SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERDIGITAL COMMUNICATIONS CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
INTERDIGITAL COMMUNICATIONS CORPORATION
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
INTERDIGITAL COMMUNICATIONS CORPORATION
SUITE 105
2200 RENAISSANCE BOULEVARD
KING OF PRUSSIA, PENNSYLVANIA 19406-2755
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 1995
------------------------
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of InterDigital Communications
Corporation (the 'Company') will be held at the Radisson Hotel Philadelphia
Airport, Salons 1 - 4, 500 Stevens Drive, Philadelphia, Pennsylvania, on May 31,
1995, at 1:00 p.m. local time, for the following purposes:
1. To elect two directors of the Company;
2. To consider and vote upon a proposal to approve the adoption of the
Company's 1995 Stock Option Plan for Employees and Outside Directors, as
described in the accompanying Proxy Statement;
3. To ratify the appointment of Arthur Andersen LLP as independent
accountants to examine the financial statements of the Company for the year
ending December 31, 1995;
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of record of Common Stock at the close of business on April
28, 1995 are entitled to notice of and to vote at the meeting.
The Radisson Hotel Philadelphia Airport is offering a reduced room rate to
the Company's shareholders who wish to stay overnight and who make their
reservations by May 16, 1995. For reservations call (610) 521-5900 or (800)
333-3333 and mention that you will be attending the InterDigital Shareholders
Meeting. For directions to the hotel, call the Radisson Hotel Philadelphia
Airport at (610) 521-5900.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE SELF-ADDRESSED ENVELOPE, ENCLOSED FOR YOUR CONVENIENCE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DECIDE TO ATTEND THE
MEETING AND WISH TO VOTE IN PERSON, YOU MAY REVOKE YOUR PROXY BY WRITTEN NOTICE
AT THAT TIME.
By Order of the Board of Directors
Howard E. Goldberg, Secretary
April 28, 1995
<PAGE>
INTERDIGITAL COMMUNICATIONS CORPORATION
------------------------
PROXY STATEMENT
The following information is furnished in connection with the solicitation
of proxies by the Board of Directors of InterDigital Communications Corporation,
a Pennsylvania corporation (the 'Company'), for the Annual Meeting of
Shareholders (the 'Meeting') to be held on May 31, 1995, and at any adjournments
or postponements thereof. The approximate date on which this Proxy Statement and
the accompanying proxy will be first sent or given to shareholders is May 3,
1995. The principal executive offices of the Company are located at Suite 105,
2200 Renaissance Boulevard, King of Prussia, Pennsylvania 19406-2755.
The record date for determining shareholders entitled to vote at the
Meeting has been fixed at the close of business on April 28, 1995 ('Record
Date'). As of such date, there were 44,048,176 shares of the Company's Common
Stock ('Common Stock') outstanding and entitled to vote. Each share of Common
Stock entitles the holder to one vote, and votes may not be cumulated in the
election of directors. Holders of the Company's $2.50 Cumulative Convertible
Preferred Stock ('$2.50 Preferred Stock') are not entitled to vote at the
Meeting. Under Pennsylvania law and the By-Laws of the Company, the presence of
a quorum is required for each matter to be acted upon at the Meeting. The
presence, in person or by proxy, of holders of the Common Stock entitled to cast
at least a majority of the votes which all holders of the Common Stock are
entitled to cast will constitute a quorum for purposes of the Meeting. Directors
are elected by a plurality vote and approval of all other matters presented at
the Meeting requires the affirmative vote of a majority of the votes cast by
shareholders present, in person or by proxy, at the Meeting. Votes withheld and
abstentions will be counted in determining the presence of a quorum, but will
not be voted and will have no effect on matters to be voted at the Meeting.
Broker non-votes will not be counted in determining the presence of a quorum and
will not be voted.
A form of proxy is enclosed for use at the Meeting. Proxies will be voted
in accordance with shareholders' instructions. If no instructions are indicated
on the proxy, all shares represented by valid proxies received pursuant to the
solicitation (and not revoked before they are voted) will be voted FOR the
election of the nominees named below as directors, FOR the adoption of the 1995
Stock Option Plan for Employees and Outside Directors, FOR the ratification of
the appointment of Arthur Andersen LLP as independent accountants to examine the
financial statements of the Company for the year ending December 31, 1995, and
by the proxies in their discretion on any other matters to come before the
Meeting. Any proxy given may, however, be revoked by the shareholder executing
it at any time before it is voted by a later dated proxy, written revocation
sent to the Secretary of the Company or attendance at the Meeting and voting in
person.
The cost of solicitation of proxies by the Board of Directors of the
Company (the 'Board') will be borne by the Company. Proxies may be solicited by
mail, personal interview, telephone or telegraph and, in addition, directors,
officers and regular employees of the Company may solicit proxies by such
methods without additional remuneration. In addition, the Company has retained
W.F. Doring & Co. to aid in the solicitation of proxies for which a fee of
approximately $7,000, plus expenses, will be paid. Banks, brokerage houses and
other institutions, nominees or fiduciaries will be requested to forward the
proxy materials to beneficial owners in order to solicit authorizations for the
execution of proxies. The Company will, upon request, reimburse such banks,
brokerage houses and other institutions, nominees and fiduciaries for their
expenses in forwarding such proxy materials to the beneficial owners of the
Company's Common Stock.
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ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board presently consists of five members, divided into three classes,
each having a term of three years and until their successors are elected and
qualified. At the Meeting, two directors will be elected to serve for a term of
three years and until their successors are elected and qualified. The Board has
nominated one current director and one new nominee for election at the Meeting
for a term expiring at the 1998 Annual Meeting of Shareholders. Unless authority
to vote for the nominees is withheld in the proxy, the persons named in the
accompanying proxy intend to vote the shares represented by the proxy FOR the
election as directors of the nominees named below. Although the Board does not
contemplate that the named nominees will be unavailable for election, in the
event a vacancy occurs, it is presently intended that the proxy will be voted
for the election of a nominee who shall be designated by the Board. Three
directors will continue to serve as directors following the Meeting as set forth
below, with one director having a term expiring at the 1996 Annual Meeting of
Shareholders and two directors having terms expiring at the 1997 Annual Meeting
of Shareholders.
The following biographical information is furnished as to each nominee for
election as a director and each of the current directors:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE YEAR TERM EXPIRING AT 1998 ANNUAL MEETING
BARNEY J. CACIOPPO, 67, has been the owner and President of Harbor
Engineering & Service Co., an engineering consulting firm, since February 1965.
He was the owner and President of Argon Electric Co., a company which provides
electrical construction services, for 25 years until his retirement in January
1993. He is a registered professional engineer in the State of Illinois.
HARLEY L. SIMS, 67, has been a director of the Company since April 1992.
Since 1983, he has been the President of L&A Contracting Company, a Mississippi
company engaged in heavy and highway construction. He is also President of
Southeastern Concrete Company, a concrete producer.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 1997 ANNUAL MEETING
WILLIAM J. BURNS, 66, has been a director of the Company since June 1990.
Mr. Burns has served as the Company's Chief Executive Officer and Chairman of
the Board since November 1994. He has been a self-employed investor and
financial consultant for the last 15 years.
D. RIDGELY BOLGIANO, 62, has been a director of the Company since 1981. He
became the Company's Vice-President of Research and Chief Scientist in April
1984, and has been affiliated with the Company in various capacities since 1974.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 1996 ANNUAL MEETING
HARRY G. CAMPAGNA, 56, has been a director of the Company since April 1994,
at which time he was elected by the Board to fill the vacancy created by the
resignation of William W. Erdman in February 1994. Mr. Campagna has been the
President, Chief Executive Officer and Chairman of the Board of Qualitex Co., a
company co-founded and co-owned by Mr. Campagna and his wife, for more than the
past five years. Qualitex is a manufacturer of press pads and related items for
the garment, apparel and textile maintenance industries.
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COMMITTEES AND MEETINGS OF
THE BOARD OF DIRECTORS
The Company's Board of Directors has an Audit Committee, a Compensation and
Stock Option Committee, a Finance and Investment Committee and a Nomination and
Search Committee. The current members of the Audit Committee are Mr. Sims and
Mr. Campagna. During 1994, the Audit Committee held two meetings. The functions
of the Audit Committee include the recommendation and selection of independent
accountants, the review of audit results, the review of related party
transactions and the evaluation of internal accounting procedures of the
Company.
The Company's Compensation and Stock Option Committee (the 'Compensation
Committee') currently consists of Mr. Campagna and Mr. Sims. The Compensation
Committee held three meetings in 1994. Its responsibilities include making
recommendations to the full Board concerning compensation, bonus awards and
similar matters and granting awards under stock option plans of the Company.
The Company's Nomination and Search Committee currently consists of Mr.
Campagna, Chairman, Mr. Hamilton, and Mr. Sims. The Nomination and Search
Committee held two meetings in 1994. Its functions include reviewing and making
recommendations to the full Board concerning nominees for directors. Although
the Nomination and Search Committee will consider nominees recommended by
shareholders, there are no formal procedures for such recommendations.
The Board met 20 times during 1994. During 1994, each of the above
incumbent directors attended at least 75% of the meetings of the Board and the
committees on which they serve.
COMPENSATION OF DIRECTORS
Each member of the Board who is not an officer or employee of the Company
('Outside Director') is paid an annual director's fee of $10,000, plus $400 for
each Board meeting attended ($200 if such Outside Director participates
telephonically). Under the terms of the Company's Non-Qualified Stock Option
Plan adopted in 1982, the Outside Directors have received annual grants of
non-qualified stock options to purchase Common Stock at an exercise price equal
to the fair market value of the Common Stock at the date of grant. The
non-discretionary grant of options to acquire 7,000 shares of the Company's
Common Stock has been made on July 1 of each year to Outside Directors who
served continuously from July 1 of the preceding year. Additional options have
been granted to Outside Directors to acquire 1,000 shares for each committee of
the Board on which the director served as chairperson (2,000 in the case of all
members of the Executive Committee), subject in certain instances to proration
for partial period service. If the 1995 Stock Option Plan for Employees and
Outside Directors is approved at the Meeting, stock option grants in the amounts
described above will be made in the future to Outside Directors under the new
Plan instead of under the Non-Qualified Stock Option Plan. The Company also
reimburses directors for certain expenses incurred in attending Board and
committee meetings.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten-percent
shareholders (collectively, 'Reporting Persons') are additionally required to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations of Reporting
Persons that no other reports were required with
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respect to fiscal 1994, all Section 16(a) filing requirements applicable to the
Reporting Persons were complied with; except that each of the following current
or former executive officers or directors filed one report late relating to one
transaction each: Mr. Bolgiano, Mr. Burns, W.W. Keen Butcher, Mr. Campagna,
Diana Lady Dougan, William A. Doyle, Peter F. Erb, Mr. Hamilton, David E.
