Document:

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                                                                     EXHIBIT 4.2

                             TRANSWITCH CORPORATION

                             2000 STOCK OPTION PLAN

1.  PURPOSE

     The name of this plan is the TranSwitch Corporation 2000 Stock Option Plan
(the "2000 Plan").  The purpose of the 2000 Plan is to promote the long-term
success of TranSwitch Corporation, a Delaware corporation (the "Company"), by
providing financial incentives to employees and consultants of the Company who
are in positions to make significant contributions toward such success except
that no member of the Board of Directors of TranSwitch Corporation (the "Board")
or officer of the Company appointed by the Board shall be eligible for grants of
options under the 2000 Plan.  The 2000 Plan is designed to attract individuals
of outstanding ability to become or to continue as employees of the Company or
consultants of the Company, to enable such individuals to acquire or increase
proprietary interests in the Company through the ownership of shares of common
stock of the Company, and to render superior performance during their
associations with the Company.  The Company intends that this purpose will be
effected by the granting, pursuant to the 2000 Plan, of options for shares of
the Company's Common Stock that do not meet the definition of "incentive stock
options" in Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code") (such options granted hereunder, "Nonqualified Options").

     References herein to "the Company" shall include any successor corporation
to the Company and, except where the context requires otherwise, also any
present or future direct or indirect subsidiary of the Company (such that if the
Company has one or more subsidiaries, individuals who are employees thereof or
consultants thereto are eligible to be granted Nonqualified Options under the
2000 Plan).  As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.  References herein to "the Board" shall
include the board of directors of any successor corporation to the Company.

2.  OPTIONS TO BE GRANTED AND ADMINISTRATION

     (a) Options Granted.  Options granted under the 2000 Plan shall only be
Nonqualified Options.

     (b) Administration of 2000 Plan.  The 2000 Plan shall be administered by
the Board or by a committee (the "Committee") appointed by the Board.
Hereinafter, all references in this 2000 Plan to the "Committee" shall mean the
Board if no Committee is appointed.  The Committee may select one of its members
as its chairman, and shall hold meetings at such times and at such places as it
may determine.  A majority of the Committee shall constitute a quorum and acts
of a majority of the members of the Committee at a meeting at which a quorum is
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present, or acts reduced to or approved in writing by all the members of the
Committee (if consistent with applicable state law), shall be the valid acts of
the Committee.  From time to time, the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the 2000 Plan.  The interpretation and construction by the Committee
of any provisions of the 2000 Plan or of any nonqualified option granted under
it shall be final unless otherwise determined by the Board.  The Committee may
from time to time adopt such rules and regulations for carrying out the 2000
Plan as it may deem advisable.  No member of the Board or the Committee shall be
liable for any action or determination made in good faith with respect to the
2000 Plan or any nonqualified option granted under it.

     (c) The Committee.  Subject to the terms and conditions of the 2000 Plan,
the Committee shall have the power:

          (i) To determine from time to time the Nonqualified Options to be
granted to eligible persons under the 2000 Plan, and to prescribe the terms and
provisions (which need not be identical) of each Nonqualified Option granted
under the 2000 Plan to such persons;

          (ii) To construe and interpret the 2000 Plan and Nonqualified Options
granted thereunder and to establish, amend, and revoke rules and regulations for
administration of the 2000 Plan.  In this connection, the Committee may correct
any defect or supply any omission, or reconcile any inconsistency in the 2000
Plan, or in any nonqualified option agreement, in the manner and to the extent
it shall deem necessary or expedient to make the 2000 Plan fully effective.  All
decisions and determinations by the Committee in the exercise of this power
shall be final and binding upon the Company and all optionees; and

          (iii)  Generally, to exercise such powers and to perform such acts as
are deemed necessary or expedient to promote the best interests of the Company
with respect to the 2000 Plan, including all actions the Committee deems
necessary, under Section 422 of the Code and the regulations thereunder, to
ensure that no Nonqualified Option issued hereunder is treated as an "incentive
stock option" under Section 422(b) of the Code.

3.  STOCK SUBJECT TO THE 2000 PLAN

     (a) Stock under the 2000 Plan.  The stock subject to the Nonqualified
Options granted under the 2000 Plan shall be shares of the Company's authorized
but unissued common stock, par value $.001 per share (the "Common Stock"), or
previously issued shares of Common Stock that have been reacquired and reserved
by the Board for resale upon exercise of Nonqualified Options granted under the
2000 Plan.  The total number of shares of Common Stock that may be issued
pursuant to Nonqualified Options granted under the 2000 Plan shall not exceed an
aggregate of 10,000,000 shares of Common Stock.  Such number shall be subject to
adjustment as provided in Section 9 hereof.

