders fail to
materialize or other factors render the customer's product less marketable. As
a result of the foregoing or other factors, the Company may experience material
fluctuations in future operating
-5-
<PAGE>
results on a quarterly or annual basis which could materially and adversely
affect its business, financial condition and operating results.
DEPENDENCE ON VERY LARGE SCALE INTEGRATED CIRCUIT ("VLSI") FABRICATION
FACILITIES
The Company does not own or operate a VLSI fabrication facility, and all of
its semiconductor device requirements are currently supplied by four outside
foundries. There are significant risks associated with the Company's reliance
on outside foundries, including the lack of assured wafer supply and control
over delivery schedules, the unavailability of or delays in obtaining access to
key process technologies and limited control over quality assurance,
manufacturing yields and production costs. In addition, the manufacture of
integrated circuits is a highly complex and technology demanding process.
Although the Company has undertaken to diversify its sources of semiconductor
device supply and works closely with its foundries to minimize the likelihood of
reduced manufacturing yields, the Company's foundries have from time to time
experienced lower than anticipated manufacturing yields, particularly in
connection with the introduction of new products and the installation and start-
up of new process technologies. Such reduced yields have at times adversely
affected the Company's operating results. There can be no assurance that the
Company's foundries will not experience lower than expected manufacturing yields
in the future, which could materially and adversely affect the Company's
business, financial condition and operating results.
The Company purchases semiconductor devices from outside foundries pursuant
to purchase orders and does not have a guaranteed level of production capacity
at any of its foundries. The Company provides the foundries with rolling
forecasts of its production requirements; however, the ability of each foundry
to provide wafers to the Company is limited by the foundry's available capacity.
Therefore, the Company's foundry suppliers could choose to prioritize capacity
for other customers or uses or reduce or eliminate deliveries to the Company on
short notice. Accordingly, there is no assurance that the Company's foundries
will allocate sufficient capacity to satisfy the Company's requirements. In
addition, the Company has been, and expects in the future to be, particularly
dependent upon a limited number of foundries for its VLSI device requirements.
In particular, as of the date of this filing, all of the Company's BiCMOS
devices were manufactured by a single foundry supplier. Any sudden demand for
an increased amount of semiconductor devices or sudden reduction or elimination
of any existing source or sources of semiconductor devices could result in a
material delay in the shipment of the Company's products. There can be no
assurance that material disruptions in supply, which have occurred periodically
in the past, will not occur in the future. In the event of any such disruption,
if the Company were unable to qualify alternative manufacturing sources for
existing or new products in a timely manner or if such sources were unable to
produce VLSI devices with acceptable manufacturing yields, the Company's
business, financial condition and operating results would be materially and
adversely affected.
DEPENDENCE ON TELECOMMUNICATIONS AND DATA COMMUNICATIONS MARKETS
Virtually all of the Company's product revenues are derived from sales of
products for telecommunications and data communications applications. These
markets are characterized by
-6-
<PAGE>
intense competition, rapid technological change and short product life cycles.
In addition, the telecommunications and data communications equipment markets
have undergone a period of rapid growth and consolidation in the last few years.
The Company's business, financial condition and operating results would be
materially and adversely affected in the event of a significant slowdown in
these markets.
Products for telecommunications and data communications applications are
based on industry standards, which are continually evolving. The emergence of
new industry standards could render the Company's products unmarketable or
obsolete. There can be no assurance that the Company will be able to
successfully develop and introduce new products based on emerging industry
standards and the failure of the Company to introduce such products could
materially and adversely affect the Company's business, financial condition and
operating results. In addition, a significant portion of the Company's revenues
has been, and will continue to be, derived from sales of Synchronous Optical
Network/Synchronous Digital Hierarchy ("SONET/SDH") and Asynchronous Transfer
Mode ("ATM")-based products. There can be no assurance that SONET/SDH and ATM-
based products will achieve a significant degree of market acceptance and that
the Company's customers will be able to assimilate the Company's SONET/SDH and
ATM-based products. Failure of SONET/SDH and ATM-based products to achieve
market acceptance or of the Company's customers to assimilate the Company's
SONET/SDH and ATM-based products would materially and adversely affect the
Company's business, financial condition and operating results.
DEPENDENCE ON NEW PRODUCTS; RISK OF PRODUCT DEVELOPMENT DELAYS
The Company's success depends upon its ability to develop new VLSI devices
for existing and new markets, to introduce such products in a timely manner and
to have such products selected for design into new products of leading systems
manufacturers. The development of these new devices is highly complex and from
time to time the Company has experienced delays in completing the development of
new products. Successful product development and introduction depends on a
number of factors, including accurate new product definition, timely completion
and introduction of new product designs, availability of foundry capacity,
achievement of manufacturing yields and market acceptance of the Company's and
its customers' products. The Company's success also depends upon its ability to
accurately specify and certify the conformance of its products to applicable
standards and to develop its products in accordance with customer requirements.
There can be no assurance that the Company will be able to adjust to changing
market conditions as quickly and cost-effectively as necessary to compete
successfully. Furthermore, there can be no assurance that the Company will be
able to introduce new products in a timely and cost-effective manner or in
sufficient quantities to meet customer demand or that such products will achieve
market acceptance. In addition, there can be no assurance that the electronic
systems manufactured by the Company's customers will be introduced in a timely
manner or that such systems will achieve market acceptance. The Company's or
its customers' failure to develop and introduce new products successfully and in
a timely manner would materially and adversely affect the Company's business,
financial condition and operating results.
-7-
<PAGE>
The Company's new products are generally incorporated into a customer's
products or systems at the design stage. However, customer decisions to use the
Company's products (design wins), which can often require significant
expenditures by the Company without any assurance of success, often precede the
generation of volume sales, if any, by a year or more. Moreover, the value of
any design win will largely depend upon the commercial success of the customer's
product and on the extent to which the design of the customer's electronic
system accommodates components manufactured by the Company's competitors. There
can be no assurance that the Company will continue to achieve design wins.
CUSTOMER CONCENTRATION
Historically, a relatively small number of customers have accounted for a
significant portion of the Company's total revenues in any particular period.
The Company has no long-term volume purchase commitments from any of its major
customers. In 1996 ECI Telecom Ltd, Insight Electronics, Inc. and Tellabs
Operations, Inc. accounted for 22%, 16% and 14% of total revenues, respectively.
In 1995, Tellabs Operations, Inc. and Insight Electronics, Inc. accounted for
17% and 16% of total revenues, respectively. In 1994, ECI Telecom Ltd.
accounted for approximately 16% of total revenues. The Company anticipates that
sales of its products to relatively few customers will continue to account for a
significant portion of its total revenues. The reduction, delay or cancellation
of orders from one or more significant customers could materially and adversely
affect the Company's business, financial condition and operating results. In
addition, since the Company's products are often sole sources to its customers,
the Company's business, financial condition and operating results could be
materially and adversely affected if one or more of its major customers were to
develop other sources of supply. Furthermore, in view of the relatively short
product life cycles in the telecommunications and data communications equipment
markets, the Company's business, financial condition and operating results would
be materially and adversely affected if one or more of its significant customers
were to select devices manufactured by one of the Company's competitors for
inclusion in future product generations. There can be no assurance that the
Company's current customers will continue to place orders with the Company, that
orders by existing customers will continue at the levels of previous periods or
that the Company will be able to obtain orders from new customers. Loss of one
or more of the Company's current customers or a disruption in the Company's
sales and distribution channels could materially and adversely affect the
Company's business, financial condition and operating results.
PATENTS, LICENSES AND INTELLECTUAL PROPERTY CLAIMS
The Company's success depends in part on its ability to obtain patents and
licenses and to preserve other intellectual property rights covering its
products and development and testing tools. To that end, the Company has
obtained certain domestic and foreign patents and intends to continue to seek
patents on its inventions when appropriate. The process of seeking patent
protection can be time consuming and expensive and there can be no assurance
that patents will issue from currently pending or future applications or that
the Company's existing patents or any new patents that may be issued will be
sufficient in scope or strength to provide meaningful protection or any
commercial advantage to the Company. There can be no assurance that foreign
-8-
<PAGE>
intellectual property laws will protect the Company's intellectual property
rights. Furthermore, there can be no assurance that others will not
independently develop similar products, duplicate the Company's products or
design around any patents issued to the Company. The Company may be subject to
or may initiate interference proceedings in the patent office, which can demand
significant financial and management resources. From time to time, the Company
may be notified that it is infringing certain patents and other intellectual
property rights of others. As claims arise, the Company evaluates their merits.
No assurance can be given that licenses will be obtainable on acceptable terms,
that damages for infringement will not be assessed or that litigation will not
occur. Litigation, which could result in substantial cost to and diversion of
resources of the Company, may be necessary to enforce patents or other
intellectual property rights of the Company or to defend the Company against
claimed infringement of the rights of others. The failure to obtain necessary
licenses or other rights or litigation arising out of any such claims could have
a material adverse effect on the Company's business, financial condition and
operating results.
COMPETITION
The semiconductor industry is intensely competitive and is characterized by
price erosion, rapid technological change, shortage in fabrication capacity,
heightened international competition in many markets, and unforeseen
manufacturing yield problems. The telecommunications and data communications
industries, which are the primary target markets for the Company, are also
becoming intensely competitive because of deregulation and heightened
international competition. This is likely to result in pricing pressures on the
Company's products, potentially affecting its margins.
TranSwitch believes that the principal bases of competition include product
definition, product design, test capabilities, reliability, functionality, time-
to-market, reputation and price. The ability of the Company to compete
successfully in the rapidly evolving area of high performance integrated circuit
technology depends on factors both within and outside its control, including
success in designing and subcontracting the manufacture of new products that
implement new technologies, protection of Company products by effective
utilization of intellectual property laws, product quality, reliability, price,
efficiency of production, the pace at which customers incorporate the Company's
integrated circuits into their products, success of competitors' products and
general economic conditions.