Kaplan, Robert B. Liepold and Mr. Sims.
------------------------------
Under the rules of the Securities and Exchange Commission (the
'Commission'), the Compensation Committee Report on Executive Compensation below
and the Shareholder Return Performance Graph appearing on page 10 of this Proxy
Statement are not to be deemed to be 'solicitation material' or to be 'filed'
with the Commission, or to be subject to certain of the proxy rules or to the
liabilities of Section 18 of the Securities Exchange Act of 1934 (the 'Exchange
Act'), except to the extent that the Company specifically requests that such
information be treated as 'soliciting material' or specifically incorporates it
by reference into a filing under the Securities Act of 1933 (the 'Securities
Act') or the Exchange Act. Notwithstanding anything to the contrary set forth in
any of the Company's previous filings under the Securities Act or the Exchange
Act that might incorporate future filings, including this proxy statement, in
whole or in part, the Compensation Committee Report and the Shareholder Return
Performance Graph shall not be incorporated by reference in such filings.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee is currently composed of two Outside
Directors, neither of whom is an officer or employee of the Company or any of
its subsidiaries. The Committee makes recommendations to the full Board
regarding the adoption, extension, amendment, and termination of the Company's
compensation plans. In conjunction with the Company's President and with its
Chief Executive Officer ('CEO'), it recommends to the Board the employment,
promotion and remuneration of senior management, officers and directors,
recommends compensation plans in which employees, officers and directors are
eligible to participate, and grants benefits under such plans. The Committee has
provided the following report on executive compensation reported for 1994 and
the policies which it employed during such period:
One of the most important duties of the Committee is to determine the
compensation of the Company's executive officers. The executive compensation
program is a coordinated and balanced program consisting of:
o Salary and benefits;
o Incentive cash compensation, principally oriented towards executive
officers, key employees and employees responsible for sales and
marketing functions; and
o Equity incentives, principally in the form of stock option awards.
The Committee is guided by the following executive compensation philosophy
of the Company:
1. Enable the Company to attract and retain superior management by
providing a competitive total compensation package.
2. Align the interests of shareholders and management through a
flexible compensation program that provides a substantial portion of
executive officers' potential total compensation in the form of equity
incentives, and which further benefits the Company through the conservation
of cash resources.
3. Balance the objectives of short-term improvements in financial
performance and long-term investment in technology and market position
through incentive compensation awards which (i) reward improvements in
financial performance with discretionary annual cash bonuses, and
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<PAGE>
(ii) stimulate a long-term perspective with equity incentives whose value
principally derives from future stock price appreciation.
Executive compensation consists primarily of three components: base salary,
incentive compensation, and equity incentives.
Base Salary
The Company's policy is to set base salaries for each executive officer
position, including that of the CEO, in the middle range of scales for
equivalent jobs with other similarly situated industrial employers. The Company
uses compensation studies and outside consultants to monitor the Company's
competitive compensation status, and to recommend salary ranges and compensation
changes to the Committee.
Executive officers other than the CEO are reviewed annually by their
superiors, and the CEO is reviewed by the Committee. Salary adjustments for
executive officers are determined by the quality of their individual performance
and the relationship of their salary to their established salary range.
Generally, adjustments to the base salary of the CEO have been governed by
the same factors as other executive officers, but also specifically take into
account the Company's current financial performance as measured by results of
operations, balance sheet strength, and overall financial soundness. The
Committee also considers the CEO's leadership in establishing meaningful and
challenging standards for financial performance, motivating other members of
management, and projecting an appropriate image of the Company to its employees,
actual and potential customers, and members of the business and financial
community. During 1994, however, the position of CEO was occupied by four
different individuals. Accordingly, the base salaries of the various CEOs have
remained relatively constant.
Based upon such criteria, (as well as changeover in the case of the CEO)
the executive officers generally were not awarded salary increases other than in
conjunction with promotions or the assumption of increased responsibilities.
Incentive Compensation
Incentive compensation for sales and marketing management is based upon the
attainment of certain specified goals and objectives. In determining the amount
of any awards, the Committee reviews actual performance for the prior fiscal
year and considers the effect of significant market factors which could not have
been reasonably anticipated at the time the goals were established, and makes
appropriate adjustment. No incentive compensation has been paid to sales and
marketing management pertaining to 1994.
Annual incentive compensation for other executives is based upon
performance which demonstrates a sharp and continuing focus on strengthening the
Company's operating results and building shareholder value. In 1994, the
Committee approved a bonus plan under which bonuses aggregating up to 12.5% of
the Company's net profits will be paid to participants in the plan.
Participation in the bonus pool is open to all officers at or above the level of
Vice President, including the CEO. In addition, the Committee may award bonuses
under the plan to other employees. The maximum bonus awarded to the CEO under
the plan will not exceed 1 1/2% of the net profits, and the maximum bonus
payable to other levels of executive officers is subject to progressively lower
percentage caps. Bonuses paid under the plan will be subject to a cap of 40% of
the officer's or employee's base salary, and members of management who elect to
participate in the plan will be subject to certain restrictions with respect to
future additional base salary increases.
In general, the Committee has focused towards equity incentives as a means
of conserving cash resources while making compensation more highly leveraged and
dependent upon the achievement of significant financial and non-financial goals
which would support increased shareholder value. No incentive compensation has
been paid to executive officers pertaining to 1994.
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Equity Incentives
Stock options are utilized as future-oriented incentives. Their value is
derived from increases in the Company's stock value. In the case of both
incentive stock options and non-qualified stock options granted at 100% of fair
market value, the options will have no value unless the Company's stock price
increases following the grant date. Non-qualified stock options may be granted
at any price which the Committee considers appropriate; all incentive stock
options and substantially all non-qualified stock options, except those issued
in lieu of other forms of expressly agreed compensation to conserve cash, have
been granted at 100% of the fair market value at the date of grant. Stock
options (other than non-qualified options which are performance-based or issued
in lieu of other forms of compensation not otherwise immediately payable)
generally vest over three years and expire ten years from the date of grant.
The compensation of Mr. Erdman, Mr. Hamilton, Dr. Schilling and Mr. Burns,
each of whom served as CEO of the Company during 1994, was determined in a
similar manner to that of other senior executives, as described above, except
with regard to Mr. Erdman and Mr. Burns. With respect to Mr. Erdman and Mr.
Burns, their equity incentives, when vested, comprised or would have comprised a
significantly higher percentage of potential total compensation than for any
other executive. In 1992, as inducements to accept the positions of President
and Chief Operating Officer and to join the Board of Directors, and in
conjunction with his later appointment as CEO, non-qualified stock options to
acquire 1,500,000 shares of the Company's Common Stock were granted to Mr.
Erdman. In conjunction with Mr. Erdman's resignation, the option to acquire
1,000,000 shares of Common Stock was forfeited and the option to acquire 500,000
shares of Common Stock was vested in February 1994. Mr. Burns was granted
options to acquire 250,000 shares of the Company's Common Stock in conjunction
with his appointment as CEO. Mr. Hamilton served as CEO on an interim basis and
Dr. Schilling's awards of stock options in 1994 were patent incentive awards.
The Committee intends to reconsider its policies from time to time and
revise its policies in accordance with the Company's then present performance,
competitive position, market for the Company's products and the Company's
available financial resources and any other considerations it deems appropriate.
COMPENSATION AND STOCK OPTION COMMITTEE:
Harry G. Campagna
Harley L. Sims
April 28, 1995
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SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the annual
and long-term compensation paid to or for (i) each individual who served as the
Company's Chief Executive Officer during 1994 and (ii) the Company's four other
most highly compensated executive officers whose total annual salary and bonus
exceeded $100,000 in 1994 (collectively, the 'Named Officers'), for services
rendered to the Company and its subsidiaries during 1992, 1993 and 1994:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL OCCUPATION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)(1)
- ---------------------------------------------- ---- --------- ----------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
William J. Burns 1994 $ 161,151(2) $ 0 250,000 $ 0
Chief Executive Officer
(since November 1994)
Donald L. Schilling, Ph.D. 1994 $ 215,558 $ 0 36,000 $ 5,252
Past Chief Executive Officer 1993 179,408 0 0 3,381
(April 1994 - November 1994) 1992 44,452 0 1,170,000(3) 734
Lyman C. Hamilton 1994 $ 59,231 $ 0 8,000 $ 0
Past Interim Chief Executive Officer
(February 1994 - April 1994)
William W. Erdman 1994 $ 328,654 $ 0 0 $ 3,331
Past Chief Executive Officer 1993 315,907 0 0 4,551
(through February 1994) 1992 107,892 $ 20,000 1,500,000 3,448
William A. Doyle 1994 $ 139,627 $ 0 70,000 $ 2,805
President 1993 107,923 0 0 3,507
1992 100,331 0 65,000 0
Howard E. Goldberg 1994 $ 130,688 $ 0 30,000 $ 1,933
Executive Vice President, 1993 92,035 0 85,000 905
General Counsel and Secretary
James J. Boyce 1994 $ 129,750(4) $ 0 50,000 $ 1,886
Executive Vice President,
Chief Operating Officer
Robert S. Bramson(5) 1994 $ 150,000 $ 27,933(6) 0(7) $ 4,500
Past President and Chief 1993 140,539 0 0 2,546
Executive Officer of InterDigital 1992 48,456(8) 0 120,000 637
Patents Corporation
</TABLE>
- ------------------
(1) Amounts listed under 'All Other Compensation' for 1994 represent the dollar
value of insurance premiums with respect to term life insurance (Schilling
$3,038; Erdman $1,496; Doyle $780; Goldberg $508; Boyce $1,886; Bramson
$2,250) and employer contributions to the Company's 401(k) plan (Schilling
$2,214; Erdman $1,835; Doyle $2,025; Goldberg $1,425; Bramson $2,250).