                                      -2-
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     (b) Reallocation of Unexercised Non-Qualified Options.  Whenever any
outstanding Nonqualified Option under the 2000 Plan expires, is canceled or is
otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such Nonqualified Option may again be
the subject of Nonqualified Options under the 2000 Plan.

4.  NON-QUALIFIED STOCK OPTION GRANTS

     Nonqualified Options may be granted to employees of the Company, to
consultants to the Company who are not employees of the Company, and to such
other persons as the Committee shall select from time to time, provided that, in
no event, shall any member of the Board or any officer of the Company appointed
by the Board be eligible to receive any grants of Nonqualified Options issued
under the 2000 Plan.  The determination of the persons eligible to receive
grants and the number of shares of Common Stock for which Nonqualified Options
are granted shall be made by the Committee.

5.  TERMS OF THE NONQUALIFIED OPTION AGREEMENTS

     Each nonqualified option agreement for Nonqualified Options granted under
the 2000 Plan (each, a "Nonqualified Option Agreement") shall contain such
provisions as the Committee shall from time to time deem appropriate, including
restrictions applicable to shares of Common Stock issuable upon exercise of
Nonqualified Options. The Committee may from time to time confer authority and
responsibility on one or more of its own members and/or one or more officers of
the Company to execute and deliver the Nonqualified Option Agreements.  The
proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of the
Nonqualified Option Agreements.  The Nonqualified Option Agreements need not be
identical, but each Nonqualified Option Agreement by appropriate language, or by
reference to this Section 5 of the 2000 Plan, shall include the substance of all
of the following provisions:

     (a) Expiration.  Each Nonqualified Option shall expire on the date
specified in the Nonqualified Option Agreement, which date shall not be later
than the seventh anniversary of the date on which the nonqualified option was
granted.  Unless otherwise determined by the Committee, each Nonqualified Option
shall in any event expire not later than three months after the optionee is for
any reason no longer employed by (or in the case of a consultant, engaged in a
business relationship with) the Company, except (i) if such termination of
employment (or business relationship) results from optionee's disability (within
the meaning of Section 22(e)(3) of the code), a Nonqualified Option may be
exercised within 180 days thereafter (but in no event later than the scheduled
expiration date set forth in the nonqualified option agreement), to the extent
such Nonqualified Option could have been exercised on the date of such
termination of employment, and (ii) if such termination of employment (or
business relationship) results from the optionee's death, a nonqualified option
may be exercised by his executors or administrators within 180 days thereafter
(but in no event later than the scheduled expiration date set forth in the
Nonqualified Option Agreement), to the extent such Nonqualified Option could
have been exercised on the date of such optionee's death.

                                      -3-
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     (b) Exercise.  Subject to the provisions of Section 5(a), each Nonqualified
Option granted under the 2000 Plan shall be exercisable as follows:

          1.  Vesting.  The Nonqualified Option shall either be fully
     exercisable on the date of grant or shall become exercisable thereafter in
     such installments as the Committee may specify.

          2.  Full Vesting of Installments.  After an installment becomes
     exercisable it shall remain exercisable until expiration or termination of
     the Nonqualified Option, unless otherwise specified by the Committee.

          3.  Partial Exercise.  Each Nonqualified Option or installment may be
     exercised at any time or from time to time, in whole or in part, for up to
     the total number of shares with respect to which it is then exercisable.

          4.  Acceleration of Vesting.  The Committee shall have the right to
     accelerate the date that any installment of any Nonqualified Option becomes
     exercisable.

          Unless otherwise provided by the Committee, for this purpose the date
of the grant of a Nonqualified Option shall be the date on which the Committee
approves the grant.  To the extent not exercised, vested installments shall
accumulate and be exercisable in whole or in part at any time after becoming
exercisable, but not later than the date the Nonqualified Option expires or
terminates.  Nonqualified Option Agreements may also contain provisions relating
to the treatment of Nonqualified Options in the event of a merger, consolidation
or liquidation of, or sale of assets by, the Company.