The Company's competition consists of suppliers from the United States as
well as other countries, including competition from semiconductor divisions of
vertically integrated companies like AT&T, IBM Corporation, NEC Corporation and
Siemens Corporation. New entrants are also likely to attempt to obtain a share
of the market for the Company's current and future products. Certain of the
Company's competitors are more established, benefit from greater market
recognition, and have substantially greater financial, development,
manufacturing, and marketing resources than the Company.
-9-
<PAGE>
FOREIGN SALES
In 1994, 1995 and 1996, foreign sales accounted for approximately 47%, 38%
and 46%, respectively, of the Company's total revenues. The Company anticipates
that foreign sales will continue to account for a significant percentage of its
revenues. A significant portion of the Company's total revenues will therefore
be subject to risks associated with foreign sales, including unexpected changes
in legal and regulatory requirements and policy changes affecting the
telecommunications and data communications markets, changes in tariffs, exchange
rates and other barriers, political and economic instability, difficulties in
accounts receivable collection, difficulties in managing distributors or
representatives, difficulties in staffing and managing foreign operations,
difficulties in protecting the Company's intellectual property overseas,
seasonality of sales and potentially adverse tax consequences. Although the
Company's sales to date have been denominated in United States dollars, the
value of the United States dollar in relation to foreign currencies may also
adversely affect the Company's sales to foreign customers. To the extent that
the Company expands its international operations or changes its pricing
practices to denominate prices in foreign currencies, the Company will be
exposed to increased risks of currency fluctuations.
THE SEMICONDUCTOR INDUSTRY
The Company provides semiconductor devices to the telecommunications and
data communications markets. The semiconductor industry is highly cyclical and
has been subject to significant economic downturns at various times,
characterized by diminished product demand, accelerated erosion of average
selling prices and production over-capacity. Although the semiconductor
industry has in recent periods experienced increased demand and production
capacity constraints, there can be no assurance as to how long this condition
will continue. The Company may experience substantial period-to-period
fluctuations in future operating results due to general semiconductor industry
conditions, overall economic conditions, or other factors.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the continued
service of its executive officers and other key management and technical
personnel, and on its ability to continue to attract, retain and motivate
qualified personnel, such as experienced mixed-signal circuit designers and
systems applications engineers. The competition for such employees is intense.
The loss of the services of one or more of the Company's design engineers,
executive officers or other key personnel or the Company's inability to recruit
replacements for such personnel or to otherwise attract, retain and motivate
qualified personnel could have a material adverse effect on the Company's
business, financial condition and operating results. The Company has no long-
term employment contracts with any of its employees.
TRANSITION TO NEW PROCESS TECHNOLOGIES
The Company's future success is also dependent upon its ability to develop
products that utilize new process technologies, to introduce them to the
marketplace ahead of competitors and
-10-
<PAGE>
to have them selected to be designed into products of leading systems
manufacturers. Semiconductor design and process methodologies are subject to
rapid technological change, and require large expenditures for research and
development. Most of the Company's products are currently manufactured using a
0.8 or O.5 micron CMOS process or a 1.0 micron BiCMOS process. The Company
continuously evaluates the benefits, on a product-by-product basis, of migrating
to smaller geometry process technologies in order to reduce costs. Other
companies in the industry have experienced difficulty in effecting transitions
to new manufacturing processes and, consequently, have suffered reduced yields
or delays in product deliveries. The Company believes that transitioning its
products to a smaller geometry will be important for the Company to remain
competitive. The Company's business, financial condition and operating results
could be materially adversely affected if such transitions are substantially
delayed or inefficiently implemented.
MANAGEMENT OF GROWTH
Due to the level of technical and marketing expertise necessary to support
its existing and new customers, the Company must attract highly qualified and
well-trained personnel. There may be only a limited number of persons with the
requisite skills to serve in these positions and it may become increasingly
difficult for the Company to hire such personnel. Future expansion by the
Company may also significantly strain the Company's management, manufacturing,
financial and other resources. There can be no assurance that the Company's
systems, procedures, controls and existing space will be adequate to support the
Company's operations. Failure to manage the Company's growth properly could
have a material adverse effect on the Company's business, financial condition
and operating results.
VOLATILITY OF STOCK PRICE AND DILUTION
The market for securities of high technology companies, including those of
the Company, has been highly volatile. The market price of the Company's Common
Stock has fluctuated between $21.625 and $3.625 from June 19, 1995 to November
18, 1997 and was $10.25 on November 18, 1997, and it is likely that the price of
the Common Stock will continue to fluctuate widely in the future. The trading
price of the Company's Common Stock could be subject to wide fluctuations in
response to quarter-to-quarter variations in operating results, announcements of
technological innovations or new products by the Company or its competitors,
general conditions in the telecommunications and data communications equipment
markets, changes in earnings estimates by analysts, or other events or factors.
-11-
<PAGE>
DILUTION
"Dilution" represents the difference between the assumed price to public per
share of Common Stock and the net tangible book value per share immediately
after the completion of this offering. "Net tangible book value per share"
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of Common Stock outstanding.
On October 10, 1997, the Company issued 14,500 shares of the Series A Stock
to the Selling Stockholders as part of a private placement transaction. Each
share of Series A Stock is convertible into shares of Common Stock at any time
at the option of the Selling Stockholder holding such share of Series A Stock,
subject to certain limitations, at the lesser of (i) $10.58 per share and (ii)
ninety percent (90%) of the average of the closing bid price of the Company's
Common Stock, as reported by the Nasdaq National Market, for the ten (10)
trading days immediately preceding the date written notice of conversion is
received by the Company.
As of September 30, 1997, the net tangible book value of the Company's Common
Stock was $14,594,000 or $1.19 per share of Common Stock. The pro forma net
tangible book value of the Company's Common Stock at September 30, 1997,
assuming full conversion of the Preferred Stock (based upon a conversion price
of $10.58 for the Common Stock), resulting in the issuance of approximately
1,370,510 shares, would be $29,094,000 or $2.14 per share. Assuming a price to
the public of $10.58 per share, there would be an immediate dilution per share
of $8.44 to new investors.
The following table illustrates the dilution per share described above:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed Offering price per share $10.58
Net tangible book value per share before the Offering $ 1.19
Increase per share attributable to new investors 0.95
------
Pro forma net tangible book value per share after the Offering 2.14
------
Dilution per share to new investors (1) $ 8.44
======
</TABLE>
(1) Excludes dilutive effect of additional shares issuable upon exercise
of outstanding stock options.
USE OF PROCEEDS
The Company will receive no part of the proceeds from the sale of any of
the Shares by any of the Selling Stockholders. The Company has, however,
received proceeds from the sale of the Series A Stock to the Selling
Stockholders, which proceeds were applied to working capital.
-12-
<PAGE>
SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
Percentage of
Number of Shares of Number of Shares Number of Class to be
Common Stock Owned to be Acquired upon Shares of Held upon
Prior Conversion of Common Stock Completion of
Names to the Offering Preferred Stock to be Sold Offering
- ------------------ --------------------- -------------------- ------------ ---------------------
<S> <C> <C> <C> <C>
Deltec Asset 385,650(1) (2) 551,724(3) 3.1%
Management
Corporation
Tudor BVI Futures 0(1) (2) 169,048(3) 0.0%
Ltd.
Raptor Global 0(1) (2) 66,207(3) 0.0%
Fund, L.P.
Raptor Global 0(1) (2) 183,614(3) 0.0%
Fund, Ltd.
Tudor Arbitrage 200(1) (2) 22,510(3) (4)
Partners, Ltd.
John D. Gruber 146,000(1) (2) 22,069(3) 1.1%
and Linda W.
Gruber JTWROS
Gruber and 19,500(1) (2) 33,103(3) (4)
McBaine
International
Lagunitas 45,000(1) (2) 110,346(3) (4)
Partners, L.P.
Clarion Capital 0(1) (2) 55,172(3) 0.0%
Corporation
Unigestion Holding 0(1) (2) 55,172(3) 0.0%
The Kaufman Fund, 0(1) (2) 331,035(3) 0.0%
Inc.
</TABLE>
____________________
(1) Does not include shares of Common Stock issuable upon conversion of the
Series A Stock.
(2) The Selling Stockholder can receive shares of Common Stock through
conversion of the Series A Stock. The Series A Stock is convertible into
Common Stock at the lesser of (i) $10.58 and (ii) ninety percent (90%) of
------
the average market price for the Common Stock for the ten (10) trading days
immediately preceding the date on which the Series A Stock is converted.
(3) Consists of shares of Common Stock included in this offering that are
issuable upon conversion of the Series A Stock held by such Selling
Stockholder.
(4) Percentage of class to held upon completion of offering is less than 1.0%.
-13-
<PAGE>
PLAN OF DISTRIBUTION
The distribution by the Selling Stockholders of the Shares may be effected
in one or more transactions that may take place in the over-the-counter market,
or such other market on which the Company's securities may from time to time be
trading, including ordinary broker's transactions or through sales to one or
more dealers for resale of the Shares as principals, in privately negotiated
transactions, through the writing of options on the Shares (whether such options
are listed on an options exchange or otherwise) or by a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. If the Selling Stockholders effect such
transactions by selling the Shares through underwriters, dealers or agents, such
underwriters, dealers or agents may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Shares for whom they may act as agent. The Selling
Stockholders and any such underwriters, dealers or agents that participate in
the distribution of the Shares may be deemed to be underwriters, and any profit
on the sale of the Shares by them and any discounts, commissions or concessions
received by them may be deemed to be underwriting discounts and commissions
under the Securities Act. The Selling Stockholders may also sell the Shares
pursuant to Rule 144 under the Securities Act. Brokers or dealers acting in
connection with the sale of the Shares may receive fees or commissions in
connection therewith. The Company will not receive any of the proceeds from the
sale of the Shares by the Selling Stockholders.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of shares of Common Stock may not simultaneously
engage in market making activities with respect to such shares of Common Stock
for a period of up to five business days prior to the commencement of such
distribution, subject to certain exceptions. In addition and without limiting
the foregoing, the Selling Stockholders and any other person participating in
the distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Rule 10b-5 and Regulation M, which provisions may limit the time of
purchases and sales of any Shares by the Selling Stockholders or any other such
person. All of the foregoing may affect the marketability of the Shares.