(2) Includes the amount of $146,000 which was accrued but deferred.
(3) Stock options granted concurrent with the Company's purchase of SCS Telecom,
Inc. and SCS Mobilecom, Inc. from Dr. and Mrs. Schilling and the
commencement of the Company's employment of Dr. Schilling and his wife.
(4) Includes amounts paid to Mr. Boyce from the commencement of his employment
as well as consulting compensation paid him prior thereto.
(5) Mr. Bramson's employment terminated in April 1995.
(6) InterDigital Patents Corporation ('Patents Corp.') is a wholly-owned
subsidiary of the Company which owns approximately 94% of InterDigital
Technology Corporation ('ITC'). During his employment with Patents Corp.,
Mr. Bramson was a participant in the Patents Corp. Executive Bonus Plan,
under which the Compensation and Stock Option Committee is entitled, in its
discretion, to award bonus compensation to certain executive officers of
Patents Corp. based on the net revenues of Patents Corp., as defined under
the plan. Under the plan, the bonus compensation available to participants
each year is determined by a cumulative formula based upon award of
participation 'points' in prior years,
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as modified by 'points' awarded in the current year by the Committee. As
the Committee has not determined whether to make any point assignments for
certain periods under the plan as of the date hereof, the amount of any
bonus which Mr. Bramson might be awarded under the plan is not calculable
at this time. Mr. Bramson may be entitled to a portion of any amounts
payable under the plan through 2005, although in 1995 the Company
terminated the plan with respect to any future assignment of 'points'. The
bonus award, $27,933, reflected in the table is unrelated to the plan.
(7) Mr. Bramson claims to have received an option from Patents Corp. to
purchase a number of shares of common stock of Patents Corp. equal to 1.2%
of its outstanding shares, at an exercise price of $.01 per share, which
the Company does not acknowledge. The claim is currently a matter of
negotiation between Mr. Bramson and the Company.
(8) Includes amounts paid to Mr. Bramson from the commencement of his employment
in November 1992 as well as consulting compensation paid to Mr. Bramson
prior thereto.
Dr. Schilling entered into a five-year employment agreement on October 15,
1992 in conjunction with the Company's acquisition of SCS Mobilecom, Inc. and
SCS Telecom, Inc. The employment agreement provided for a base salary of
$175,000, a Company-paid automobile and Company-paid estate and financial
planning services during such term. In connection with his resignation in
November 1994, Dr. Schilling and the Company entered into a Termination
Agreement pursuant to which he will receive severance benefits in the amount of
$262,500 over a one year period plus payment of accrued and unused vacation
time, the continuation of medical benefits for 12 months and reimbursement of
certain expenses. In addition, the expiration of certain restrictions on the
transfer of Common Stock owned by him was accelerated such that the final
restrictions will expire on December 15, 1995. Furthermore, options granted to
Dr. Schilling and his wife under the 1992 Non-Qualified Stock Option Plan to
purchase an aggregate of 1,150,000 shares of Common Stock became fully vested.
In conjunction with Mr. Erdman's resignation in February 1994, the Company
and Mr. Erdman entered into a Termination Agreement, with a duration of one
year, pursuant to which Mr. Erdman was obligated to provide consulting services
through February 1995 and received $300,000 plus certain other benefits
amounting to $32,065. The Termination Agreement further provided for the
immediate cancellation of stock options to acquire 1,000,000 shares of the
Company's Common Stock, and for the immediate vesting of previously unvested
stock options to acquire 250,000 shares of Common Stock. Upon his resignation,
Mr. Erdman was thereby vested in aggregate stock options to acquire 500,000
shares of Common Stock.
STOCK OPTION GRANTS, EXERCISES AND HOLDINGS
The following tables set forth certain information concerning stock options
granted to and exercised by the Named Officers during fiscal 1994 and
unexercised stock options held by them at the end of fiscal 1994.
OPTIONS/SARS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------ ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(1)
OPTIONS/ EMPLOYEES EXERCISE OR EXPIRATION ---------------------
NAME SARS GRANTED(#) IN LAST FISCAL YEAR BASE PRICE DATE 5% 10%
- -------------------------------------- --------------- ------------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
William J. Burns...................... 250,000 36.7% $ 3.063 12/10/04 $ 481,576 $1,220,908
Donald L. Schilling, Ph.D............. 21,000 3.1% $ 4.375 12/08/04 $ 57,780 $ 146,475
15,000 2.2% $ 3.063 12/11/04 $ 28,895 $ 73,224
Lyman C. Hamilton..................... 8,000 1.8% $ 3.000 6/30/04 $ 15,093 $ 38,250
William W. Erdman..................... 0 0 -- -- $ 0 $ 0
William A. Doyle...................... 20,000 2.9% $ 4.375 3/22/04 $ 55,028 $ 139,452
50,000 7.3% $ 3.063 12/08/04 $ 96,215 $ 243,982
Howard E. Goldberg.................... 30,000 4.4% $ 3.125 10/18/04 $ 58,959 $ 149,413
James J. Boyce........................ 50,000 7.3% $ 4.375 3/23/04 $ 137,571 $ 348,631
Robert S. Bramson(2).................. 0 0 -- -- $ 0 $ 0
</TABLE>
- ------------------
8
<PAGE>
(1) Potential Realizable Value is reported net of the option exercise price, but
before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock option
exercises are dependent upon the future performance of the Company's Common
Stock. The amounts reflected in this table may not necessarily be achieved.
(2) See footnote (6) under Summary Compensation Table above.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES FY-END(#) AT FY-END ($)(1)
ACQUIRED ON VALUE ------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ------------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William J. Burns (2)............. 0 $ 0 286,000 0 $ 1,116,125 $ 0
Donald L. Schilling, Ph.D. (3)... 0 $ 0 1,186,000 0 $ 846,438 $ 0
Lyman C. Hamilton................ 0 $ 0 49,050 0 $ 64,688 $ 0
William W. Erdman................ 0 $ 0 500,000 0 $ 812,500 $ 0
William A. Doyle................. 0 $ 0 121,333 53,667 $ 315,432 $ 203,914
Howard E. Goldberg............... 0 $ 0 60,000 55,000 $ 74,063 $ 130,313
James J. Boyce................... 0 $ 0 20,000 30,000 $ 60,000 $ 90,000
Robert S. Bramson (4)............ 0 $ 0 105,000 15,000 $ 204,375 $ 31,375
</TABLE>
- ------------------
(1) The values of unexercised, in-the-money options are calculated by
subtracting the exercise price from the fair market value of the shares of
Common Stock underlying the options at December 31, 1994.
(2) Excludes stock purchase warrants to purchase shares of Common Stock at
indicated prices as follows: 1,000 shares at $8.10; 34,000 shares at $10.00;
1,500 shares at $7.875; and 1,500 shares at $7.875.
(3) Includes options to purchase shares of Common Stock beneficially held by
Annette Schilling, Dr. Schilling's wife.
(4) Information for Mr. Bramson does not reflect any option to purchase common
stock of Patents Corp., as discussed in footnote (6) under Summary
Compensation Table above.
9
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares for years 1990 through 1994 the yearly change
in the cumulative total return to holders of the Company's Common Stock with the
cumulative total return of the CRSP Index for AMEX Stock Market -- United States
Companies (the 'AMEX Index') and the industry group consisting of twenty-six
AMEX listed, United States companies classified under the same first three
digits as the Company's Standard Industry Classification, as compiled by the
Center for Research in Security Prices, The University of Chicago, Graduate
School of Business (the 'Published Industry Group Index').
[ INSERT GRAPH ]
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 12/29/89 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94
- ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
InterDigital Communications Corporation 100.0 68.1 100.0 157.4 89.4 125.5
AMEX Stock Market (US Companies) 100.0 84.0 115.9 121.0 142.4 131.9
AMEX Stocks (SIC 3660-3669 US Companies) 100.0 56.4 54.9 55.0 45.1 45.5
Communications Equipment
</TABLE>
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/29/89.
Prepared by the Center for Research in Security Prices
The above graph assumes that the value of the investment in InterDigital
Communications Corporation, the AMEX Index companies and the Published Industry
Group Index companies was $100 at the market close on December 29, 1989 (the
last trading day in 1989), and that all dividends paid by companies included in
the AMEX Index and the Published Industry Group Index were reinvested. During
this period the Company has not declared or paid any dividends on its Common
Stock.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of March 31, 1995 (except as
otherwise indicated below), by each of the Company's directors, by each nominee
for director, by each of the Named Officers, by all directors and officers of
the Company as a group, and by each person known to the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock.
Unless otherwise indicated, the shareholders listed possess sole voting and
investment power with respect to the shares listed.
<TABLE>
<CAPTION>
PERCENT OF COMMON
AMOUNT AND STOCK OUTSTANDING
NATURE OF (IF GREATER THAN
NAME OF BENEFICIAL OWNER OWNERSHIP (1) 1%) (2)
- ---------------------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
D. Ridgely Bolgiano......................................................... 254,305 --
William J. Burns............................................................ 493,504(3) 1.1%
Barney J. Cacioppo.......................................................... 90,700(4) --
Harry G. Campagna........................................................... 156,725(3) --
Lyman C. Hamilton, Jr....................................................... 49,050 --
Harley L. Sims.............................................................. 611,103(3) 1.4%
Donald L. Schilling, Ph.D................................................... 190,000(3) --
William W. Erdman........................................................... 459,136(3) 1.1%
William A. Doyle............................................................ 122,123 --
Howard E. Goldberg.......................................................... 63,037(3) --
James J. Boyce.............................................................. 20,000 --
Robert S. Bramson........................................................... 106,319 --
All directors and officers as a group (10 persons).......................... 1,913,066(3) 4.3%
</TABLE>
- ------------------
(1) Includes the following number of shares of Common Stock which may be
acquired by the persons and group identified in the table (or members of the
immediate family or other persons or entities affiliated with such persons
or members of such group), through the exercise of options or warrants which
were exercisable as of March 31, 1995 or will become exercisable within 60
days of such date: Mr. Bolgiano, 184,300; Mr. Burns, 324,000; Mr. Cacioppo,
54,700; Mr. Campagna, 76,725; Mr. Hamilton, 49,050; Mr. Sims, 59,750; Mr.