     (c) Purchase Price.  Unless the Committee shall otherwise determine at the
time the Nonqualified Option is granted, the purchase price per share of Common
Stock under each Nonqualified Option shall be not less than the fair market
value of a share of Common Stock on the date the Nonqualified Option is granted.
If, at the time an Option is granted under the Plan, the Company's Common Stock
is publicly traded, "fair market value" shall be determined as of the date of
grant or, if the prices or quotes discussed in this sentence are unavailable for
such date, the last business day for which such prices or quotes are available
prior to the date of grant and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then traded
on a national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq National Market.  If the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market value"
shall mean the fair value of the Common Stock as determined by the Committee
after taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.

6.  LIMITATION ON RIGHTS OF OPTIONEES

                                      -4-
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     (a) Transferability of Nonqualified Options.  Except as set forth below,
(i) no Nonqualified Option shall be transferable by any optionee other than by
will or by the laws of descent and distribution or pursuant to a valid domestic
relations order and (ii) Nonqualified Options may be exercised during the
optionee's lifetime only by the optionee (or, if the optionee is disabled and so
long as the Nonqualified Option remains exercisable, by the optionee's duly
appointed guardian or other legal representative).

     (b) No Shareholder Rights.  No optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any Nonqualified Option
unless and until (i) the Nonqualified Option shall have been exercised pursuant
to the terms thereof, (ii) the Company shall have issued and delivered the
shares to the optionee, and (iii) the optionee's name shall have been entered as
a shareholder of record on the books of the Company.  Thereupon, the optionee
shall have full voting, dividend and other ownership rights with respect to such
shares of Common Stock.

     (c) No Employment Rights.  Neither the 2000 Plan nor the grant of any
Nonqualified Option thereunder shall be deemed to confer upon any optionee any
rights of employment with the Company, including, without limitation, any right
to continue in the employ of the Company, or affect the right of the Company to
terminate the employment of an optionee at any time, with or without cause.

     (d) Authority of the Company.  The existence of the Nonqualified Options
shall not affect:  the right or power of the Company or its shareholders to make
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; any issue of bonds, debentures,
preferred or prior preference stock affecting the Common Stock or the rights
thereof; the dissolution or liquidation of the Company, or sale or transfer of
any part of its assets or business; or any other act, whether of a similar
character or otherwise.

7.  METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE

     (a) Notice of Exercise.  Any Nonqualified Option granted under the 2000
Plan may be exercised by the optionee by delivering to the Chief Financial
Officer of the Company (or such other representative of the Company as the
Committee may designate) on any business day a written notice specifying the
number (which shall be consistent with the provisions of Section 5(b) hereof) of
shares of Common Stock the optionee then desires to purchase (the "Notice").

     (b) Payment. Common Stock purchased upon the exercise of an Option shall
be paid for by one or any combination of the following forms of payment: (i) by
check payable to the order of the Company; (ii) except as otherwise explicitly
provided in the applicable option agreement, and only if the Common Stock is
then publicly traded, delivery of an irrevocable and unconditional undertaking
by a creditworthy broker to deliver promptly to the Company sufficient funds to
pay the exercise price, or delivery by the Participant to the Company of a copy
of irrevocable and unconditional instructions to a creditworthy broker to
deliver promptly to the Company cash or a check sufficient to pay the exercise
price; (iii) to the extent explicitly

                                      -5-
<PAGE>

provided in the applicable option agreement, by delivery of shares of Common
Stock owned by the Participant valued at fair market value (as determined by the
Board or as determined pursuant to the applicable option agreement); or (iv) to
the extent explicitly provided in the applicable option agreement, by delivery
of a promissory note of the Participant to the Company (and delivery to the
Company by the Participant of a check in an amount equal to the par value of the
shares purchased). If the Committee exercises its discretion to permit payment
of the Exercise of a Non-Qualified Option by means of the methods set forth in
clauses (ii), (iii) or (iv) of the preceding sentence, such discretion shall be
exercised in writing at the time of the grant of the Non-Qualified Option in
question.

8.  WITHHOLDING; ESCROW

     The Company shall be entitled to withhold from any compensation or other
payments then or thereafter due to the optionee such amounts as may be necessary
to satisfy any withholding requirements of federal or state law or regulation
and, further, to collect from the optionee any additional amounts which may be
required for such purpose as a condition of delivering the shares of Common
Stock acquired pursuant to a Nonqualified Option.  The Committee may, in its
discretion, require shares of the Common Stock acquired by an optionee upon the
exercise of a Nonqualified Option to be held in an escrow arrangement for the
purpose of enabling compliance with this Section 8.