The Company has agreed with the Selling Stockholders to file the
Registration Statement of which this Prospectus is a part with the Commission,
and has agreed with the Selling Stockholders to keep the Registration Statement
effective until October 10, 2003 or such earlier time as all of the Shares have
been sold. The Company will pay all of the expenses incident to the
registration of the Shares and certain other expenses related to the offering.
The Company has agreed to indemnify the Selling Stockholders against certain
liabilities they may incur in connection with the issuance and sale of the
Shares, including liabilities under the Securities Act. To the extent any
indemnification by an indemnifying party is prohibited or limited by law, the
Company has agreed to make the maximum contribution with respect to any amounts
for which it would otherwise be liable under such indemnification provision to
the fullest extent permitted by law.
-14-
<PAGE>
In order to comply with certain states' securities laws, if applicable, the
Shares may be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states, the Shares may not be sold unless the
Shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for the Company by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements and schedule of the Company and
consolidated subsidiaries included in the Company's Annual Report on Form 10-K
as of December 31, 1996 and 1995, and for each of the years in the three-year
period ended December 31, 1996, have been incorporated by reference herein and
elsewhere in the Registration Statement, in reliance upon the report set forth
therein of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
-15-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an estimate of the expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered, other than underwriting compensation:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee -- Securities and Exchange Commission.. $ 4,970
Nasdaq SmallCap Market additional listing fee........... 2,000
Blue Sky Fees and Expenses.............................. 1,000
Accounting Fees and Expenses............................ 5,000
Legal Fees and Expenses................................. 10,000
Transfer Agent Fees and Expenses........................ 1,000
Miscellaneous........................................... 1,030
TOTAL.............................................. $25,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(A) THE COMPANY IS A DELAWARE CORPORATION. SECTION 145 OF THE
DELAWARE GENERAL CORPORATION LAW, AS AMENDED, PROVIDES IN REGARD TO
INDEMNIFICATION OF DIRECTORS AND OFFICERS AS FOLLOWS:
"(a) A corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the
II-1
<PAGE>
best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have the power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a Director or Officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (included attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by former directors
II-2
<PAGE>
and officers or other employees and agents may be so paid upon such terms and
conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
(h) For purposes of this section, references to "the corporation''
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents so that any person who was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises''
shall include employee benefit plans; references to "fines'' shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation'' shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation'' as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
II-3
<PAGE>
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
(B) ARTICLE 10 OF THE REGISTRANT'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION CONTAINS THE FOLLOWING PROVISIONS RELATING TO THE INDEMNIFICATION
OF DIRECTORS AND OFFICERS:
1. Actions, Suits and Proceedings Other than by or in the Right of
---------------------------------------------------------------
the Corporation. The Corporation shall indemnify each person who was or is a
- ---------------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 6
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses
II-4
<PAGE>
(including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
------------------------------------------------
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---- ----------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purpose hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to
---------------------------------
his right to be indemnified, the Indemnitee must notify the Corporation in
writing as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expenses of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which case the fees and
II-5
<PAGE>
expenses of counsel for the Indemnitee shall be at the expense of the
Corporation, except as otherwise expressly provided by this Article. The
Corporation shall not be entitled, without the consent of the Indemnitee, to
assume the defense of any claim brought by or in the right of the Corporation or
as to which counsel for the Indemnitee shall have reasonably made the conclusion
provided for in clause (ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6
-------------------
below, in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
- -------- -------
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking may be accepted without reference to the
financial ability of such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification
-----------------------------
or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and o what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet the applicable standard of conduct set
forth in Section 1 or 2, as the case may be. Such determination shall be made
in each instance by (a) a majority vote of the directors of the Corporation who
are not at that time parties to the action, suit or proceeding in question
("disinterested directors"), even though less than a quorum, (b) if there are no
such disinterested directors, or if such disinterested directors so direct, by
independent legal counsel (who may be regular legal counsel to the corporation)
in a written opinion, (c) a majority vote of a quorum of the outstanding shares
of stock of all classes entitled to vote for directors, voting as a single
class, which quorum shall consist of stockholders who are not at that time
parties to the action, suit or proceeding in question, or (d) a court of
competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
--------
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this
II-6
<PAGE>
Article shall be on the Corporation. Neither the failure of the Corporation to
have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable laws shall affect or diminish in any
way the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to an Indemnitee who has ceased to be a director or officer, and
shall incur to the benefit of the estate, heirs, executors and administrators of
the Indemnitee. Nothing contained in this Article shall be deemed to prohibit,
and the Corporation is specifically authorized to enter into, agreements with
officers and directors providing indemnification rights and procedures different
from those set forth in this Article. In addition, the Corporation may, to the
extent authorized from time to time by its Board of Directors, grant
indemnification rights to other employees or agents of the Corporation or other
persons serving the Corporation and such rights may be equivalent to, or greater
or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance,
---------
at its expense, to protect itself and any director, officers, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
II-7
<PAGE>
such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation to the fullest extent permitted by an applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. Subsequent Legislation. If the General Corporation Law of the
----------------------
State of Delaware is amended after adoption of this Article to expand further
the indemnification permitted to Indemnitees, then the Corporation shall
indemnify such persons to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
(C) THE AMENDED AND RESTATED BY-LAWS CONTAIN NO PROVISIONS RELATING TO
INDEMNIFICATION OF OFFICERS AND DIRECTOR.
ITEM 16. EXHIBITS.
The following exhibits, required by Item 601 of Regulation S-K, are
filed as a part of this Registration Statement. Exhibit numbers, where
applicable, in the left column correspond to those of Item 601 of Regulation S-
K.
<TABLE>
<CAPTION>
Exhibit No. Item and Reference
- ----------- ------------------
<S> <C>
4a - Specimen Common Stock Certificate (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-1, No. 33-91694 and
incorporated by reference).
4b - Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock of the Company.
4c - Form of Stock Purchase Agreement dated October 10, 1997 among the
Company and the purchasers of Series A Convertible Preferred
Stock.
5 - Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
23 - Consent of KPMG Peat Marwick LLP.
24 - Power of Attorney empowering Dr. Santanu Das and Michael F.
Stauff and each of them to execute this Registration Statement
(see page II-11).
</TABLE>
II-8
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such
II-9
<PAGE>
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A, and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h), under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
(d) The undersigned registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Shelton, State of Connecticut on November 21,
1997.
TranSwitch Corporation
By: /s/ Dr. Santanu Das
-----------------------------------
Dr. Santanu Das
President, Chief Executive
Officer
Power of Attorney
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints Dr. Santanu Das and Michael F. Stauff
and each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (until
revoked in writing) to sign any and all amendments (including post-effective
amendments and amendments thereto) to this Registration Statement on Form S-3 of
TranSwitch Corporation, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary fully to all intents and purposes as he might or could
do in person thereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
II-11
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
Name Capacity Date
/s/ Dr. Santanu Das President, Chief Executive November 21, 1997
- --------------------------- Officer and Director
Dr. Santanu Das
/s/ Michael F. Stauff Senior Vice President, Chief November 21, 1997
- --------------------------- Financial Officer and Treasurer
Michael F. Stauff
/s/ Dr. Steward S. Flaschen Director November 21, 1997
- ---------------------------
Dr. Steward S. Flaschen
/s/ Dr. Charles Lee Director November 21, 1997
- ---------------------------
Dr. Charles Lee
/s/ Dr. Ljubomir Micic Director November 21, 1997
- ---------------------------
Dr. Ljubomir Micic
/s/ Dr. Albert E. Paladino Director November 21, 1997
- ---------------------------
Dr. Albert E. Paladino
/s/ Erik van der Kaay Director November 21, 1997
- ---------------------------
Erik van der Kaay
II-12
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------ ----------------------
4a Specimen Common Stock Certificate (filed as Exhibit 4a to the
Company's Registration Statement on Form S-1, No. 33-91694 and
incorporated by reference).
4b Certificate of Designations, Preferences and Rights of Series A
Preferred Stock of the Company.
4c Form of Stock Purchase Agreement dated October 10, 1997 among the
Company and the purchasers of Series A Convertible Preferred Stock.
5 Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
23 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney empowering Dr. Santanu Das and Michael F. Stauff and
each of them to execute this Registration Statement (see page II-11).
<PAGE>
EXHIBIT 4b
TRANSWITCH CORPORATION
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK
The undersigned officer of TranSwitch Corporation, a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"CORPORATION"), does hereby certify that, pursuant to authority conferred by the
- ------------
Corporation's Amended and Restated Certificate of Incorporation and pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation, on October 3, 1997, adopted
a resolution providing for certain powers, designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of certain shares of Series A Convertible
Preferred Stock, $.01 par value, of the Corporation, which resolution is as
follows:
RESOLVED: That, pursuant to the authority vested in the Board of Directors
of the Corporation and in accordance with the General Corporation Law of the
State of Delaware and the provisions of the Corporation's Amended and Restated
Certificate of Incorporation, a series of 18,000 shares of the class of
authorized Preferred Stock, par value $.01 per share, of the Corporation is
hereby created as the Series A Convertible Preferred Stock, and that the
designation and number of shares thereof and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations and restrictions thereof, are as set
forth on Exhibit A attached hereto.