Erdman, 455,000; Mr. Doyle, 121,333; Mr. Goldberg, 60,000; Mr. Boyce,
20,000; Mr. Bramson, 105,000; all directors and officers as a group,
1,037,058.
(2) Based upon 43,851,354 shares of Common Stock issued and outstanding at March
31, 1995.
(3) Investment and voting power with respect to certain of these shares may be
shared with members of the immediate family or other persons or entities
affiliated with the listed person or members of the listed group.
(4) Beneficial ownership as of April 24, 1995.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During 1994 the following directors served on the Compensation and Stock
Option Committee of the Board: Mr. Butcher, Mr. Hamilton, Mr. Kaplan, Mr.
Liepold, Mr. Sims, Mr. Burns and Mr. Campagna. Of the aforementioned Committee
members, only Mr. Hamilton and Mr. Burns were executive officers of the Company
during 1994, each having resigned from the Committee upon his appointment as an
officer (in February and May 1994, respectively). During 1994, only Mr. Campagna
and family members of Mr. Burns (who resigned from the Compensation Committee in
May 1994) engaged in any transaction set forth under or required to be set forth
below under 'Certain Relationships and Related Transactions.'
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Schilling and his wife lease two converted residences located in Port
Washington, New York to the Company for office and laboratory use. The leases,
which became effective in July 1987, are for a ten year term (unless sooner
terminated pursuant to the terms of Dr. Schilling's Termination Agreement), and
provide for an aggregate base rental of $72,000 per annum, and obligate the
Company to pay increases in real estate taxes over the 1986 base year.
In connection with the private placement of Short Term Convertible Notes of
the Company in May 1994 (the 'Notes') Messrs. David A. Burns, Michael W. Burns
and Jeffrey S. Burns, sons of William Burns, loaned the Company an aggregate
amount of $251,250 and Mr. Campagna loaned the Company $112,500. The Notes bore
interest at a rate of 11%, and as additional inducement for the lenders to
advance the loans, the Company issued warrants to the lenders to purchase shares
of Common Stock. Mr. Campagna waived all payment of interest on his Notes and
received warrants to purchase 15,000 shares of Common Stock at a per share
exercise price of $2.50. David, Michael and Jeffrey Burns were issued warrants
to purchase an aggregate of 33,500 shares of Common Stock at a per share
exercise price of $3.75. The Notes issued to the Burns were repaid in full on
November 3, 1994 with interest, and the Note issued to Mr. Campagna was repaid
in full on October 7, 1994. Although, under the terms of the Notes, the holders
had the right to demand a late charge of 5% of the amount due, neither the Burns
nor Mr. Campagna made such a demand.
PROPOSED APPROVAL OF THE COMPANY'S 1995 STOCK OPTION PLAN FOR
EMPLOYEES AND OUTSIDE DIRECTORS
(PROPOSAL 2)
OVERVIEW
The Board has adopted the 1995 Stock Option Plan for Employees and Outside
Directors (the 'Plan'), subject to shareholder approval. The purpose of the Plan
is to assist the Company in attracting and retaining qualified employees and
non-employee directors ('Outside Directors') and to recognize and compensate
said employees and Outside Directors for their contributions to the Company and
its subsidiaries. A total of 4,000,000 shares of Common Stock will be reserved
for issuance under the Plan, if this Proposal No. 2 is approved by shareholders.
The Plan will not be implemented if this Proposal No. 2 is not approved by the
shareholders. The following summary of the Plan is not intended to be complete
and is qualified in its entirety by reference to the Plan which is attached as
Appendix 'A' to this Proxy Statement.
The Plan provides for the grant of Incentive Stock Options (ISO) (as such
term is defined in the Internal Revenue Code of 1986, as amended (the 'Code')
and Non-Qualified Stock Options (which are options that do not qualify as
Incentive Stock Options) (collectively, 'Discretionary Options') to regularly
compensated employees (including officers and directors) of the Company and its
subsidiaries and consultants or advisors engaged by the Company ('Employees')
selected by the Compensation and Stock Option Committee ('Committee') in its
discretion. Non-Qualified Stock Options will be granted automatically to Outside
Directors under the terms of the Plan ('Non-Discretionary Options').
Approximately 161 Employees and three Outside Directors will be eligible to
participate in the Plan. No more than 150,000 shares of the Common Stock may be
awarded to any Optionee over the term of the Plan.
The Plan will be administered by the Compensation and Stock Option
Committee, except that the Board will administer the portions of the Plan
relating to the grant of Non-Discretionary Options. The term of the Plan will
expire ten years from the date of approval by the shareholders.
Under the Plan, the Committee's powers include the power to interpret the
Plan as it relates to Discretionary Options, subject to Plan restrictions, to
determine when and to whom Discretionary Options may be granted, the number of
shares to be covered thereby, the exercise price, the vesting and expiration
dates of the options, the manner in which a holder who is indebted to the
Company will
12
<PAGE>
satisfy the debt as a condition to being permitted to exercise the Discretionary
Option, and certain other items. An immediate sale of Common Stock acquired upon
the exercise of a Discretionary Option that is an ISO to repay indebtedness to
the Company will be a 'disqualifying disposition', the tax consequences of which
are discussed below, and certain other items. All Discretionary Options granted
under the Plan must be evidenced by an Option Agreement. In determining the
persons to whom Discretionary Options may be granted, the Committee may
condition the grant of Discretionary Options upon the fulfillment of performance
goals applicable to the individual, a business unit, or the Company as a whole,
including, for example, stock price, market share or penetration, sales,
earnings per share, return on equity, decrease in costs, operating cash flow or
any other performance criteria.
The term of a Discretionary Option, although fixed by the Committee, may
not exceed ten years from the date of grant (five years with respect to grants
of incentive stock options to an Optionee who holds more than 10% of the voting
power of the Company's Common Stock) and with certain exceptions, may not be
exercised more than 6 months following an Optionee's termination of employment
(3 months with respect to grants of Incentive Stock Options) nor more than one
year following an Optionee's death or disability. The Plan also provides for
acceleration of exercisability upon a change of control of the Company.
The exercise price of Discretionary Options shall be no less than the fair
market value of the Common Stock on the date of grant except that (i) Options
granted to consultants or other employees for special achievements may be at a
price determined by the Committee equal to or exceeding $.01 per share of Common
Stock and (ii) in the case of Discretionary Options that are Incentive Stock
Options and are granted to persons owning more than ten percent of the voting
power of the Common Stock, the Option price determined by the Committee shall be
no less than 110% of the fair market value of the Common Stock on the grant
date. The exercise price of Discretionary Options may be paid in cash, by
tendering Common Stock of the Company having a fair market value on the date of
exercise equal to the exercise price, by means of a brokers' cashless exercise,
or any combination thereof.
Discretionary Options may qualify as Incentive Stock Options within the
meaning of Section 422 of the Code. A recipient of an ISO will not recognize
taxable income upon the grant or exercise thereof, however, the amount by which
the fair market value of the underlying Common Stock exceeds the exercise price
on the date of exercise will be treated as an item of tax preference and
included in the computation of the Optionee's alternative minimum taxable income
in the year of exercise. An Optionee will recognize long term capital gain or
loss upon the disposition of Common Stock acquired upon the exercise of an ISO
provided that the Optionee does not dispose of such Common Stock within two
years of the granting of such ISO, or within one year after the exercise of such
ISO. If such holding periods are satisfied, the Company will not be allowed a
deduction by reason of the grant or exercise of the ISO.
If an Optionee does not satisfy these holding period requirements, a
'disqualifying disposition' occurs and the Optionee will recognize ordinary
income in the year of the disposition of the shares of Common Stock in an amount
equal to the excess of the fair market value of the shares at the time the ISO
was exercised over the exercise price of the ISO. The balance of gain realized,
if any, will be long-term or short-term capital gain, depending upon whether or
not the shares were sold more than one year after the ISO was exercised. If an
Optionee sells the shares prior to the satisfaction of the holding period
requirements but at a price below the fair market value of the shares at the
time the ISO was exercised, the amount of ordinary income will be limited to the
amount realized on the sale in excess of the exercise price of the ISO. The
Company and its subsidiaries will generally be allowed a deduction to the extent
the Optionee recognizes ordinary income.
The Plan permits the grant of Stock Appreciation Rights in conjunction with
the grant of Discretionary Options. A Stock Appreciation Right or the applicable
portion thereof granted with respect to a given Discretionary Option shall
generally terminate and no longer be exercisable upon the termination or
exercise of the related Discretionary Option. A Stock Appreciation Right permits
the Participant to receive, upon exercise of the Stock Appreciation Right, an
amount in cash and/or shares
13
<PAGE>
of Common Stock equal in value to the excess of the fair market value of one
share of Common Stock over the exercise price per share, multiplied by the
number of shares in respect of which the Stock Appreciation Right shall have
been exercised. Exercise of a Stock Appreciation Right for a specified number of
shares will reduce by that number the number of shares exercisable under the
Discretionary Option, and exercise of the Discretionary Option will
correspondingly reduce the number of shares exercised under the Stock
Appreciation Right.
Exercise of a Stock Appreciation Right for cash may be made only from the
third business day until the twelfth business day following the public release
of the Company's quarterly or annual sales or earnings. Upon exercise of a Stock
Appreciation Right, the Optionee will recognize ordinary income in an amount
equal to the cash or the fair market value of the Common Stock received on the
exercise date. The Company will generally be entitled to a compensation
deduction in the same amount and at the same time that an Optionee holding a
Stock Appreciation Right recognizes ordinary income, and will comply with
applicable withholding requirements with respect to such compensation.