9.  ADJUSTMENT UPON CHANGES IN CAPITALIZATION

     Upon the occurrence of any of the following events, an optionee's rights
with respect to Nonqualified Options granted to such optionee hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
Nonqualified Option Agreement between the optionee and the Company relating to
such Nonqualified Option:

     (a) Stock Dividends and Stock Splits.  If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Nonqualified Options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.

     (b) Consolidations or Mergers.  If the Company is to be consolidated with
or acquired by another entity in a merger or other reorganization in which the
holders of the outstanding voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such event, hold, as a
group, less than a majority of the voting securities of the surviving or
successor entity, or in the event of a sale of all or substantially all of the
Company's assets or otherwise (each, an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Nonqualified
Options, either (i) make appropriate provision for the continuation of such
Nonqualified Options by substituting on an equitable basis for the shares then
subject to such Nonqualified Options either (a) the consideration payable with
respect to the outstanding shares of Common Stock in connection with the
Acquisition,

                                      -6-
<PAGE>

     (b) shares of stock of the surviving or successor corporation or (c) such
other securities as the Successor Board deems appropriate, the fair market value
of which shall not materially exceed the fair market value of the shares of
Common Stock subject to such Nonqualified Options immediately preceding the
Acquisition; or (ii) upon written notice to the optionees, provide that all
Nonqualified Options must be exercised, to the extent then exercisable or to be
exercisable as a result of the Acquisition, within a specified number of days of
the date of such notice, at the end of which period the Nonqualified Options
shall terminate; or (iii) terminate all Nonqualified Options in exchange for a
cash payment equal to the excess of the fair market value of the shares subject
to such Nonqualified Options (to the extent then exercisable or to be
exercisable as a result of the Acquisition) over the exercise price thereof.

     (c) Recapitalization or Reorganization.  In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
subparagraph (b) above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, an optionee upon exercising a Nonqualified Option may be entitled to
receive for the purchase price paid upon such exercise the securities he or she
would have received if he or she had exercised such Nonqualified Option prior to
such recapitalization or reorganization.

     (d) Dissolution or Liquidation.  In the event of the proposed dissolution
or liquidation of the Company, each Nonqualified Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.

     (e) Issuances of Securities.  Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Nonqualified Options.  No adjustments shall be made for dividends
paid in cash or in property other than securities of the Company.

     (f) Fractional Shares.  No fractional shares shall be issued under the 2000
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.

     (g) Adjustments.  Upon the happening of any of the events described in
subparagraphs (a), (b) or (c) above, the class and aggregate number of shares
set forth in Section 3 hereof that are subject to Nonqualified Options which
previously have been or subsequently may be granted under the 2000 Plan shall
also be appropriately adjusted to reflect the events described in such
subparagraphs.  The Committee or the Successor Board shall determine the
specific adjustments to be made under this Section 9 and, subject to Section 2,
its determination shall be conclusive.

10.  AMENDMENT OR TERMINATION OF 2000 PLAN

     The Board may modify, revise or terminate the 2000 Plan at any time and
from time to time.  Except as provided in Section 9 hereof, rights and
obligations under any Nonqualified Option granted before any amendment of the
2000 Plan shall not be altered or impaired by such amendment, except with the
consent of the optionee.

                                      -7-
<PAGE>

11.  EFFECTIVE DATE; NONEXCLUSIVITY

     (a) Effective Date.  This 2000 Plan will be deemed to have been adopted and
to be effective when approved by the Board.

     (b) Nonexclusivity.  The adoption of the 2000 Plan shall not be construed
as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of options otherwise than under the 2000 Plan, and such
arrangements may be either applicable generally or only in specific cases.