---------
EXECUTED as of this 10th day of October, 1997.
TRANSWITCH CORPORATION
By: /s/ Dr. Santanu Das
-------------------
Dr. Santanu Das
President
<PAGE>
EXHIBIT A
---------
A. DESCRIPTION AND DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK
-------------------------------------------------------------------
1. DESIGNATION AND DEFINITIONS.
---------------------------
(A) DESIGNATION. A total of 18,000 shares of the Corporation's
-----------
previously undesignated Preferred Stock, $.01 par value, shall be designated as
the "Series A Convertible Preferred Stock." The original issue price per share
of the Series A Convertible Preferred Stock shall be $1,000.00 (the "ORIGINAL
--------
ISSUE PRICE").
- -----------
(B) CERTAIN DEFINITIONS. As used herein, the following terms, unless
-------------------
the context otherwise requires, have the following respective meanings:
(i) "CLOSING BID PRICE" means the closing bid price of the
-----------------
Common Stock of the Corporation as reported by (i) the Nasdaq National Market or
Nasdaq SmallCap Market, (ii) if the Corporation's Common Stock is no longer
traded on a Nasdaq market, such other exchange on which the Corporation's Common
Stock is then traded or (iii) if the Corporation's Common Stock is not traded on
an exchange, an established quotation service for over-the-market securities.
(ii) "CLOSING DATE" means the date of completion of the initial
------------
purchase and sale of the Series A Convertible Preferred Stock, as defined in the
Stock Purchase Agreements (defined below).
(iii) "CONVERSION DATE" means each date on which the Corporation
---------------
receives written notice in accordance with Section 5(h) hereof from a holder of
Series A Convertible Preferred Stock that such holder elects to convert shares
of its Series A Convertible Preferred Stock.
(iv) "REGISTRATION STATEMENT" means the registration statement
----------------------
to be filed by the Corporation in accordance with the terms of the Stock
Purchase Agreements under the U.S. Securities Act of 1933, as amended, to
register the shares of Common Stock issuable upon conversion of the Series A
Convertible Preferred Stock.
(v) "SEC" means the United States Securities and Exchange
---
Commission.
(vi) "STOCK PURCHASE AGREEMENTS" means the Stock Purchase
-------------------------
Agreements between the Corporation and the purchasers of the Series A
Convertible Preferred Stock.
2. PARTICIPATING DIVIDENDS. If the Board of Directors shall declare
-----------------------
a cash dividend payable upon the then outstanding shares of Common Stock (other
than a stock dividend on the
<PAGE>
-2-
Common Stock distributed solely in the form of additional shares of Common
Stock), the holders of the Series A Convertible Preferred Stock shall be
entitled to the amount of dividends on the Series A Convertible Preferred Stock
as would be declared payable on the largest number of whole shares of Common
Stock into which the shares of Series A Convertible Preferred Stock held by each
holder thereof could be converted pursuant to the provisions of Section 5
hereof, such number determined as of the record date for the determination of
holders of Common Stock entitled to receive such dividend. Such determination
of "whole shares" shall be based upon the aggregate number of shares of Series A
Convertible Preferred Stock held by each holder, and not upon each share of
Series A Convertible Preferred Stock so held by the holder.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
--------------------------------------
(A) TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP. In the event
---------------------------------------------------
of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, or in the event of its insolvency, before any
distribution or payment is made to any holders of Common Stock or any other
class or series of capital stock of the Corporation designated to be junior to
the Series A Convertible Preferred Stock, and subject to the liquidation rights
and preferences of any class or series of Preferred Stock designated by the
Board of Directors in the future to be senior to, or on a parity with the Series
A Convertible Preferred Stock with respect to liquidation preferences, the
holders of each share of Series A Convertible Preferred Stock shall be entitled
to be paid first out of the assets of the Corporation available for distribution
to holders of the Corporation's capital stock of all classes, whether such
assets are capital, surplus or earnings, an amount equal to the greater of:
--------
(I) the Original Issue Price per share of Series A Convertible Preferred
Stock held by any holder plus declared but unpaid dividends (if any); or
(II) such amount per share of Series A Convertible Preferred Stock as
would have been payable had each such share of Series A Convertible Preferred
Stock been converted to Common Stock immediately prior to such event of
liquidation, dissolution or winding up pursuant to the provisions of Section 5
hereof.
For purposes of this Section 3, a merger or consolidation of the
Corporation with or into another corporation (other than a merger or
reorganization involving only a change in the state of incorporation of the
Corporation or the acquisition by the Corporation of other businesses where the
Corporation survives as a going concern), the sale of all or substantially all
of the Corporation's capital stock or assets to any other person or the sale or
other transfer of the Corporation's securities representing more than fifty
percent (50%) of the voting power of the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation.
If, upon liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation available for distribution to its stockholders
shall be insufficient to pay the holders of the Series A Convertible Preferred
Stock the full amount to which they otherwise would be entitled, the holders of
Series A Convertible Preferred Stock shall share ratably in any distribution of
available assets pro rata in proportion to the respective liquidation preference
--- ----
<PAGE>
-3-
amounts which would otherwise be payable upon liquidation with respect to the
outstanding shares of the Series A Convertible Preferred Stock if all
liquidation preference amounts with respect to such shares were paid in full.
After such payment shall have been made in full to the holders of the
Series A Convertible Preferred Stock, or funds necessary for such payment shall
have been set aside by the Corporation in trust for the account of holders of
the Series A Convertible Preferred Stock so as to be available for such payment,
the remaining assets available for distribution shall be distributed ratably
among the holders of the Common Stock and any class or series of capital stock
designated to be junior to the Series A Convertible Preferred Stock (if any) in
right of payment upon any liquidation, dissolution or winding up of the
Corporation.
The amounts set forth above shall be subject to equitable adjustment
by the Board of Directors whenever there shall occur a stock dividend, stock
split, combination, reorganization, recapitalization, reclassification or other
similar event involving a change in the capital structure of the Common Stock or
Series A Convertible Preferred Stock.
Payments made to the holders of the Series A Convertible Preferred
Stock pursuant to this Section 3 shall be made in cash; provided, that in the
event of any reorganization, merger or other business combination which is
desired to be treated by the Board of Directors as a "pooling of interests" for
accounting purposes under Accounting Principles Board Opinion No. 16, each
holder of Preferred Stock shall receive payments in the same form of
consideration as is payable with respect to the Common Stock. If allowed under
such Accounting Principles Board Opinion, such consideration shall be
reallocated among the holders of Series A Convertible Preferred Stock in a
manner to give economic effect to the intent and purpose of this Section 3(a).
(B) DISTRIBUTIONS OTHER THAN CASH. Whenever the distributions
-----------------------------
provided for in this Section shall be payable in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors. All distributions
(including distributions other than cash) made hereunder shall be made pro rata
--- ----
to the holders of Series A Convertible Preferred Stock.
4. VOTING POWER.
------------
(A) GENERAL. Except as otherwise expressly provided in this Section 4
-------
or as otherwise required by the General Corporation Law of the State of
Delaware, each holder of Series A Convertible Preferred Stock shall be entitled
to vote on all matters and shall be entitled to that number of votes equal to
the largest number of whole shares of Common Stock into which such holder's
shares of Series A Convertible Preferred Stock could be converted, pursuant to
the provisions of Section 5 hereof, at the record date for the determination of
stockholders entitled to vote on any matter or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise required by law, the holders of
shares of Series A Convertible Preferred Stock and Common Stock shall vote
together (or render
<PAGE>
-4-
written consents in lieu of a vote) as a single class on all matters submitted
to the stockholders of the Corporation.
Such determination of "whole shares" shall be based upon the aggregate
number of shares of Series A Convertible Preferred Stock held by each holder,
and not upon each share of Series A Convertible Preferred Stock so held by the
holder.
(B) AMENDMENTS TO CHARTER. For so long as there are any shares of
---------------------
Series A Convertible Preferred Stock outstanding, the Corporation shall not
amend its Certificate of Incorporation or this Certificate of Designation
without the approval, by vote or written consent, of the holders of at least a
majority of the then outstanding shares of Series A Convertible Preferred Stock,
voting together as a class, each share of Series A Convertible Preferred Stock
to be entitled to one vote in each instance, if such amendment would adversely
affect the rights of the holders of Series A Convertible Preferred Stock.
Without limiting the generality of the foregoing, for purposes of this Section
4(b), the creation, or increase in the authorized number of shares, of any class
or series of stock ranking prior to the Series A Convertible Preferred Stock
either as to dividends or upon liquidation shall be deemed to adversely affect
the rights of the holders of Series A Convertible Preferred Stock, but the
creation, or increase in the authorized number of shares, of the Series A
Convertible Preferred Stock or of any class or series of stock on a parity with
the Series A Convertible Preferred Stock either as to dividends or upon
liquidation shall not be deemed to adversely affect the rights of the holders of
---
Series A Convertible Preferred Stock.
5. CONVERSION RIGHTS.
-----------------
(A) OPTIONAL CONVERSION. No shares of Series A Convertible Preferred
-------------------
Stock held by any holder shall be convertible by such holder prior to the
earlier of (i) ninety (90) days after the Closing Date and (ii) the date on
which the SEC declares effective the Registration Statement. Beginning on such
date, each holder of Series A Convertible Preferred Stock shall have the right,
at such holder's option, to convert any or all of the shares of Series A
Convertible Preferred Stock held by such holder into such number of fully paid
and nonassessable shares of Common Stock as shall be determined by multiplying
the number of shares of Series A Convertible Preferred Stock to be converted by
a fraction, the numerator of which is the Original Issue Price, and the
denominator of which is the applicable Conversion Price (as defined below).
