A. Purpose and Scope

The primary function of the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of TranSwitch Corporation (the "Corporation") is to exercise the responsibilities and duties set forth below, including but not limited to (i) discharging the Board's responsibilities relating to the compensation of the Corporation's executives, (ii) reviewing and approving administration of the Corporation's incentive compensation and stock plans; and (iii) producing an annual report on executive compensation for inclusion in the Corporation's proxy statement in accordance with applicable rules and regulations. The Committee shall review company's proposals and make recommendations to management of the Corporation on company-wide compensation programs and practices. The Committee shall make the recommendation of final action with respect to the individual salary, bonus, and equity arrangements of the Corporation's Chief Executive Officer (the "CEO") and President. The Committee will present that recommendation to the Board of Directors for final approval and ratification. In consultation with management, the Committee shall make recommendations to the Board of Directors with respect to the individual salary, bonus and equity arrangements of the Corporation's other executive officers. Finally, subject to approval by the full Board, the Committee shall recommend any new equity-based plans and any material amendments thereto (including increases in the number of shares of common stock of the Corporation that are available for grant as options or otherwise thereunder) for which stockholder approval is required or desirable.

 

 

B. Structure

1. The Committee shall be comprised of not fewer than three members, each of whom shall (i) meet any and all independence requirements promulgated by the Securities and Exchange Commission, the National Association of Securities Dealers, any exchange upon which the securities of the Corporation are traded or any governmental or regulatory body exercising authority over the Corporation (each, a "Regulatory Body") as in effect from time to time; and (ii) be free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee (the "Independence Standards").

2. Each member of the Committee shall be appointed annually by the outside directors on the Board, considering the recommendations of the Nominating & Governance Committee, which appointments shall be approved by the whole Board. Each member of the Committee shall serve until his or her successor shall be duly appointed and qualified or until his or her earlier resignation or removal. Members of the Committee shall elect their own Chair by majority vote of the full Committee membership.

 

 

C. General Responsibilities

The Committee's role is generally one of oversight and it recognizes that management is responsible for designing and modifying salary ranges and grades, incentive compensation programs, compensation strategy and practices, performance evaluation systems, succession planning, and the conduct and funding of the various retirement plans of the Corporation. In carrying out its responsibilities, the Committee and its members are providing oversight, review, and consultation to management. The Committee is not providing any expert or special assurance as to the matters identified in this Charter or exercising discretion, authority or control over the management. The following matters comprise the recurring activities of the Committee in carrying out its functions. The responsibilities and duties of a member of the Committee are in addition to his or her duties as a member of the Board.

1. The Committee shall review and approve corporate goals and objectives relevant to compensation of the President and CEO, make a performance appraisal of each such officer in light of those goals and objectives and establish and approve the appropriate level of base compensation and bonus and incentive compensation based on such evaluations. In determining the long-term incentive component of compensation of the President and CEO, the Committee should consider the Corporation's performance and relative shareholder return, the value of similar incentive plan awards to CEOs and Presidents at comparable companies and the awards given to the Corporation's CEO and President in past years. The Committee will present to the Board for final approval and ratification a recommendation to be implemented. In conjunction with the President and CEO, the Committee directs the management succession planning, particularly for CEO succession.

2. With the exception of the President and CEO pursuant to Section C.1 above, the Committee, in consultation with management, shall evaluate the performance of the Corporation's executive officers and make recommendations to the Board regarding the appropriate level of base compensation and bonus and incentive compensation for such officers.

3. With respect to the CEO and the other executive officers of the Corporation, the Committee, in consultation with management, shall review and approve annually (i) any employment agreements, severance agreements and change in control agreements or provisions, when and if appropriate; and (ii) any special or supplemental benefits.

4. The Committee shall retain a compensation consultant(s), when and if appropriate, from time to time, to advise the Committee on executive compensation practices and policies or any other matters within this Charter.

5. In consultation with management, the Committee shall consider and take actions with respect to the adoption, amendment, administration or termination of compensation, welfare, benefit, pension and other plans related to compensation of current and former employees of the Corporation, in each case taking into account appropriate industry benchmarks and, as appropriate, the compensation policies pursued by companies similarly situated to the Corporation.

6. In consultation with management, the Committee shall (i) review the terms and conditions of compensation plans; (ii) determine the eligibility requirements applicable to participants in each such plan as may be required by the terms of a plan; (iii) evaluate the performance of each benefit plan and all fiduciaries of the plans; (iv) approve, and recommend to the full Board for its approval, the initial adoption of any equity-based plan and any material modification to such plan (such as an increase in the number of shares available under such plan); and (iv) make such amendments to the Corporation's non-equity based plans and take such actions in regard to the plans as the Committee deems appropriate.

7. In consultation with management, the Committee shall design and approve incentive, including any equity-based compensation, plans to allow the Corporation to attract and retain talented personnel and align the pay of such personnel with the long-term interests of shareholders. In addition, the Committee shall submit each equity-based compensation plan and each material modification thereof to the Board for its approval and take actions that may be necessary or advisable to implement and administer the Corporation's incentive compensation plans, all in accordance with the terms of such plans.

8. The Committee shall evaluate and recommend to the full Board the appropriate level of director compensation and take primary responsibility for ensuring that any payments to directors, other than in their capacity as directors, are fully and properly disclosed.

9. The Committee shall make public this Charter, and any amendments thereto, as appropriate or to ensure compliance with any rules or regulations of any Regulatory Body.

10. The Committee shall produce an annual report on executive compensation for inclusion in the Corporation's proxy statement in accordance with applicable rules and regulations.

11. The Committee shall oversee the Corporation's compliance with any rules promulgated by any Regulatory Body prohibiting loans to officers and directors of the Corporation.

12. The Committee shall regularly communicate with the Board in order to ensure that the Board is fully informed of the Corporation's compensation policies and other issues within the Committee's jurisdiction.

13. The Committee shall exercise such additional powers as may be reasonably necessary or desirable, in the Committee's discretion, to fulfill its responsibilities and duties under this Charter.

 

 

D. Committee Meetings

The Committee shall meet quarterly, or more frequently if necessary, but in no event shall the Committee meet less than once per year. Meetings may be called by the Chair of the Committee or at the request of any member of the Committee or of the Board. At all Committee meetings, a majority of the then-current members of the Committee shall constitute a quorum.

The Committee may invite members of management or others to attend Committee meetings and, at the request of the Committee, provide pertinent information on the issues being considered; provided, however, that the CEO may not be present during any voting or deliberations on compensation of the CEO.

Minutes of Committee meetings shall be kept and recorded with the books and records of the Corporation. Minutes of each meeting shall be distributed to the members of the Board and the Secretary of the Corporation.