12.  GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW

     (a) Securities Laws.  If in the opinion of legal counsel for the Company,
the issuance or sale of any shares of Common Stock pursuant to the exercise of a
Nonqualified Option would not be lawful for any reason, including, without
limitation, the inability of the Company to obtain from any governmental
authority or regulatory body having jurisdiction the authority deemed by such
counsel to be necessary to such issuance or sale, the Company shall not be
obligated to issue or sell any shares of Common Stock pursuant to the exercise
of a Nonqualified Option to an optionee or any other authorized person unless a
registration statement that complies with the provisions of the Securities Act
of 1933, as amended (the "Act"), in respect of such shares of Common Stock is in
effect at the time thereof, or other appropriate action has been taken under and
pursuant to the terms and provisions of the Act, or the Company receives
evidence satisfactory to such counsel that the issuance and sale of such shares
of Common Stock, in the absence of an effective registration statement or other
appropriate action, would not constitute a violation of the Act or any
applicable state securities law.  The Company is in no event obligated to
register any such shares of Common Stock, to comply with any exemption from
registration requirements or to take any other action which may be required in
order to permit, or to remedy or remove any prohibition or limitation on, the
issuance or sale of such shares of Common Stock to any optionee or other
authorized person.

     (b) Governing Law.  The 2000 Plan shall be governed by and interpreted
under the laws of the State of Delaware.

13.  TERMINATION OF GRANTING OF NONQUALIFIED OPTIONS UNDER THE 2000 PLAN

     No Nonqualified Option may be granted under the 2000 Plan after the tenth
anniversary of the effective date of the 2000 Plan (as set forth in Section 11
hereto).

                                      -8-
<PAGE>

                                Addendum to the
                 Transwitch Corporation 2000 Stock Option Plan
                            For Residents of France

The following conditions apply to all individuals resident of France granted
options under Transwitch Corporation's 2000  Stock Option Plan.

  1. MODIFICATIONS:  As per Article 2 (c) ii, the committee reserves the right
     to establish, amend and revoke rules and regulations for the administration
     of the 2000 plan, in connection with correcting any defect, supplying any
     omission, or reconciling any inconsistency that may exist in the plan.
     Prior to making any modification to the plan that could be detrimental to
     option holders, Transwitch will obtain the written consent of option
     holders.

  2. STOCK SUBJECT TO THE PLAN:  As per Article 3, paragraph a of the plan, the
     total shares of common stock that can be granted under the plan shall not
     exceed 8,000,000 shares. In accordance with French law the total number of
     options granted but not yet exercised shall not allow for the purchase of
     more than one third of Transwitch Corporation's total shares.

  3. ELIGIBILITY:  Article 4 states that persons eligible to participate in the
     plan may include non employee consultants who provide services to the
     corporation.

        a. For option grants made to French residents, grants are restricted
           to participants who are employees of the company.

        b. In accordance with French law, the option to purchase shares shall
           be offered by Transwitch (parent corporation) to the personnel of its
           subsidiary in France only if the parent corporation owns the French
           corporation 10% or more either directly or indirectly.

        c. Stock option grants made to residents of France shall not be made
           to any shareholder holding 10% or more of Transwitch Corporation's
           share capital, in France or elsewhere.

  4. EXERCISE PRICE: As per Article 5 c, the exercise price of options shall not
     be less than 100% of the fair market value of the share of common stock on
     the date of grant. In addition to the above, for French residents, the
     exercise price cannot be less than 95% of the average quotation value of
     the shares for the 20 quotation dates before the date of grant.

  5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION:  As per Article 9 (e), the
     issuance of stock or convertible securities will not give rise to an
     adjustment in the number or price of shares granted under the option plan.
     For residents of France, the exercise price of shares granted under the
     option plan will be reduced upon issuance of stock or convertible

                                      -9-
<PAGE>

     securities to take into consideration the impact of such issuances on the
     share price, but in no case will the exercise price be less than the
     nominal value of the share.

  6. RESTRICTIONS ON SALE OF STOCK:  The company reserves the right to restrict
     the sale of stock issued pursuant to an exercise of this option, for a
     period of up to three years from the date the option is exercised.

                                      -10-<PAGE>

                                                                     EXHIBIT 4.3

                             TranSwitch Corporation
                  Form of Non-Qualified Stock Option Agreement
                  --------------------------------------------

     TranSwitch Corporation (the "Company") hereby grants the following stock
option pursuant to its 2000 Stock Option Plan.  The terms and  conditions
attached hereto are also a  part hereof.