(B) CONVERSION PRICE. The conversion price per share (the "CONVERSION
---------------- ----------
PRICE") shall be equal to the lesser of (i) $10.58; and (ii) ninety percent
- ----- -------------
(90%) of the average of the Closing Bid Price for the ten (10) trading days
immediately preceding any holder's Conversion Date or Mandatory Conversion Date
(as defined in Section 5(c) below), as the case may be.
(C) MANDATORY CONVERSION. On the fifth (5th) anniversary of the
--------------------
Closing Date (such date or any later date as set forth in the paragraph
immediately below, the "MANDATORY CONVERSION DATE"), if the Registration
-------------------------
Statement is in force and effect and the Corporation is in compliance with the
terms of the Series A Convertible Preferred Stock, all
<PAGE>
-5-
shares of the Series A Convertible Preferred Stock then outstanding shall,
without any action on the part of the holders thereof, be automatically
converted into such number of fully paid and nonassessable shares of Common
Stock as shall be determined by multiplying the number of shares of Series A
Convertible Preferred Stock then held outstanding by a fraction, the numerator
of which is the Original Issue Price and the denominator of which is the
applicable Conversion Price.
If the Registration Statement is not in force and effect or if the
Corporation is not in compliance with the terms of the Series A Convertible
Preferred Stock on the fifth anniversary of the Closing Date, then at any time
thereafter, the Corporation may, at its sole option and without any action on
the part of the holders thereof, convert all shares of the Series A Convertible
Preferred Stock then outstanding into such number of fully paid and
nonassessable shares of Common Stock as shall be determined by multiplying the
number of shares of Series A Convertible Preferred Stock then held outstanding
by a fraction, the numerator of which is the Original Issue Price and the
denominator of which is the applicable Conversion Price if, at the time of such
conversion, the Registration Statement is in force and effect and the
Corporation is in compliance with the terms of the Series A Convertible
Preferred Stock. Any date on which the Corporation converts the Series A
Preferred Stock pursuant to this paragraph shall be a "Mandatory Conversion
Date." If the Corporation exercises its conversion option pursuant to this
paragraph, it shall give notice of such exercise to all holders of Series A
Convertible Preferred Stock no later than five (5) trading days before the
Mandatory Conversion Date.
Each holder of Series A Convertible Preferred Stock as of the
Mandatory Conversion Date shall, promptly after such date, surrender for
conversion to the Corporation at its principal office or to any transfer agent
for the Series A Convertible Preferred Stock or the Common Stock all
certificates representing all shares of Series A Convertible Preferred Stock
held by such holder, accompanied by a written notice specifying the name or
names in which such holder wishes the certificate(s) for shares of Common Stock
to be issued.
Effective as of the close of business on the Mandatory Conversion
Date, each share of Series A Convertible Preferred Stock then outstanding shall
be (and be deemed to have been) converted automatically, without any further
action by the holders thereof, into shares of Common Stock. Such conversion
shall be deemed to have occurred whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer agent.
(D) EQUITABLE ADJUSTMENT. If the Corporation at any time after the
--------------------
Closing Date subdivides (by any stock split, stock dividend or otherwise) its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price calculation set forth in Section 5(b)(i) shall be
proportionately reduced, and, conversely, if, after the Closing Date, the
outstanding shares of Common Stock are combined into a smaller number of shares,
the Conversion Price calculation set forth in Section 5(b)(i) shall be
proportionately increased. In any such case, the Conversion Price calculation
set forth in Section 5(b)(ii) shall remain unchanged.
<PAGE>
-6-
If the Corporation at any time subdivides (by any stock split, stock
dividend or otherwise) its outstanding shares of Series A Convertible Preferred
Stock into a greater number of shares, the Original Issue Price shall be
proportionately reduced, and, conversely, if the outstanding shares of Series A
Convertible Preferred Stock are combined into a smaller number of shares, the
Original Issue Price shall be proportionately increased.
(E) IN-KIND DIVIDENDS OTHER THAN COMMON STOCK DIVIDENDS. In the event
---------------------------------------------------
the Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution (other than a distribution in liquidation or other distribution
otherwise provided for herein) with respect to the Common Stock payable in (i)
securities of the Corporation other than shares of Common Stock, or (ii) other
----- ----
assets (excluding cash dividends or distributions), then and in each such event
provision shall be made so that the holders of the Series A Convertible
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the number of securities or such
other assets of the Corporation which they would have received had their Series
A Convertible Preferred Stock been converted into Common Stock on the date of
such event and had they thereafter, during the period from the date of such
event to and including the Conversion Date, retained such securities or such
other assets receivable by them during such period, giving application to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the holders of the Series A Convertible Preferred
Stock.
(F) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common Stock
------------------------------------------
issuable upon the conversion of the Series A Convertible Preferred Stock shall
be changed into the same or different number of shares of any class or classes
of capital stock, whether by capital reorganization, recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for elsewhere in this Section 5, or the sale of all
or substantially all of the Corporation's capital stock or assets to any other
person), then and in each such event the holders of Series A Convertible
Preferred Stock shall have the right thereafter to convert such shares into the
kind and amount of shares of capital stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification or other
change by the holders of the number of shares of Common Stock into which such
shares of Series A Convertible Preferred Stock might have been converted
immediately prior to such reorganization, recapitalization, reclassification or
change, all subject to further adjustment as provided herein.
(G) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY CORPORATION. In each
----------------------------------------------------
case of an adjustment or readjustment of the conversion rights of the holders of
Series A Convertible Preferred Stock as set forth in Sections 5(d) through 5(f)
above, the Corporation at its expense will furnish each holder of Series A
Convertible Preferred Stock so affected with a certificate prepared by an
officer of the Corporation, showing such adjustment or readjustment, and stating
in detail the facts upon which such adjustment or readjustment is based.
(H) EXERCISE OF CONVERSION PRIVILEGE. To exercise its conversion
--------------------------------
privilege, a holder of Series A Convertible Preferred Stock shall give written
notice by telecopy or express
<PAGE>
-7-
overnight courier to the Corporation at its principal office that such holder
elects to convert shares of its Series A Convertible Preferred Stock and shall
simultaneously or thereafter surrender the original certificate(s) representing
the shares being converted to the Corporation at its principal office together
with an originally executed copy of such notice. Such notice shall also state
the name or names (with its address or addresses, as well as the address(es) for
delivery) in which the certificate(s) for shares of Common Stock issuable upon
such conversion shall be issued. The certificate(s) for the shares of Series A
Convertible Preferred Stock surrendered for conversion shall be accompanied by
proper assignment thereof to the Corporation or in blank. As promptly as
practicable after the Corporation receives the original certificate(s) for the
shares of Series A Convertible Preferred Stock surrendered for conversion, the
proper assignment thereof to the Corporation or in blank and the original notice
of conversion, the Corporation shall issue and shall deliver to the holder of
the shares of Series A Convertible Preferred Stock being converted, at the
addresses set forth therefor by the holder, such certificate(s) as it may
request for the number of whole shares of Common Stock issuable upon the
conversion of such shares of Series A Convertible Preferred Stock in accordance
with the provisions of this Section 5, and cash, as provided in Section 5(i), in
respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder as holder of the converted shares of Series A Convertible
Preferred Stock shall cease and the person(s) in whose name(s) any
certificate(s) for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder(s) of record of the shares of Common
Stock represented thereby.
(I) CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common
---------------------------------
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Convertible Preferred Stock. Instead of any
fractional shares of Common Stock that would otherwise be issuable upon
conversion of Series A Convertible Preferred Stock, the Corporation shall pay to
the holder of the shares of Series A Convertible Preferred Stock being converted
a cash adjustment in respect of such fractional shares in an amount equal to the
same fraction of the market price per share of the Common Stock (as determined
in a reasonable manner prescribed by the Board of Directors) at the close of
business on the Conversion Date. The determination as to whether or not any
fractional shares are issuable shall be based upon the aggregate number of
shares of Series A Convertible Preferred Stock being converted at any one time
by any holder thereof, not upon each share of Series A Convertible Preferred
Stock being converted.
(J) PARTIAL CONVERSION. In the event some but not all of the shares
------------------
of Series A Convertible Preferred Stock represented by a certificate(s)
surrendered by a holder are converted, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series A Convertible Preferred
Stock which were not converted. Such new certificate shall be so delivered in
accordance with Section 5(h).
(K) RESERVATION OF COMMON STOCK. The Corporation shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for
<PAGE>
-8-
the purpose of effecting the conversion of the shares of the Series A
Convertible Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series A Convertible Preferred Stock (including any shares of
Series A Convertible Preferred Stock represented by any warrants, options,
subscription or purchase rights for the Series A Convertible Preferred Stock),
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Series A Convertible Preferred Stock (including any shares of Series A
Convertible Preferred Stock represented by any warrants, options, subscriptions
or purchase rights for the Series A Convertible Preferred Stock), then the
Corporation shall be deemed to be in breach and default of its obligations
hereunder, and in addition to all charges, claims and rights at law or in equity
that each holder shall be entitled to, the Corporation shall use all means
reasonably available to it, and promptly take any and all actions as may be
necessary, to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
6. STATUS. Upon any conversion, exchange or redemption of shares of
------
Series A Convertible Preferred Stock, the shares of Series A Convertible
Preferred Stock that are converted, exchanged, or redeemed will have the status
of authorized and unissued shares of preferred stock, and the number of shares
of preferred stock that the Corporation will have authority to issue will not be
decreased by the conversion, exchange or redemption of shares of Series A
Convertible Preferred Stock, but the number of shares of Series A Convertible
Preferred Stock that the Corporation will have authority to issue will be
reduced so that the shares of Series A Convertible Preferred Stock that were
converted, exchanged, or redeemed may not be re-issued.