Following shareholder approval of the Plan, on each July 1 during the term
of the Plan (a 'Grant Date') each person who served as an Outside Director from
July 1 of the entire preceding 12-month period (a 'Full Year') will be
automatically granted a Non-Discretionary Option to purchase 7,000 shares of
Common Stock. Any Outside Director who served in such capacity for less than a
Full Year will be automatically granted a pro rata portion of such amount, based
on the number of days served. Additionally, on each Grant Date, each person who
served as a Chairman of a Board committee (other than the Executive Committee)
while an Outside Director will be automatically granted a Non-Discretionary
Option to purchase 1,000 shares or a pro rata portion of such amount if he
served less than a Full Year. On each Grant Date, each member of the Executive
Committee who served in such capacity from the preceding July 1 while an Outside
Director will be automatically granted a Non-Discretionary Option to purchase
2,000 shares or a pro rata portion of such amount if he served for less than a
Full Year. The exercise price of these Non-Discretionary Options will be the
fair market value on the relevant Grant Date which may be paid in cash, or
certified funds or by tendering shares of Common Stock having a fair market
value on the date of exercise equal to the exercise price, by means of a
brokers' cashless exercise or any combination of the foregoing.
Non-Discretionary Options will be exercisable in full or in part from and after
their respective Grant Dates until the earlier of one year after the Optionee
ceases to be an Outside Director or ten years from the Grant Date.
All Non-Discretionary Options and those Discretionary Options designated by
the Committee as Non-Qualified Stock Options are not intended to qualify as
incentive stock options under the Code. Generally, recipients of Non-Qualified
Stock Options will not recognize taxable income at the time of grant but will
recognize ordinary income upon exercise in an amount equal to the difference
between the fair market value of the shares of Common Stock acquired and the
aggregate exercise price. The Company will receive a deduction at that time in a
like amount and should not be limited by the provisions of Section 162(m) of the
Code which restricts a corporation's compensation deduction in certain
circumstances. Upon the disposition of shares of Common Stock acquired upon the
exercise of a Non-Qualified Option, the Optionee will recognize long-term or
short-term capital gain or loss in an amount equal to the difference between the
amount realized and such Optionee's basis in the shares sold. Such basis will
generally be the fair market value of the shares sold on the date it was
acquired through Option exercise.
The Board of Directors has the right to terminate or amend the Plan
provided that the Board obtain shareholder approval to any amendment that would
materially increase benefits to the Plan participants, materially increase the
number of shares issuable under the Plan, or materially modify the requirements
as to eligibility for participation in the Plan.
No Option granted under the Plan may be assigned except by will or the laws
of descent and distribution or pursuant to a domestic relations order as defined
by the Code.
On April 28, 1995, the last reported sales price of the Common Stock as
reported by the American Stock Exchange was $6 3/4 per share.
14
<PAGE>
The table below summarizes the number of Options that will be awarded under
the Plan to each of the Named Officers, all current executive officers as a
group, all current directors who are not executive officers as a group, and all
non-executive employees as a group, to the extent determinable, if the Plan is
approved by shareholders at the Meeting.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF SHARES (1)
- --------------------------------------------------------- ---------------------
<S> <C>
William J. Burns
Chief Executive Officer................................ --
Donald L. Schilling, Ph.D.
Past Chief Executive Officer........................... --
Lyman C. Hamilton
Past Chief Executive Officer........................... 6,425
William W. Erdman
Past Chief Executive Officer........................... --
William A. Doyle
President.............................................. --
Howard E. Goldberg
Executive Vice President, General Counsel
and Secretary.......................................... --
James J. Boyce
Executive Vice President, Chief Operating Officer...... --
Robert S. Bramson
Past President and Chief Executive Officer
of Patents Corp........................................ --
Current Executive Officers as a Group.................... --
Current Non-Employee Directors as a Group................ 22,425
Non-Executive Employees as a Group....................... --
</TABLE>
- ------------------
(1) Except for automatic grants of Non-Discretionary Options made to Outside
Directors, future benefits under the Plan are not determinable since grants
of Options are at the discretion of the Committee. Grants of
Non-Discretionary Options to Outside Directors will be made on July 1, 1995.
Accordingly, the number of shares reflected assumes current Outside
Directors will continue in office and current committee positions until such
date (except Mr. Hamilton who will not stand for reelection at the Meeting).
The affirmative vote of a majority of the votes cast at the Meeting on
Proposal 2 is required to approve the adoption of the Plan. If such approval
is not received, the Plan will not become effective. In order for the Plan to
satisfy the conditions of rule 16b-3 under the Exchange Act, the affirmative
vote of the majority of shares present in person or represented by proxy at the
Meeting and entitled to vote on Proposal 2 is required.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2 TO APPROVE THE
ADOPTION OF THE 1995 STOCK OPTION PLAN FOR EMPLOYEES AND OUTSIDE DIRECTORS.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 3)
The Board of Directors of the Company has appointed Arthur Andersen LLP as
independent public accountants to examine the financial statements of the
Company for the year ending December 31, 1995. Arthur Andersen LLP has served as
accountants for the Company since 1982. Representatives of Arthur Andersen LLP
will be present at the meeting to make a statement if they desire to do so and
to respond to appropriate questions.
15
<PAGE>
To be ratified, the appointment must be approved by a majority of the votes
cast by all holders of the Common Stock present, in person or by proxy, and
entitled to vote at the meeting.
Although the submission of the appointment of Arthur Andersen LLP is not
required by law or the By-Laws of the Company, the Board is submitting it to the
shareholders to ascertain their views. If the shareholders do not ratify the
appointment, the Board will not be bound to seek other independent accountants
for 1995, but the selection of other independent accountants will be considered
in future years.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 3 TO RATIFY THE APPOINTMENT OF
ARTHUR ANDERSEN LLP.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the next Annual
Meeting of Shareholders must be received by the Company by January 27, 1996 in
order to be considered for inclusion in the Company's proxy material for such
meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Company does not intend to
present and has not been informed that any other person intends to present any
appropriate business not specified in this Proxy Statement for action at the
Meeting. However, if other matters should properly come before the meeting or
any adjournment thereof, it is the intention of the persons named in the
accompanying proxy, or their substitutes, to vote the proxy in accordance with
their judgment in such matters.
THE COMPANY HAS PROVIDED TO EACH PERSON SOLICITED, A COPY OF ITS ANNUAL
REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES, BUT EXCLUDING EXHIBITS, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994. REQUESTS FOR EXHIBITS,
FOR WHICH THE COMPANY WILL IMPOSE A CHARGE, SHOULD BE DIRECTED IN WRITING TO
HOWARD E. GOLDBERG, SECRETARY, INTERDIGITAL COMMUNICATIONS CORPORATION, SUITE
105, 2200 RENAISSANCE BOULEVARD, KING OF PRUSSIA, PENNSYLVANIA 19406-2755.
By Order of the Board of Directors
Howard E. Goldberg, Secretary
King of Prussia, Pennsylvania
April 28, 1995
16
<PAGE>
APPENDIX 'A'
INTERDIGITAL COMMUNICATIONS CORPORATION
1995 STOCK OPTION PLAN FOR EMPLOYEES AND OUTSIDE DIRECTORS
SECTION 1. PURPOSES.
The purposes of the Plan are (a) to recognize and compensate selected
Employees and Outside Directors of the Company and its Subsidiaries who
contribute to the development and success of the Company and its Subsidiaries;
(b) to maintain the competitive position of the Company and its Subsidiaries by
attracting and retaining qualified Employees and Outside Directors of the
Company; and (c) to provide incentive compensation to Employees based upon the
Company's performance as measured by the appreciation in Common Stock. The
Discretionary Options granted pursuant to the Plan are intended to constitute
either Incentive Stock Options within the meaning of Section 422 of the Code or
Non-Qualified Stock Options except that no Incentive Stock Option will be
granted to persons other than Employees as that term is specifically defined
with respect to Incentive Stock Options. The Non-Discretionary Options granted
pursuant to the Plan are intended to constitute Non-Qualified Stock Options. The
terms of this Plan shall be incorporated in any Option Agreement to be executed
by an Optionee and the type of Options granted will be specified in the
Agreement.
SECTION 2. DEFINITIONS.
(a) 'Board' shall mean the Board of Directors of the Company, as
constituted from time to time.
(b) 'Change of Control' shall mean the occurrence of any of the following
events:
(i) the acquisition in one or more transactions by any 'Person' (as
the term person is used for purposes of Sections 13(d) or 14(d) of the
Exchange Act) of 'Beneficial Ownership' (as the term beneficial ownership
is used for purposes of Rule 13d-3 promulgated under the Exchange Act) of
fifty percent (50%) or more of the combined voting power of the Company's
then outstanding voting securities (the 'Voting Securities'), provided that
for purposes of this Section 2(b)(i), the Voting Securities acquired
directly from the Company by any Person shall be excluded from the
determination of such Person's Beneficial Ownership of Voting Securities
(but such Voting Securities shall be included in the calculation of the
total number of Voting Securities then outstanding); or
(ii) approval by shareholders of the Company of (A) a merger,
reorganization or consolidation involving the Company if the shareholders
of the Company immediately before such merger, reorganization or
consolidation do not or will not own directly or indirectly immediately
following such merger, reorganization or consolidation, more than fifty
percent (50%) of the combined voting power of the outstanding voting
securities of the corporation resulting from or surviving such merger,
reorganization or consolidation in substantially the same proportion as
their ownership of the Voting Securities immediately before such merger,
reorganization or consolidation, or (B) (1) a complete liquidation or
dissolution of the Company or (2) an agreement for the sale or other
disposition of all or substantially all of the assets of the Company; or
(iii) acceptance by shareholders of the Company of shares in a share
exchange if the shareholders of the Company immediately before such share
exchange do not or will not own directly or indirectly immediately
following such share exchange more than fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation
resulting from or surviving such share exchange in substantially the same
proportion as the ownership of the Voting Securities outstanding
immediately before such share exchange.
(c) 'Code' shall mean the Internal Revenue Code of 1986, as amended.
(d) 'Committee' shall mean the Compensation and Stock Option Committee of
the Board, or any committee of the Board performing similar functions, as
appointed from time to time by the Board.
A-1
<PAGE>
The Committee shall be constituted so as to permit the Plan to comply with Rule
16b-3 promulgated under the Exchange Act, as the same may be amended from time
to time.
(e) 'Company' shall mean InterDigital Communications Corporation, a
Pennsylvania corporation.
(f) 'Common Stock' shall mean common stock of the Company, $.01 par value
per share.