--------------------------------------------------------------------------------
Name of Optionee (the "Optionee"):
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Date of this option grant:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Number of shares of the Company's Common Stock
subject to this option ("Option Shares"):
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Option exercise price per share:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Number, if any, of Option Shares that may be
purchased on or after grant date:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Number of Option Shares subject to vesting
schedule:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Vesting Start Date:
--------------------------------------------------------------------------------

     Vesting Schedule:
     ----------------

--------------------------------------------------------------------------------
[Date]
                                                                _________ shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[Date]

                                                     an additional ______ shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[Date]

                                                     an additional ______ shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[Date]

                                                     an additional ______ shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Payment alternatives (specify any or all of
Section 7(a)(i) though (iv):

                                                  Section 7(a) (i) through (___)
--------------------------------------------------------------------------------

===============================================================================
                                                   TranSwitch Corporation
____________________________________
Signature of Optionee                              By:_________________________
                                                      Name of Officer:
____________________________________                  Title:
Street Address

____________________________________
City/State/Zip Code
<PAGE>

                             TranSwitch Corporation

          Stock Option Agreement -- Incorporated Terms and Conditions
          -----------------------------------------------------------

     1.  Grant Under Plan.  This option is granted pursuant to and is governed
by the Company's 2000 Stock Option Plan (the "Plan") and, unless the context
otherwise requires, terms used herein shall have the same meaning as in the
Plan.

     2.  Grant as Non-Qualified Stock Option.  This option is a non-statutory
stock option and is not intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code").

     3.  Vesting of Option if Business Relationship  Continues.  The Optionee
may exercise this option on or after the date of this option grant for the
number of shares of Common Stock, if any, indicated on the cover page hereof.
If the Optionee has continuously engaged in a business relationship with the
Company through the dates listed on the vesting schedule set forth on the cover
page hereof, the Optionee may exercise this option for the additional number of
shares of Common Stock set opposite the applicable vesting date.
Notwithstanding the foregoing, the Board may, in its discretion, accelerate the
date that any installment of this option becomes exercisable.  The foregoing
rights are cumulative and (subject to Sections 4 or 5 hereof if the Optionee
ceases to be employed by the Company) may be exercised only before the date
which is seven years from the date of this option grant.

     4.  Termination of Business Relationship.

          (a) Termination Other Than for Cause.  If the Optionee ceases to be
     engaged in a business relationship with the Company, other than by reason
     of death or disability as defined in Section 5 or termination for Cause as
     defined in Section 4(c), no further installments of this option shall
     become exercisable, and this option may no longer be exercised after the
     passage of three months from the Optionee's last day of the business
     relationship, but in no event later than the scheduled expiration date.
     For purposes hereof, if the optionee is a natural person, the business
     relationship shall not be considered as having terminated during any leave
     of absence if such leave of absence has been approved in writing by the
     Company and if such written approval contractually obligates the Company to
     continue the business relationship with the Optionee after the approved
     period of absence; in the event of such an approved leave of absence,
     vesting of this option shall be suspended (and the period of the leave of
     absence shall be added to all vesting dates) unless otherwise provided in
     the Company's written approval of the leave of absence. For purposes
     hereof, business relationship shall include a consulting arrangement
     between the Optionee and the Company that immediately follows termination
     of employment, but only if so stated in a written consulting agreement
     executed by the Company that specifically refers to this option.  This
     option shall not be affected by any change of employment within or among
     the Company and its Subsidiaries
<PAGE>

     so long as the Optionee continuously maintains a business relationship with
     the Company or any Subsidiary.

          (b) Termination for Cause.  If the business relationship of the
     Optionee is terminated for Cause (as defined in Section 4(c)), this option
     shall no longer be exercised from and after the Optionee's receipt of
     written notice of such termination.

          (c) Definition of Cause.  "Cause" shall mean conduct involving one or
     more of the following: (i) the substantial and continuing failure of the
     Optionee, after notice thereof, to render services to the Company in
     accordance with the terms or requirements of his or her business
     relationship; (ii) disloyalty, gross negligence, willful misconduct,
     dishonesty, fraud or breach of fiduciary duty to the Company;  (iii)
     deliberate disregard of the rules or policies of the Company, or breach of
     an employment or other agreement with the Company, which results in direct
     or indirect loss, damage or injury to the Company; (iv) the unauthorized
     disclosure of any trade secret or confidential information of the Company;
     or (v) the commission of an act which constitutes unfair competition with
     the Company or which induces any customer or supplier to breach a contract
     with the Company.