7. NOTICES OF RECORD DATE. In the event of any:
----------------------
(A) taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
(B) capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other Corporation, or any other entity or
person, or
(C) voluntary or involuntary dissolution, liquidation or winding up of
the Corporation,
then and in each such event the Corporation shall telecopy and thereafter mail
or cause to be mailed to each holder of Series A Convertible Preferred Stock a
notice specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right and a description of such
dividend, distribution or right, (ii) the date on which any such reorganization,
<PAGE>
-9-
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective, and
(iii) the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up. Such notice shall
be telecopied and thereafter mailed by first class mail, postage prepaid, or by
express overnight courier service, at least ten (10) days prior to the date
specified in such notice on which such action is to be taken.
<PAGE>
EXHIBIT 4c
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of the 10th day of October, 1997,
between TranSwitch Corporation, a Delaware corporation with its principal
offices at 8 Progress Drive, Shelton, Connecticut 06484 (the "Company"), and the
-------
investor whose name and address is set forth on the signature page hereto (the
"Investor").
- ---------
In consideration of the mutual covenants contained in this Agreement, the
Company and the Investor agree as follows:
1. Authorization and Sale of the Shares. Subject to the terms and
------------------------------------
conditions of this Agreement, the Company has authorized the sale of up to
18,000 shares of its Series A Convertible Preferred Stock, $.01 par value per
share (the "Preferred Stock"), of the Company. The Preferred Stock is
---------------
convertible into shares of Common Stock, $.001 par value per share (the "Common
------
Stock"), of the Company. The shares of Common Stock into which the Preferred
- -----
Stock is convertible are hereinafter sometimes referred to as the "Conversion
----------
Shares."
- ------
2. Agreement to Sell and Purchase the Preferred Stock. At the Closing (as
--------------------------------------------------
defined in Section 3), the Company will sell to the Investor, and the Investor
will purchase from the Company, upon the terms and conditions hereinafter set
forth, the number of shares of Preferred Stock set forth on the signature page
hereto at a purchase price per share of $1,000.
The Company proposes to enter into this same form of purchase agreement
with certain other investors (the "Other Investors") and expects to complete
---------------
sales of the Preferred Stock to them. The Investor and the Other Investors are
hereinafter sometimes collectively referred to as the "Investors," and this
---------
Agreement and the agreements executed by the Other Investors are hereinafter
sometimes collectively referred to as the "Agreements." The term "Placement
---------- ---------
Agent" means Advest, Inc.
- -----
3. Delivery of the Preferred Stock at Closing. The completion of the
------------------------------------------
purchase and sale of the Preferred Stock (the "Closing") shall occur at a place
-------
and time (the "Closing Date") specified by the Company and the Placement Agent.
------------
At the Closing, the Company shall deliver to the Investor one or more stock
certificates representing the number of shares of Preferred Stock set forth on
the signature page hereto, each such certificate to be registered in the name of
the Investor or, if so indicated on the signature page hereto, in the name of a
nominee designated by the Investor.
The Company's obligation to close the transaction shall be subject to the
following conditions, any one or more of which may be waived by the Company:
(a) receipt by Testa, Hurwitz & Thibeault, LLP (the "Escrow Agent") of funds in
------------
the full amount of the purchase price for the Preferred Stock being purchased
hereunder; (b) completion of the purchases and sales under the Agreements with
Other Investors; and (c) the accuracy of the representations and warranties made
by the Investors and the fulfillment of those undertakings of the Investors to
be fulfilled prior to the Closing.
<PAGE>
-2-
The Investor's obligation to close the transaction shall be subject to the
following conditions, any one or more of which may be waived by the Investor:
(a) Investors shall have executed Agreements for the purchase of at least 5,000
shares of Preferred Stock; (b) the representations and warranties made by the
Company herein shall be accurate in all material respects as of the Closing
Date; (c) the Company shall have paid the fees and disbursements of Bingham Dana
LLP in connection with this transaction, provided that such fees and expenses
shall not exceed $2,500 and provided, further, that the bill for such fees and
disbursements shall have been submitted to the Company at least one business day
prior to the Closing Date; and (d) the Company shall have fulfilled in all
material respects those undertakings of the Company to be fulfilled prior to
Closing as set forth herein. Subject to clause (a) above, the Investor's
obligations hereunder are expressly not conditioned on the purchase by any or
all of the Other Investors of the Preferred Stock that they have agreed to
purchase from the Company. The Company may sign Stock Purchase Agreements with
respect to sales of Preferred Stock to Other Investors on dates subsequent to
the Closing Date, provided that all such Agreements shall have been executed on
or prior to the date on which the Registration Statement (as defined in Section
7.1 hereof) is filed with the Securities and Exchange Commission (the
"Commission").
- -----------
If the Escrow Agent does not receive at least $5,000,000 in the aggregate
from the Investors as of October 15, 1997, the Company shall so notify the
Investor, and each of the Investor and the Company shall have the option, in its
sole discretion, to terminate this Agreement and direct the Escrow Agent to
refund to the Investor any funds that the Escrow Agent has received from the
Investor in payment of the purchase price for the Preferred Stock to be
purchased hereunder and interest accrued from the date that the Escrow Agent
received such funds.
4. Representations, Warranties and Covenants of the Company. The Company
--------------------------------------------------------
hereby represents and warrants to, and covenants with, the Investor as follows:
4.1 Organization and Qualification. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of State of
Delaware and is duly licensed or qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business transacted by it or the character of the properties owned or leased
by it requires such licensing or qualification and in which the failure to be so
licensed or qualified would have a material adverse effect on the Company. The
Company has all requisite corporate power and authority to own and hold its
properties and to conduct its business as currently conducted.
4.2 Authorized Capital Stock. As of September 30, 1997, the authorized
------------------------
capital stock of the Company consisted of (a) 25,000,000 shares of Common Stock,
of which 12,213,736 shares were duly authorized, validly issued and outstanding,
fully paid and non-assessable with no personal liability attaching to the
ownership thereof; and (b) 1,000,000 shares of preferred stock, $.01 par value,
of which no shares were issued and outstanding. As of September 30, 1997, the
Company had reserved 3,049,898 shares of Common Stock for issuance pursuant to
outstanding warrants, its employee and director stock option plans and its
employee stock purchase plan, and other than such warrants and option and
purchase plans, there were no
<PAGE>
-3-
outstanding securities exchangeable for or convertible into shares of Common
Stock or other rights to purchase shares of Common Stock. As of the Closing
Date, 18,000 shares of the Company's preferred stock will be designated Series A
Convertible Preferred Stock, and prior to the Closing Date, no shares of Series
A Convertible Preferred Stock will be issued and outstanding. When issued and
delivered to the Investor by the Company against payment of the consideration
set forth herein, the Preferred Stock will be duly authorized, validly issued,
fully paid and non-assessable with no personal liability attaching to the
ownership thereof. When issued upon conversion of the Preferred Stock in
accordance with the terms of the Certificate of Designation filed with the
Secretary of State of Delaware setting forth the designation, preferences and
rights of the Preferred Stock, the Conversion Shares will be duly authorized,
validly issued, fully paid and non-assessable with no personal liability
attaching to the ownership thereof. The designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect of each class
and series of authorized capital stock of the Company are as set forth in the
Amended and Restated Certificate of Incorporation of the Company, as amended,
and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and in
accordance with all applicable laws.
4.3 Due Execution, Delivery and Performance of the Agreements, Etc. The
--------------------------------------------------------------
Company's execution, delivery and performance of the Agreements, the issuance,
sale and delivery of the Preferred Stock and the issuance and delivery of the
Conversion Shares (a) have been duly authorized under Delaware law by all
requisite corporate action by the Company, and (b) will not violate any law or
the Amended and Restated Certificate of Incorporation or Amended and Restated
By-laws of the Company or any provision of any material indenture, mortgage,
agreement, contract or other material instrument to which the Company is a party
or by which the Company or any of its properties or assets is bound as of the
date hereof, or result in a breach of or constitute (upon notice or lapse of
time or both) a default under any such indenture, mortgage, agreement, contract
or other material instrument or result in the creation or imposition of any
lien, security interest, mortgage, pledge, charge or other encumbrance of any
material nature whatsoever upon any properties or assets of the Company. Upon
their execution and delivery, and assuming the valid execution thereof by the
respective Investors, the Agreements will constitute a valid and binding
obligation of the Company, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to the general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
the indemnification agreements of the Company in this Agreement may be legally
unenforceable.
4.4 Offering of the Preferred Stock. The Company has not offered the
-------------------------------
Preferred Stock or any such similar security for sale to, or solicited any offer
to buy the Preferred Stock or any such similar security from, or otherwise
approached or negotiated with respect thereto with, any person in such a way as
to subject the offering, issuance or sale of the Preferred Stock to the
registration provisions of the Securities Act of 1933, as amended (the
"Securities Act"), and the Company has not taken and will not take any other
- ---------------
action (including, without limitation, any offer, issuance or sale of any
security of the Company under circumstances that
<PAGE>
-4-
might require the integration of such security with Preferred Stock under the
Securities Act or the rules and regulations of the Commission thereunder) so as
to subject the offering, issuance or sale of the Preferred Stock to the
registration provisions of the Securities Act.
4.5 Additional Information. The Company represents and warrants that the
----------------------
information contained in the following documents, which the Placement Agent has
furnished to the Investor, or will furnish prior to the Closing, is or will be
true and correct in all material respects as of the respective final dates of
such documents, and such information does not contain an omission of a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
(c) the Company's Proxy Statement for the Annual Meeting of Stockholders
held on May 29, 1997;
(d) the Company's Annual Report to its stockholders for the fiscal year
ended December 31, 1996;
(e) the Confidential Private Placement Memorandum dated August 14, 1997
with respect to the offering of the Preferred Stock; and
(f) the Preliminary Term Sheet with respect to the offering of the
Preferred Stock.