(g) 'Disability' or 'Disabled' shall mean the inability of an Optionee to
render his or her normal services to the Company resulting from a mental or
physical illness, impairment or any other similar occurrence which can be
expected to result in death or which has lasted or can be expected to last for a
period of twelve (12) consecutive months, as determined by the Board of
Directors.
(h) 'Discretionary Option' shall mean an Incentive Stock Option or a
Non-Qualified Stock Option (other than a Non-Discretionary Option).
(i) 'Employee' shall mean (i) any person (including directors and officers)
who is employed by the Company or a Subsidiary and is compensated for such
employment by a regular salary and (ii) any consultant or advisor engaged by the
Company or a Subsidiary (other than officers or directors), provided that bona
fide services shall be rendered by consultants or advisors and such services
must not be in connection with the offer or sale of securities in a
capital-raising transaction; except that an Employee for purposes of a
Discretionary Option that is an Incentive Stock Option shall mean only a person
(including officers and directors) who is employed by the Company or a
subsidiary and is compensated for such employment by a regular salary.
(j) 'Exchange Act' shall mean the Securities Exchange Act of 1934, as in
effect from time to time.
(k) 'Fair Market Value' shall mean the fair market value of a share of
Common Stock, as determined pursuant to Section 9 hereof.
(l) 'Grant Date' shall mean July 1 of each year during the term of this
Plan commencing 1995.
(m) 'Incentive Stock Option' shall mean any option intended to be and
designated as an incentive stock option within the meaning of Section 422 of the
Code.
(n) 'Non-Discretionary Option' shall mean a Non-Qualified Stock Option to
purchase Common Stock that is granted to Outside Directors pursuant to Section 7
hereof.
(o) 'Non-Qualified Stock Option' shall mean an Option which does not
qualify as an Incentive Stock Option.
(p) 'Option' shall mean a Discretionary Option or an Non-Discretionary
Option.
(q) 'Option Agreement' shall mean a written agreement in such form or forms
as the Committee (subject to the terms and conditions of this Plan) may from
time to time approve evidencing and reflecting the terms of a Option.
(r) 'Optionee' shall mean any Participant to whom an Option has been
granted under the Plan.
(s) 'Outside Director' shall mean any member of the Board who, on the date
of the granting of an Option hereunder, is not an officer or employee of the
Company.
(t) 'Participant' shall mean each Employee, Outside Director, consultant
and advisor who is eligible to participate in the Plan.
(u) 'Plan' shall mean this 1995 Stock Option Plan for Employees and Outside
Directors, as amended from time to time.
(v) 'Proprietary Information' shall mean any and all confidential,
proprietary, business and technical information or trade secrets of the Company
or of any Subsidiary or affiliate of the Company revealed, obtained or developed
in the course of Optionee's employment with the Company or in the course of
Optionee's performance of services for the Company in any other capacity. Such
Proprietary
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Information shall include but shall not be limited to, methods of production and
manufacture, research, marketing and development plans and efforts, cost
information, pricing information, marketing methods and plans, identities of
customers and suppliers, the Company's relationship with actual or potential
customers and the needs and requirements of any such actual or potential
customers, and any other confidential information relating to the business of
the Company. Proprietary Information shall not include (i) such information as
may be necessary or appropriate for an Optionee to disclose in the course of his
employment for the effective and efficient discharge of his duties as an
Employee of the Company or as may be required by law to be disclosed; and (ii)
such information as is readily available to the general public so long as such
information did not become available to the general public as a direct or
indirect result of Optionee's breach of his obligation to maintain
confidentiality.
(w) 'Securities Act' shall mean the Securities Act of 1933, as in effect
from time to time.
(x) 'Shares' shall mean shares of Common Stock.
(y) 'Stock Purchase Agreement' shall mean an agreement in such form as the
Committee may from time to time approve (subject to the terms and conditions of
this Plan), which an Optionee may be required to execute as a condition of
purchasing Shares upon exercise of an Option.
(z) 'Subsidiary' shall mean a subsidiary corporation of the Company,
whether now or hereafter existing, and whether direct or indirect, as defined in
Sections 424(f) and (g) of the Code.
SECTION 3. PARTICIPATION.
Options shall be granted to such Participants as may be selected from time
to time by either the Committee or the Board as set forth herein, each in its
sole discretion. Participants who are Employees shall be eligible to receive
Discretionary Options under the Plan except that no Discretionary Option that is
an Incentive Stock Option will be granted to a Participant other than an
Employee as that term is specifically defined with respect to Incentive Stock
Options. Participants who are Outside Directors shall be eligible only to
receive Non-Discretionary Options under the Plan.
SECTION 4. ADMINISTRATION.
(a) Procedure. The portion of the Plan relating to the grant of
Discretionary Options shall be administered by the Committee. The portion of the
Plan relating to the grant of Non-Discretionary Options shall be administered by
the Board. All decisions, determinations and interpretations of the Committee or
the Board, as the case may be, shall be final and binding on the respective
Optionees and any other holders of any Options granted under the Plan.
(b) Powers of the Committee. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion: (i) to grant
Discretionary Options; (ii) to determine the Fair Market Value per Share in
accordance with Section 9 of the Plan; (iii) to determine the exercise price of
the Discretionary Options to be granted in accordance with Sections 6 and 9 of
the Plan; (iv) to determine the Employees to whom, and the time or times at
which Discretionary Options shall be granted, and the number of Shares to be
subject to each such Discretionary Option as described in greater detail in
Section 6 hereof; (v) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vi) to determine the terms and provisions of each
Discretionary Option granted under the Plan, each Option Agreement and each
Stock Purchase Agreement, if any (which need not be identical with the terms of
other Discretionary Options, Option Agreements and Stock Purchase Agreements)
and, with the consent of the Optionee, to modify or amend an outstanding
Discretionary Option, Option Agreement or Stock Purchase Agreement provided that
no Incentive Stock Option may be modified if such action would cause it to cease
to be an 'Incentive Stock Option', unless the Optionee specifically acknowledges
and consents to the tax consequences of such action; (vii) to accelerate the
exercise date of any Discretionary Option; (viii) to determine whether any
Employee will be required to execute a stock repurchase agreement or other
agreement as a condition to the exercise of a Discretionary Option, and to
determine the terms and provisions of any such agreement (which need not be
identical with the terms of any other such agreement) and, with the consent of
the Optionee, to amend any such
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agreement; (ix) to interpret the Plan or any agreement entered into with respect
to the grant or exercise of Discretionary Options; (x) to authorize any person
to execute on behalf of the Company any instrument required to effectuate the
grant of a Discretionary Option previously granted by the Committee or to take
such other actions as may be necessary or appropriate with respect to the
Company's rights pursuant to Discretionary Options or agreements relating to the
grant or exercise thereof; and (xi) to make such other determinations and
establish such other procedures as it deems necessary or advisable for the
administration of the Plan, including without limitation any early termination
or extension of the Plan.
(c) Criteria for Award of Discretionary Options.
In determining the Employees to whom Discretionary Options may be granted,
the Committee may condition the grant of Discretionary Options upon the
fulfillment of performance goals applicable to the individual, a business unit,
or the Company as a whole, including, for example, stock price, market share or
penetration, sales, earnings per share, return on equity, decrease in costs,
operating cash flow or any other performance criteria.
(d) Powers of the Board. The granting of Non-Discretionary Options under
the Plan and the amount, price, vesting and timing of Non-Discretionary Options
shall be automatic, as described in Section 7 hereof. All questions of
interpretation of the Plan with respect to Non-Discretionary Options will be
determined by the Board.
(e) Limitation of Liability. Notwithstanding anything herein to the
contrary, no member of the Board or the Committee shall be liable for any good
faith determination, act or failure to act in connection with the Plan or any
Option granted hereunder.
SECTION 5. STOCK SUBJECT TO THE PLAN.
Subject to this Section 5 and to the provisions of Section 9 of the Plan,
the maximum aggregate number of Shares which may be subject to Options under the
Plan is Four Million (4,000,000). If an Option expires or becomes unexercisable
for any reason without having been exercised in full, the Shares subject to such
Option shall, unless the Plan shall have been terminated, return to the Plan and
become available for future grant under the Plan. The maximum number of shares
that shall be awarded to any Optionee over the term of the Plan shall be One
Hundred Fifty Thousand (150,000).
SECTION 6. TERMS AND CONDITIONS OF DISCRETIONARY OPTIONS.
Each Discretionary Option granted pursuant to the Plan shall be authorized
by the Committee and shall be evidenced by an Option Agreement. Each Option
Agreement shall incorporate by reference all other terms and conditions of the
Plan, and shall contain the following terms and conditions:
(a) Number of Shares. The number of Shares subject to the
Discretionary Option.
(b) Option Price. Except as hereinafter provided, the price per Share
payable on the exercise of any Discretionary Option shall be stated in the
Option Agreement and shall be no less than the Fair Market Value per share
of Common Stock on the date such Option is granted, as determined by the
Committee, except that Discretionary Options that are Non-Qualified Stock
Options granted to consultants and advisors, and to any other Employee who
shall be rewarded for unusual and special achievements, shall be at any
price determined by the Committee equal to or exceeding $.01 per share of
the Common Stock.
With respect to any Discretionary Option which is an Incentive Stock Option
granted to any Employee who, at the time of grant, owns stock possessing more
than ten percent of the total combined voting power of the Common Stock, the
price per share payable upon exercise shall be at an option price determined by
the Committee which at least equals 110% of the Fair Market Value of the Common
Stock on the date the Discretionary Option is granted and such Discretionary
Option, by its terms, may not be exercisable more than five years after the date
of grant.
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(c) Consideration. The consideration to be paid for the Shares to be
issued upon exercise of a Discretionary Option may be paid to the Company: (i)
in cash or certified funds, (ii) by delivery of Shares having a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Discretionary Option shall be exercised, (iii) by means
of a brokers' cashless exercise procedure or (iv) any combination of such
methods of payment.
Where payment of the option price is to be made with Shares acquired under
any compensation plan of the Company, such Shares will not be accepted as
payment unless the Optionee has acquired such shares at least six months prior
to such payment.