     5.  Death; Disability.

          (a) Death.  If the Optionee is a natural person who dies while in a
     business relationship with the Company, this option may be exercised, to
     the extent otherwise exercisable on the date of his or her death, by the
     Optionee's estate, personal representative or beneficiary to whom this
     option has been transferred pursuant to Section 9, only at any time within
     180 days after the date of death, but not later than the scheduled
     expiration date.

          (b) Disability.  If the Optionee is a natural person who ceases to be
     engaged in a business relationship with the Company by reason of his or her
     disability, this option may be exercised, to the extent otherwise
     exercisable on the date of cessation of employment, only at any time within
     180 days after such cessation of employment, but not later than the
     scheduled expiration date.  For purposes hereof, "disability" means
     "permanent and total disability" as defined in Section 22(e)(3) of the
     Code.

     6.  Partial Exercise.  This option may be exercised in part at any time and
from time to time within the above limits, except that this option may not be
exercised for a fraction of a share.

     7.  Payment of Exercise Price.

          (a)  Payment Options.  The exercise price shall be paid by one or any
     combination of the following forms of payment that are applicable to this
     option, as indicated on the cover page hereof:
<PAGE>

         (i)   by check payable to the order of the Company; or

         (ii)  if the Common Stock is then traded on a national securities
               exchange or on the Nasdaq National Market (or successor trading
               system), delivery of an irrevocable and unconditional
               undertaking, satisfactory in form and substance to the Company,
               by a creditworthy broker to deliver promptly to the Company
               sufficient funds to pay the exercise price, or delivery by the
               Optionee to the Company of a copy of irrevocable and
               unconditional instructions, satisfactory in form and substance to
               the Company, to a creditworthy broker to deliver promptly to the
               Company cash or a check sufficient to pay the exercise price; or

         (iii) subject to Section 7(b) below, if the Common Stock is then
               traded on a national securities exchange or on the Nasdaq
               National Market (or successor trading system), by delivery of
               shares of  Common Stock having a fair market value equal as of
               the date of exercise to the option price; or

         (iv)  by check payable to the order of the Company for the par value of
               the shares being purchased plus delivery of the Optionee's
               [three]-year personal full recourse promissory note for the
               balance of the exercise price, with such note bearing interest
               payable not less than annually at the applicable Federal rate, as
               defined in Section 1274(d) of the Code.

          In the case of (iii) above, fair market value as of the date of
     exercise shall be determined as of the last business day for which such
     prices or quotes are available prior to the date of exercise and shall mean
     (i) the last reported sale price (on that date) of the Common Stock on the
     principal national securities exchange on which the Common Stock is traded,
     if the Common Stock is then traded on a national securities exchange; or
     (ii) the last reported sale price (on that date) of the Common Stock on the
     Nasdaq National Market (or successor trading system), if the Common Stock
     is not then traded on a national securities exchange.

          (b) Limitations on Payment by Delivery of Common Stock.  If Section
     7(a)(iii) is applicable, and if the Optionee delivers Common Stock held by
     the Optionee ("Old Stock") to the Company in full or partial payment of the
     exercise price and the Old Stock so delivered is subject to restrictions or
     limitations imposed by agreement between the Optionee and the Company, an
     equivalent number of Option Shares shall be subject to all restrictions and
     limitations applicable to the Old Stock to the extent that the Optionee
     paid for the Option Shares by delivery of Old Stock, in addition to any
     restrictions or limitations imposed by this Agreement.  Notwithstanding the
     foregoing, the Optionee may not pay any part of the exercise price hereof
     by transferring Common Stock to the Company unless such Common Stock has
     been owned by the Optionee free of any substantial risk of forfeiture for
     at least six months.
<PAGE>

     8.  Method of Exercising Option.  Subject to the terms and conditions of
this Agreement, this option may be exercised by written notice to the Company at
its principal executive office, or to such transfer agent as the Company shall
designate.  Such notice shall state the election to exercise this option and the
number of Option Shares for which it is being exercised and shall be signed by
the person or persons so exercising this option.  Such notice shall be
accompanied by payment of the full purchase price of such shares, and the
Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the notice shall be received.  Such certificate or
certificates shall be registered in the name of the person or persons so
exercising this option (or, if this option shall be exercised by the Optionee
and if the Optionee shall so request in the notice exercising this option, shall
be registered in the name of the Optionee and another person jointly, with right
of survivorship). In the event this option shall be exercised, pursuant to
Section 5 hereof, by any person or persons other than the Optionee, such notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise this option.