The Company has timely filed all materials required to be filed pursuant to
its reporting obligations under Section 13(a) and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), for at least twelve (12)
------------
months immediately preceding the Closing Date.
4.6 No Litigation. There are no actions, suits, claims, proceedings or
-------------
governmental investigations against the Company pending before any court or
governmental agency or, to the Company's knowledge, threatened to be brought
against the Company before any court or governmental agency, nor, to the
Company's knowledge, is there any basis therefor, which, either in any case or
in the aggregate, would result in any material adverse change in the business,
prospects, affairs or operations of the Company, or in any material impairment
of the right or ability of the Company to carry on its business, or in any
material liability on the part of the Company, and none which questions the
validity of this Agreement or the issuance of the Preferred Stock or Conversion
Shares or any action taken or to be taken in connection herewith or therewith.
The Company is not a party or subject to any writ, order, decree or judgment,
and there is no action, suit or proceeding currently pending that the Company
has originated.
<PAGE>
-5-
4.7 Legal Opinion. At the Closing, Testa, Hurwitz & Thibeault, LLP,
-------------
counsel to the Company, will deliver its legal opinion to the Placement Agent
substantially to the effect of Sections 4.1, 4.2, 4.3 and 4.4, which opinion
will state that each of the Investors may rely thereon as though it were
addressed to such Investor.
5. Representations, Warranties and Covenants of the Investor.
---------------------------------------------------------
5.1 Investor Qualifications. The Investor represents and warrants to, and
-----------------------
covenants with, the Company that: (i) the Investor is an "accredited investor"
as defined in Regulation D under the Securities Act and the Investor is also
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments like the purchase of the Preferred
Stock, including investments in securities issued by the Company and investments
in comparable companies; (ii) the Investor has requested, received, reviewed and
considered all information it deemed relevant in making an informed decision to
purchase the Preferred Stock; (iii) the Investor is acquiring the number of
shares of Preferred Stock set forth on the signature page hereto in the ordinary
course of its business and for its own account for investment only and with no
present intention of distributing any of such shares of Preferred Stock or any
arrangement or understanding with any other persons regarding the distribution
of such shares of Preferred Stock; (iv) the Investor will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
shares of Preferred Stock or Conversion Shares except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; (v) the Investor has completed or caused to
be completed the Questionnaire that is a part hereof for use in preparation for
the Registration Statement and the answers thereto are true and correct as of
the date hereof and will be true and correct as of the Closing Date; (vi) the
Investor will promptly notify the Company of any change in any of such
information until such time as the Investor no longer holds any shares of
Preferred Stock or any Conversion Shares or until the Company is no longer
required to keep the Registration Statement effective; (vii) the Investor has,
in connection with its decision to purchase the number of shares of Preferred
Stock set forth on the signature page hereto, relied only upon the
representations and warranties of the Company contained herein; and (viii) the
Investor is a resident of the state, territory or other jurisdiction identified
in its address set forth on the signature page hereto, and the offer of the
Preferred Stock was made to the Investor in such state, territory or other
jurisdiction.
5.2 Foreign Offers. The Investor acknowledges, represents and agrees that
--------------
no action has been or will be taken in any jurisdiction outside the United
States by the Company or the Placement Agent that would permit an offering of
the shares of Preferred Stock or Conversion Shares, or possession or
distribution of offering materials in connection with the issue of the shares of
Preferred Stock or Conversion Shares, in any jurisdiction outside the United
States where action for that purpose is required. Each Investor outside the
United States will comply with all applicable laws and regulations in each
foreign jurisdiction in which it purchases, offers, sells or delivers shares of
Preferred Stock or Conversion Shares or has in its possession or distributes any
offering material, in all cases at its own expense. The Placement
<PAGE>
-6-
Agent is not authorized to make any representation or use any information in
connection with the issue, placement, purchase and sale of the shares of
Preferred Stock or Conversion Shares other than as contained in the Confidential
Private Placement Memorandum.
5.3 Compliance with Securities Act. The Investor hereby covenants with
------------------------------
the Company not to make any sale of the shares of Preferred Stock or Conversion
Shares without (i) utilizing an available exemption under the Securities Act in
the opinion of counsel reasonably acceptable to the Company and its counsel or,
in the case of the Conversion Shares, effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied and (ii) otherwise
complying with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with the use of
such prospectus. The Investor acknowledges that there may occasionally be times
when the Company, based on the advice of its counsel, determines that it must
suspend the use of the prospectus forming a part of the Registration Statement
until such time as an amendment to the Registration Statement has been filed by
the Company and declared effective by the Commission or until the Company has
amended or supplemented such prospectus; provided, that the Company covenants
that it will use commercially reasonable efforts either to file an amendment to
the Registration Statement and cause it be declared effective as soon as
practicable thereafter or to amend or supplement the prospectus. The Investor
hereby covenants that it will not sell any Conversion Shares pursuant to said
prospectus during the period commencing at the time the Chief Executive Officer
or Chief Financial Officer of the Company gives the Investor written notice of
the suspension of the use of said prospectus and ending at the time the Company
gives the Investor notice that the Investor may thereafter effect sales pursuant
to said prospectus. The Company will suspend trading for an aggregate of not
more than ninety (90) days during any twelve (12) month period. The Investor
further acknowledges and agrees that the Conversion Shares are not transferable
on the books of the Company unless the Investor executes and delivers to the
Company and to the Company's transfer agent a certificate in the form attached
hereto as Exhibit A.
---------
5.4 Due Execution, Delivery and Performance of this Agreement. The
---------------------------------------------------------
Investor further represents and warrants to, and covenants with, the Company
that (i) the Investor has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby and
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and (ii) upon the execution and delivery of this
Agreement, this Agreement shall constitute a valid and binding obligation of the
Investor enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Investors
herein may be legally unenforceable.
6. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Investor herein shall
<PAGE>
-7-
survive the execution of this Agreement, the delivery to the Investor of the
shares of Preferred Stock being purchased and the payment therefor.
7. Registration of the Conversion Shares; Compliance with the Securities
---------------------------------------------------------------------
Act.
- ---
7.1 Registration Procedures and Expenses. The Company shall:
------------------------------------
(a) use its best efforts, subject to receipt of necessary information from
Investors, to prepare and file with the Commission, within forty-five (45) days
after the Closing Date, a Registration Statement on Form S-3 (the "Registration
------------
Statement") to enable the sale of the Conversion Shares by the Investor from
- ---------
time to time through the automated quotation system of the Nasdaq National
Market or in privately-negotiated transactions; provided that if Form S-3 is not
--------
available for such sale by the Investor as a result of (i) failure of the
Company to comply with the reporting requirements of Sections 13 and 15 of the
Exchange Act, or (ii) the Company's inclusion of shares of Common Stock in such
Registration Statement, the Company shall prepare and file with the Commission a
Registration Statement on Form S-1;
(b) use its best efforts, subject to receipt of necessary information from
the Investor, to cause the Registration Statement to become effective as
promptly as practicable after the Registration Statement is filed by the
Company;
(c) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith as
may be necessary to keep the Registration Statement effective until the earlier
of (i) the date on which all the Convertible Shares covered by such Registration
Statement have been sold and no shares of Preferred Stock are outstanding, and
(ii) the sixth (6th) anniversary of the Closing Date;
(d) furnish to the Investor with respect to the Conversion Shares
registered under the Registration Statement (and to each underwriter, if any, of
such Conversion Shares) such number of copies of prospectuses and preliminary
prospectuses in conformity with the requirements of the Securities Act and such
other documents as the Investor may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the Conversion Shares by
the Investor, and immediately notify the Investor of the happening of any event
of which the Company has knowledge as a result of which the prospectus contained
in the Registration Statement, as then in effect, contains an untrue statement
of material fact or omits to state a material fact required to make the
statements therein not misleading in light of the circumstances then existing;
(e) file documents required of the Company for normal blue sky clearance in
states specified in writing by the Investor, provided, however, that the Company
shall not be required to qualify to do business or consent to service of process
in any jurisdiction in which it is not now so qualified or has not so consented;
(f) use its best efforts to secure the designation and quotation of all the
Conversion Shares registered under the Registration Statement on the Nasdaq
National Market, if
<PAGE>
-8-
the listing of such Conversion Shares is then permitted under the rules and
regulations of such market;
(g) provide a transfer agent and registrar, which may be a single entity,
for the Conversion Shares not later than sixty (60) days from the Closing Date;
and
(h) bear all expenses in connection with the procedures in paragraph (a)
through (g) of this Section 7.1 and the registration of the Conversion Shares
pursuant to the Registration Statement, other than fees and expenses, if any, of
counsel or other advisers to the Investor or Other Investors.
A questionnaire related to the Registration Statement to be completed by
the Investor is attached hereto.
7.2 Transfer of Conversion Shares After Registration. The Investor
------------------------------------------------
agrees, upon and subject to the effectiveness of the Registration Statement,
that it will not effect any disposition of any Conversion Shares that would
constitute a sale within the meaning of the Securities Act except as
contemplated in the Registration Statement referred to in Section 7.1 and
pursuant to Rule 144 under the Securities Act and that it will promptly notify
the Company of any changes in the information set forth in the Registration
Statement regarding the Investor or its plan of distribution with respect to the
Conversion Shares. Notwithstanding anything to the contrary contained herein,
the Investor may transfer the Preferred Stock and Conversion Shares in whole or
in part to affiliates of the Investor, any entities for which the Investor or
its affiliates serve as general partner and/or investment advisor or in a
similar capacity, all mutual funds or other pooled investment vehicles or
entities under the control or management of the Investor or the general partner
or investment advisor thereof, or any affiliate of any of the foregoing.