If the consideration for the exercise of an Option is the surrender of
previously acquired and owned Shares, the Optionee will be required to make
representations and warranties satisfactory to the Company regarding his title
to the Shares used to effect the purchase (the 'Payment Shares'), including
without limitation, representations and warranties that the Optionee has good
and marketable title to such Payment Shares free and clear of any and all liens,
encumbrances, charges, equities, claims, security interests, options or
restrictions, and has full power to deliver such Payment Shares without
obtaining the consent or approval of any person or governmental authority other
than those which have already given consent or approval in a manner satisfactory
to the Company. The value of the Payment Shares shall be the Fair Market Value
of such Payment Shares on the date of exercise as determined by the Board in its
sole discretion, exercised in good faith. If such Payment Shares were acquired
upon previous exercise of incentive stock options granted within two years prior
to the exercise of the Option or acquired by the Optionee within one year prior
to the exercise of the Option, such Optionee shall be required, as a condition
to using the Payment Shares in payment of the exercise price of the Option, to
acknowledge the tax consequences of doing so, in that such previously exercised
incentive stock options may have, by such action, lost their status as incentive
stock options, and the Optionee may have to recognize ordinary income for tax
purposes as a result.
(d) Form of Option. The Option Agreement shall state whether the
Discretionary Option granted is an Incentive Stock Option or a Non-Qualified
Stock Option, and will constitute a binding determination as to the form of the
Discretionary Option granted.
(e) Exercise of Options. Any Discretionary Option granted hereunder shall
be exercisable at such times and under such conditions as shall be set forth in
the Option Agreement (as may be determined by the Committee and as shall be
permissible under the terms of the Plan), which may include performance criteria
with respect to the Company and/or the Optionee. In the event that a holder of a
Discretionary Option is indebted to the Company on account of an advance, loan
or any other reason, as a conditon to being permitted to exercise the
Discretionary Option, the holder will be required to satisfy the debt in a
manner satisfactory to the Committee, including being required to sell the
Shares received upon exercise of the Discretionary Option. A Discretionary
Option may be exercised in accordance with the provisions of this Plan as to all
or any portion of the Shares then exercisable under a Discretionary Option from
time to time during the term of the Discretionary Option. A Discretionary Option
may not be exercised for a fraction of a Share.
(f) Term and Vesting of Options.
(i) Notwithstanding any other provision of this Plan, no Discretionary
Option shall be (A) granted under this Plan after ten (10) years from the
date on which this Plan is adopted by the Board of Directors, or (B)
exercisable more than ten (10) years from the date of grant; provided,
however, that with respect to any Incentive Stock Option granted under this
Plan to any person who, at the time of the grant of such Discretionary
Option, owns stock possessing more than 10% of the total combined voting
power for all classes of the Company's stock, the foregoing clause (B)
shall be read by substituting 'five (5) years' for the term 'ten (10)
years' that appears therein.
(ii) No Discretionary Option granted to any Optionee shall be treated
as an Incentive Stock Option to the extent such Discretionary Option would
cause the aggregate Fair Market Value (determined as of the date of grant
of each such Option) of the Shares with respect to which
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Incentive Stock Options are exercisable by such Optionee for the first time
during any calendar year to exceed $100,000. For purposes of determining
whether an Incentive Stock Option would cause the aggregate Fair Market
Value of the stock to exceed the $100,000 limitation, Incentive Stock
Options shall be taken into account in the order granted. For purposes of
this subsection, Incentive Stock Options include all Incentive Stock
Options under all plans of the Company that are Incentive Stock Option
plans within the meaning of Section 422 of the Code.
(iii) Except as otherwise provided herein, Discretionary Options
granted hereunder shall mature and become exercisable in whole or in part,
in accordance with such vesting schedule as the Committee shall determine,
which schedule shall be stated in the Option Agreement. Discretionary
Options may be exercised in any order elected by the Optionee whether or
not the Optionee holds any unexercised Discretionary Options under this
Plan or any other plan of the Company.
(g) Termination of Options.
(i) Unless sooner terminated as provided in this Plan, each
Discretionary Option shall be exercisable for the period of time as shall
be determined by the Committee and set forth in the Option Agreement, and
shall be void and unexercisable thereafter.
(ii) Except as otherwise provided herein or in the Option Agreement,
upon the termination of the Optionee's employment or engagement with the
Company or a Subsidiary for any reason, Discretionary Options exercisable
on the date of said termination shall be exercisable by the Optionee (or in
the case of the Optionee's death subsequent to termination, by the
Optionee's executor(s) or administrator(s)) in the case of Incentive Stock
Options, for a period of three (3) months from the date of the Optionee's
termination of employment or engagement, and in the case of Non-Qualified
Stock Options, for a period of six (6) months from the date of the
Optionee's termination of employment.
(iii) Except as otherwise provided herein or in the Option Agreement,
upon the Disability or death of an Optionee while employed or engaged by
the Company or a Subsidiary, Discretionary Options held by such Optionee
which are exercisable on the date of Disability or death shall be
exercisable for a period of twelve (12) months commencing on the date of
the Optionee's Disability or death, by the Optionee or his legal guardian
or, in the case of death, by his executor(s) or administrator(s); provided,
however, that if such Disabled Optionee shall commence any employment
during such one (1) year period with a competitor of the Company
(including, but not limited to, full or part-time employment or independent
consulting work), as determined solely in the judgment of the Board, all
Options held by such Optionee which have not yet been exercised shall
terminate immediately upon the commencement thereof.
(iv) Options may be terminated at any time by agreement between the
Company and the Optionee.
(h) Forfeiture. Notwithstanding any other provision of this Plan, if the
Optionee's employment or engagement is terminated by the Company and the Board
makes a determination that the Optionee (i) has engaged in any type of
disloyalty to the Company, including without limitation, insubordination, fraud,
embezzlement, theft, or dishonesty in the course of his employment or
engagement, or (ii) has been convicted of a felony or (iii) has disclosed any
Proprietary Information without the consent of the Company or (iv) has breached
the terms of any written confidentiality agreement or any non-competition
agreement with the Company in any material respect, all unexercised
Discretionary Options held by such Optionee shall terminate upon the earlier of
the date of termination of employment or engagement for 'cause' or the date of
such a finding.
SECTION 7. TERMS AND CONDITIONS OF NON-DISCRETIONARY OPTIONS.
(a) Number of Shares. On each Grant Date, each person who served as an
Outside Director from July 1 of the year preceding the Grant Date through the
Grant Date (herein called a 'Full Year') shall receive a Non-Discretionary
Option to purchase 7,000 shares of Common Stock. Any person who
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served as an Outside Director for less than a Full Year shall receive a pro rata
portion of the Non-Discretionary Options he would have received had he served as
an Outside Director for a Full Year, based on the number of days served by such
person as an Outside Director from July 1 of the year preceding the Grant Date
through the Grant Date.
(b) Committee Member. In addition to (a) above, on each Grant Date, a
Non-Discretionary Option to purchase (i) 1,000 Shares shall be granted to each
person who served as Chairman of a Board Committee (other than the Executive
Committee of the Board) as an Outside Director for a Full Year, and (ii) 2,000
Shares shall be granted to each person who served on the Executive Committee of
the Board as an Outside Director for a Full Year. Any person who served for less
than a Full Year as Chairman of a committee or as a member of the Board's
Executive Committee while he was an Outside Director shall receive a pro rata
portion of the Non-Discretionary Options he would have received had he served in
such capacity for a Full Year, based on the number of days he served as such
from July 1 of the year preceding the Grant Date through the Grant Date.
(c) Option Price. The exercise price of all Non-Discretionary Options
shall be the Fair Market Value of the Common Stock on the Grant Date of such
Non-Discretionary Options.
(d) Consideration. The consideration to be paid for the Shares to be
issued upon the exercise of an Option may be paid to the Company (i) in cash or
certified funds, (ii) by delivery to the Company of Shares having a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iii) a brokers' cashless
exercise procedure, or (iv) any combination of such methods of payment. Where
payment of the option price is to be made with Shares acquired under any
compensation plan of the Company, such shares will not be accepted as payment
unless the Optionee has acquired the shares at least six months prior to such
payment.
(e) Exercise of Options. A Non-Discretionary Option may be exercised in
accordance with the provisions of this Plan as to all or any portion of the
Shares then exercisable under a Non-Discretionary Option from time to time
during the term of the Option. A Non-Discretionary Option may not be exercised
for a fraction of a Share.
(f) Term and Vesting of Non-Discretionary Options. Non-Discretionary
Options shall be exercisable in full or in part, and shall be fully vested, from
and after their respective Grant Dates except that no Non-Discretionary Option
shall be exercisable more than 10 years from the Grant Date.
(g) Termination of Non-Discretionary Options. If an Optionee ceases to be
an Outside Director for any reason (including death or Disability),
Non-Discretionary Options exercisable on the date of such event shall be
exercisable by the Optionee (or in the case of death or Disability, by his
executor(s), administrator(s) or legal guardian as the case may be) for a period
of one year from the date on which he ceases to be an Outside Director, but in
no event later than the date it would have expired had the Optionee continued to
be an Outside Director.
SECTION 8. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. (a) The Committee may grant Stock
Appreciation Rights ('SAR's) in conjunction with Discretionary Options under the
Plan such that, upon exercise of the SAR by an Optionee, the Company shall pay,
in cash, stock or both as determined by the Committee in its sole discretion, an
amount equal to the excess of the Fair Market Value of a share of Common Stock
on the date of exercise over the exercise price, multiplied by the number of
shares covered by the SAR.
(b) Exercise of an SAR for a certain number of shares shall reduce by such
number the number of shares exercisable under the Discretionary Option, and
exercise of the Option shall correspondingly reduce the number of shares
exercisable under the SAR. Except as otherwise provided herein, any exercise of
an SAR for cash in full or partial settlement thereof may be made only from the
third business day until the twelfth business day following the public release
of the Company's quarterly or annual sales and earnings.
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SECTION 9. DETERMINATION OF FAIR MARKET VALUE OF COMMON STOCK.
(a) Except to the extent otherwise provided in this Section 9, the Fair
Market Value of a share of Common Stock shall be determined by the Committee in
its sole discretion.