     9.  Option Not Transferable.  This option is not transferable or assignable
except by will or by the laws of descent and distribution or pursuant to a valid
domestic relations order.  During the Optionee's lifetime only the Optionee can
exercise this option.

     10.  No Obligation to Exercise Option.  The grant and acceptance of this
option imposes no obligation on the Optionee to exercise it.

     11.  No Obligation to Continue Employment.  Neither the Plan, this
Agreement, nor the grant of this option imposes any obligation on the Company to
continue the Optionee in employment.

     12.  Adjustments.  Except as is expressly provided in the Plan with respect
to certain changes in the capitalization of the Company, no adjustment shall be
made for dividends or similar rights for which the record date is prior to such
date of exercise.

     13.  Withholding Taxes.  If the Company in its discretion determines that
it is obligated to withhold any tax in connection with the exercise of this
option, or in connection with the transfer of, or the lapse of restrictions on,
any Common Stock or other property acquired pursuant to this option, the
Optionee hereby agrees that the Company may withhold from the Optionee's wages
or other remuneration the appropriate amount of tax.  At the discretion of the
Company, the amount required to be withheld may be withheld in cash from such
wages or other remuneration or in kind from the Common Stock or other property
otherwise deliverable to the Optionee on exercise of this option.  The Optionee
further agrees that, if the Company does not withhold an amount from the
Optionee's wages or other remuneration sufficient to satisfy the withholding
obligation of the Company, the Optionee will make reimbursement on demand, in
cash, for the amount underwithheld.

     14.  Arbitration.  Any dispute, controversy, or claim arising out of, in
connection with, or relating to the performance of this Agreement or its
termination shall be settled by arbitration in the State of Connecticut,
pursuant to the rules then obtaining of the American Arbitration
<PAGE>

Association. Any award shall be final, binding and conclusive upon the parties
and a judgment rendered thereon may be entered in any court having jurisdiction
thereof.

     15.  Provision of Documentation to Optionee.  By signing this Agreement the
Optionee acknowledges receipt of a copy of this Agreement and a copy of the
Plan.

     16.  Miscellaneous.

          (a) Notices.  All notices hereunder shall be in writing and shall be
     deemed given when sent by certified or registered mail, postage prepaid,
     return receipt requested, if to the Optionee, to the address set forth
     below or at the address shown on the records of the Company, and if to the
     Company, to the Company's principal executive offices, attention of the
     Corporate Secretary.

          (b) Entire Agreement; Modification.  This Agreement constitutes the
     entire agreement between the parties relative to the subject matter hereof,
     and supersedes all proposals, written or oral, and all other communications
     between the parties relating to the subject matter of this Agreement.  This
     Agreement may be modified, amended or rescinded only by a written agreement
     executed by both parties.

          (c)   Fractional Shares.  If this option becomes exercisable for a
     fraction of a share because of the adjustment provisions contained in the
     Plan, such fraction shall be rounded down.

          (d) Issuances of Securities; Changes in Capital Structure. Except as
     expressly provided herein or in the Plan, no issuance by the Company of
     shares of stock of any class, or securities convertible into shares of
     stock of any class, shall affect, and no adjustment by reason thereof shall
     be made with respect to, the number or price of shares subject to this
     option.  No adjustments need be made for dividends paid in cash or in
     property other than securities of the Company. If there shall be any change
     in the Common Stock of the Company through merger, consolidation,
     reorganization, recapitalization, stock dividend, stock split, combination
     or exchange of shares, liquidation, spin-off, split-up or other similar
     change in capitalization or event,  the restrictions contained in this
     Agreement shall apply with equal force to additional and/or substitute
     securities, if any, received by the Optionee in exchange for, or by virtue
     of his or her ownership of, Option Shares, except as otherwise determined
     by the Board.

          (e) Severability.  The invalidity, illegality or unenforceability of
     any provision of this Agreement shall in no way affect the validity,
     legality or enforceability of any other provision.

          (f) Successors and Assigns.  This Agreement shall be binding upon and
     inure to the benefit of the parties hereto and their respective successors
     and assigns, subject to the limitations set forth in Section 9 hereof.
<PAGE>

     (g) Governing Law.  This Agreement shall be governed by and interpreted in
     accordance with the laws of the State of Delaware, without giving effect to
     the principles of the conflicts of laws thereof.

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