7.3 Indemnification and Contribution. For the purpose of this Section
--------------------------------
7.3:
(a) the term "Selling Stockholder" means the Investor and any affiliate of
-------------------
the Investor, any entities for which the Investor or its affiliates serve as
general partner and/or investment advisor or in a similar capacity, all mutual
funds or other pooled investment vehicles or entities under the control or
management of the Investor or the general partner or investment advisor thereof,
or any affiliate of any of the foregoing;
(b) the term "Registration Statement" includes any final prospectus,
----------------------
exhibit, supplement or amendment included in or relating to the Registration
Statement referred to in Section 7.1;
(c) the term "untrue statement" means any untrue statement or alleged
----------------
untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
<PAGE>
-9-
The Company agrees to indemnify and hold harmless each Selling Stockholder
from and against any losses, claims, damages or liabilities to which such
Selling Stockholder may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue
statement of a material fact contained in the Registration Statement on the
effective date thereof, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement and the Company will
reimburse such Selling Stockholder for any reasonable legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim, or preparing to defend any such action, proceeding
or claim, provided, however, that the Company shall not be liable in any such
-------- -------
case to the extent that such loss, claim, damage or liability arises out of, or
is based upon, an untrue statement made in such Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder specifically for use in
preparation of the Registration Statement, or the failure of such Selling
Stockholder to comply with the covenants and agreements contained in Sections
5.3 or 7.2 hereof respecting sale of the Conversion Shares or any statement or
omission in any prospectus that is corrected in any subsequent prospectus that
was delivered to the Investor prior to the pertinent sale or sales by the
Investor.
The Investor agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Section 5.3 or 7.2 hereof
respecting sale of the Conversion Shares, or any untrue statement of a material
fact contained in the Registration Statement on the effective date thereof if
such untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Investor specifically for use in
preparation of the Registration Statement, and the Investor will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; provided, however,
--------- -------
that the liability of the Investor hereunder shall be limited to the net
proceeds received by the Investor from the sale of the Conversion Shares
registered under the Registration Statement.
Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 7.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall be entitled to participate therein, and, to the extent
it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the indemnifying
person to such indemnified person of its election to assume
<PAGE>
-10-
the defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
-------- -------
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
--------
however, that no indemnifying person shall be responsible for the fees and
- -------
expenses of more than one separate counsel for all indemnified parties.
To the extent any indemnification by an indemnifying person is prohibited
or limited by law, the indemnifying person agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under this Section 7.3 to the fullest extent permitted by law; provided,
--------
however, that (i) no contribution shall be made under circumstances where the
- -------
maker would not have been liable for indemnification under the fault standards
set forth in this Section 7.3, (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by the Investor shall be limited to the
net proceeds received by the Investor from the sale of the Conversion Shares
registered under the Registration Statement.
7.4 Termination of Conditions and Obligations. The conditions precedent
-----------------------------------------
imposed by Section 5 or this Section 7 upon the transferability of the
Conversion Shares shall terminate as to any particular number of Conversion
Shares when such Conversion Shares have been effectively registered under the
Securities Act and sold or otherwise disposed of in accordance with the intended
method of disposition set forth in the Registration Statement covering such
Conversion Shares or at such time as an opinion of counsel satisfactory to the
Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.
7.5 Information Available. So long as the Registration Statement is
---------------------
effective covering the resale of Conversion Shares owned by the Investor, upon
the reasonable request of the Investor, the Company will (i) furnish to the
Investor an adequate number of copies of the prospectuses to supply to any other
party requiring such prospectuses, (ii) meet with the Investor or a
representative thereof at the Company's headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Conversion
Shares, (iii) provide to the Investor copies of its filings with the Commission
and the exhibits thereto and (iv) otherwise cooperate with any Investor
conducting an investigation for the purpose of reducing or eliminating such
Investor's exposure to liability under the Securities Act, including the
reasonable production of information at the Company's headquarters.
7.6 Rule 144 Reporting. In the event that the Registration Statement has
------------------
not become effective within ninety (90) days after the Closing Date, with a view
to making available
<PAGE>
-11-
the benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Conversion Shares to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and
(c) furnish to each holder of Conversion Shares forthwith upon request a
written statement by the Company as to compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Conversion Shares without
registration.
8. Fees and Expenses. Each party hereto will pay its own expenses in
-----------------
connection with the transactions contemplated hereby, whether or not such
transactions are consummated, except that the Company shall pay the fees and
disbursements of Bingham Dana LLP in connection with this transaction, provided
that such fees and expenses shall not exceed $2,500 and provided, further, that
the bill for such fees and disbursements shall have been submitted to the
Company at least one business day prior to the Closing Date. The Investor
acknowledges that the Company intends to pay to the Placement Agent a fee in
respect of the sale of the Preferred Stock to the Investor.
9. Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, or nationally recognized overnight express courier, postage
prepaid, and shall be deemed given when so mailed and shall be delivered as
addressed as follows:
(a) if to the Company, to:
TranSwitch Corporation
8 Progress Drive
Shelton, Connecticut 06484
Attn: Dr. Santanu Das
<PAGE>
-12-
(b) with a copy mailed to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attn: Timothy C. Maguire
(c) if to the Investor, at its address as set forth at the end of
this Agreement, or at such other address or addresses as may have
been furnished to the Company in writing.
10. Changes. This Agreement may not be modified or amended except
-------
pursuant to an instrument in writing signed by the Company and the Investor.
11. Headings. The headings of the various section of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
12. Severability. In case any provision contained in this Agreement
------------
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
13. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware and the federal law of the
United States of America.
14. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
<PAGE>
-13-
IN WITNESS WHEREOF, the undersigned has executed this Stock Purchase
Agreement as of the date and year first above written.
TRANSWITCH CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
-14-
INVESTOR SIGNATURE PAGE AND QUESTIONNAIRE
The undersigned Investor hereby executes the Stock Purchase Agreement with
TranSwitch Corporation (the "Company") and hereby authorizes this signature page
-------
to be attached to a counterpart of such document executed by a duly authorized
officer of the Company.
<TABLE>
<S> <C>
No. of Shares of Preferred Stock to be Purchased:
---------------------------------------------------------
Name of Investor -- PLEASE PRINT OR TYPE
_____________________
[SIGN HERE]
By:
-----------------------------------------------------
Title:
--------------------------------------------------
Name in which Shares of Preferred Stock are to be
registered:
---------------------------------------------------------
Address of registered holder:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
Social Security or Tax ID No. of registered holder:
---------------------------------------------------------
Contact name and telephone number regarding settlement
and registration: ---------------------------------------------------------
Name
---------------------------------------------------------
Telephone Number
</TABLE>
Number of shares of common stock of the Company beneficially owned by
the Investor (meaning shares owned or controlled or which the Investor has the
right to acquire or vote), other than the shares of Preferred Stock being
purchased pursuant hereto:
-----------------
Have you or your organization had any position, office or other
material relationship within the past three years with the Company?
Yes No
------- -------
Do you or your organization have any direct or indirect affiliation
or association with any NASD member?
Yes No
------- -------
If yes to either of the last two questions, please indicate the
nature of any such relationship below:
<PAGE>
-15-
Exhibit A
---------
Date:
-------------------------
State Street Bank and Trust Company
150 Royall Street
Canton, MA 02021
Attention: Jennifer Donahue
Account Manager
INVESTOR'S CERTIFICATE OF SUBSEQUENT SALE
-----------------------------------------
The undersigned, , an officer of, or
-------------------------------------
other person duly authorized by [fill in
--------------------------------------
official name of individual or institution] hereby certifies that he/she [said
institution] is the holder of the shares evidenced by the attached certificate,
and as such, sold such shares on [date] in accordance with
------------
registration statement number [fill in number of or otherwise
----------------
identify registration statement] and the requirements of delivering a current
prospectus and current annual and quarterly reports by the Company has been
complied with in connection with such sale.
Print or Type:
Name of Purchaser
(Individual or Institution):
----------------------------------
Name of Individual representing
Purchaser (if an Institution):
----------------------------------
Title of Individual representing
Purchaser (if an Institution):
----------------------------------
Signature by:
Individual Purchaser or
Individual representing Purchaser:
----------------------------------
<PAGE>
EXHIBIT 5
November 21, 1997
TranSwitch Corporation
Three Enterprise Drive
Shelton, CT 06484
RE: Form S-3 Registration Statement
-------------------------------
Ladies and Gentlemen:
We are counsel to TranSwitch Corporation, a Delaware corporation (the
"Company"), and have represented the Company in connection with the preparation
and filing of the Company's Registration Statement on Form S-3 (the
"Registration Statement"), relating to the proposed resale from time to time of
up to 1,600,000 shares of the Company's Common Stock, par value $.001 per share
(the "Shares"), which are issuable upon conversion of the Company's Series A,
convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"),
issued in a private placement to the stockholders listed under the heading
"Selling Stockholders" in the Registration Statement.
We have reviewed the corporate proceedings taken by the Company with
respect to the authorization of the issuance of the Preferred Stock and the
Shares. We have also examined and relied upon originals or copies, certified or
otherwise authenticated to our satisfaction, of all corporate records,
documents, agreements or other instruments of the Company and the Selling
Stockholders and have made all investigations of law and have discussed with the
Company's and Selling Stockholders' representatives all questions of fact that
we have deemed necessary or appropriate.
Based upon and subject to the foregoing, we are of the opinion that the
Shares issuable upon future conversion of the Preferred Stock, when issued in
accordance with the terms of the Preferred Stock, will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our firm in the Prospectus
contained in the Registration Statement under the caption "Legal Matters."
Very truly yours,
/s/ Testa, Hurwitz & Thibeault, LLP
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
TranSwitch Corporation:
We consent to the use of our reports incorporated herein by reference and to the
reference to our Firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Stamford, Connecticut
November 21, 1997