(b) In the event that Shares are traded in the over-the-counter market, the
Fair Market Value of a share of Common Stock shall be the mean of the bid and
asked prices for a share of Common Stock on the relevant valuation date as
reported in The Wall Street Journal (or, if not so reported, as otherwise
reported by the National Quotation Bureau, Inc.) as applicable or, if there is
no trading on such date, on the next preceding trading date. In the event Shares
are listed on a national or regional securities exchange or traded on the Nasdaq
Stock Market ('Nasdaq'), the Fair Market Value of a share of Common Stock shall
be the closing price of a share of Common Stock on the exchange or on Nasdaq, as
reported in The Wall Street Journal on the relevant valuation date, or if there
is no trading on that date, on the next preceding trading date.
(c) 'Adjusted Fair Market Value' shall mean in the event of a Change of
Control, the greater of (A) the highest price per share of Common Stock paid or
payable to holders of the Common Stock in any transaction (or series of
transactions) constituting or resulting (or as to which approval by shareholders
of the Company constitutes or results) in the Change of Control or (B) the
highest Fair Market Value of a share of Common Stock on any business day during
the ninety (90) day period ending on the date of the Change of Control.
SECTION 10. ADJUSTMENTS.
(a) Subject to required action by the shareholders, if any, the number of
Shares of Common Stock as to which Options may be granted under this Plan and
the number of Shares subject to outstanding Options and the option prices
thereof shall be adjusted proportionately for any increase or decrease in the
number of outstanding Shares of Common Stock of the Company resulting from stock
splits, reverse stock splits, stock dividends, reclassifications and
recapitalizations.
(b) No fractional shares of Common Stock shall be issuable on account of
any action mentioned in paragraph 9(a) above, and the aggregate number of shares
into which Shares then covered by the Option, when changed as the result of such
action, shall be reduced to the number of whole shares resulting from such
action, unless the Board, in its sole discretion, shall determine to issue scrip
certificates with respect to any fractional shares, which scrip certificates, in
such event, shall be in a form and have such terms and conditions as the Board
in its discretion shall prescribe.
SECTION 11. RIGHTS AS A SHAREHOLDER.
The Optionee shall have no rights as a shareholder of the Company and shall
have neither the right to vote nor receive dividends with respect to any Shares
subject to an Option until such Option has been exercised.
SECTION 12. TIME OF GRANTING DISCRETIONARY OPTIONS.
The date of grant of a Discretionary Option shall, for all purposes, be the
date on which the Committee authorizes the granting of such Option. Notice of
the grant shall be given to each Participant to whom an Option is so granted
within a reasonable time after the date of such grant.
SECTION 13. PROCEDURE FOR EXERCISE OF AN OPTION.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company at its principal executive office in
accordance with the terms of any Option Agreement by the person entitled to
exercise the Option and full payment for the Shares with respect to the Option
which is exercised has been received by the Company, accompanied by any
agreements required by the Company, including an executed Stock Purchase
Agreement. No adjustment shall be made for a dividend or other right for which
the record date is prior to the date the Option is exercised, except as provided
in Section 10 of the Plan.
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As soon as practicable after any proper exercise of an Option in accordance
with the provisions of the Plan, the Company shall without transfer or issue tax
to the Optionee, deliver to the Optionee at the principal executive office of
the Company or such other place as shall be mutually agreed upon between the
Company and the Optionee, a certificate or certificates representing the Shares
for which the Option shall have been exercised. The time of issuance and
delivery of the certificate(s) representing the Shares for which the Option
shall have been exercised may be postponed by the Company for such period as may
be required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
SECTION 14. CONDITIONS TO ISSUANCE OF SHARES UPON EXERCISE.
(a) The obligation of the Company to issue and sell Shares to an Optionee
upon the exercise of an Option granted under the Plan is conditioned upon (i)
the Company obtaining any required permit or order from appropriate governmental
agencies, authorizing the Company to issue and sell such Shares, and (ii) such
issuance and sale complying with all relevant provisions of law, including,
without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed.
(b) At the option of the Board, the obligation of the Company to issue and
sell Shares to an Optionee upon the exercise of an Option granted under the Plan
may be conditioned upon obtaining appropriate representations, warranties and
agreements of the Optionee set forth in the Stock Purchase Agreement. Among
other representations, warranties, restrictions and agreements, the Optionee may
be required to represent and agree that the purchase of Shares of Common Stock
under the Option Agreement shall be for investment, and not with a view to the
public resale or distribution thereof, unless the Shares subject to the Option
are registered under the Securities Act and the issuance and sale of the Shares
complies with all other laws, rules and regulations applicable thereto. Unless
the issuance of such Shares is registered under the Securities Act, the Optionee
shall acknowledge that the Shares purchased on exercise of the Option are not
registered under the Securities Act and may not be sold or otherwise transferred
unless such Shares have been registered under the Securities Act in connection
with the sale or other transfer, or counsel satisfactory to the Company has
issued an opinion satisfactory to the Company that the sale or other transfer is
exempt from registration under the Securities Act, and unless said sale or other
transfer is in compliance with any other applicable laws, rules and regulations
including all applicable federal and state securities laws, rules and
regulations. Unless the Shares subject to an Option are registered under the
Securities Act, the certificates representing all Shares issued upon exercise of
such Option shall contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE SHARES HAVE NOT BEEN
ACQUIRED WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR DISPOSED OF, BY GIFT OR OTHERWISE, OR
IN ANY WAY ENCUMBERED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR A
SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO INTERDIGITAL
COMMUNICATIONS CORPORATION THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT AND UNDER APPLICABLE STATE SECURITIES LAWS.
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SECTION 15. TRANSFERABILITY.
No Option shall be assignable or transferable otherwise than by will or by
the laws of descent and distribution or pursuant to a domestic relations order
as defined by the Code.
SECTION 16. OTHER PROVISIONS.
The Option Agreement and Stock Purchase Agreement may contain such other
provisions as the Committee in its discretion deems advisable and which are not
inconsistent with the provisions of this Plan.
SECTION 17. CHANGE OF CONTROL.
(a) For purposes of the Plan, 'Option Cancellation Date' shall mean, as to
each Option, the later of: (i) the first business day after the expiration of a
period of six (6) months from the date of grant of the Option; (ii) in the event
of a Change of Control as defined in Section 2(b)(ii)(A) or 2(b)(ii)(B)(2), the
date on which the transaction approved by shareholders of the Company (as
provided in Section 2(b)(ii)) is consummated; and (iii) in the event of the
Change of Control as defined in Section 2(b)(i) or 2(b)(iii), the first business
day after the expiration of a period of sixty (60) days after the occurrence of
such event.
(b) Upon a Change of Control, all Options (whenever granted) outstanding on
the date of such Change of Control shall be or become immediately and fully
exercisable.
(c) In the event of the Change of Control as defined in Section 2(b)(i),
2(b)(ii)(A), 2(b)(ii)(B)(2) or 2(b)(iii), all Options (whenever granted)
outstanding on the Option Cancellation Date which are not exercised on or before
the Option Cancellation Date shall be canceled on such date by the Company, and
the Company shall on such date pay to each holder of each such canceled Option a
cash amount equal to the excess, if any, in respect of each Option canceled, of
(i) the greater of (A) the Fair Market Value of the shares of Common Stock
subject to the Option on the business day immediately preceding the Option
Cancellation Date or (B) the Adjusted Fair Market Value of the Common Stock
subject to the Option over (ii) the aggregate purchase price for such shares of
Common Stock.
SECTION 18. AMENDMENT OF THE PLAN.
The Board is authorized to make such changes in the Plan as it may deem to
be in the best interests of the Company; subject, however, to the prior approval
of the stockholders of the Company if such alteration would: (a) materially
increase benefits to Participants, (b) materially increase the number of Shares
issuable under the Plan, or (c) materially modify the requirements as to
eligibility for participation in the Plan. Notwithstanding the foregoing, the
Plan shall not be amended with respect to non-Discretionary Options more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act, or the rules thereunder. The Board may
at any time suspend or discontinue the Plan. No termination or amendment of the
Plan, however, shall adversely affect any Option theretofore granted under the
Plan without the consent of the Optionee.
SECTION 19. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Shares pursuant to
the exercise of Options shall be used for general corporate purposes or such
other purpose as may be determined by the Company.
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<PAGE>
SECTION 20. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
SECTION 21. RESERVATION OF SHARES.
The Company, during the term of this Plan, shall at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
The Company, during the term of this Plan, shall use its best efforts to
seek to obtain from appropriate regulator agencies any requisite authorization
in order to issue and sell such number of Shares as shall be sufficient to
satisfy the requirements of the Plan. The inability of the Company to obtain
from any such regulator agency having jurisdiction the requisite
authorization(s) deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any Shares hereunder, or the inability of the Company to
confirm to its satisfaction that any issuance and sale of any Shares hereunder
will meet applicable legal requirements, shall relieve the Company of any
liability in respect to the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
SECTION 22. TAXES, FEES, EXPENSES AND WITHHOLDING OR TAXES.
(a) The Company shall pay all original issue and transfer taxes (but not
income taxes, if any) with respect to the grant of Options and/or the issue and
transfer of Shares pursuant to the exercise thereof, and all other fees and
expenses necessarily incurred by the Company in connection therewith, and will
from time to time use its best efforts to comply with all laws and regulations
which, in the opinion of counsel for the Company, shall be applicable thereto.
(b) The grant of Options hereunder and the issuance of Shares pursuant to
the exercise thereof is conditioned upon the Company's reservation of the right
to withhold in accordance with any applicable law, from any compensation or
other amounts payable to the Optionee, any taxes required to be withheld under
federal, state or local law as a result of the grant or exercise of such Option
or the sale of the Shares issued upon exercise thereof. To the extent that
compensation or other amounts, if any, payable to the Optionee is insufficient
to pay any taxes required to be so withheld, the Company may, in its sole
discretion, require the Optionee, as a condition of the exercise of an Option,
to pay in cash to the Company an amount sufficient to cover such tax liability
or otherwise to make adequate provision for the Company's satisfaction of its
withholding obligations under federal, state and local law.
SECTION 23. NOTICES.
Any notice to be given to the Company pursuant to the provisions of this
Plan shall be addressed to the Company in care of its Secretary (or such other
person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to an Optionee shall be delivered
personally or addressed to him or her at the address given beneath his or her
signature on his or her Option Agreement, or at such other address as such
Participant or his or her transferee (upon the transfer of the Shares purchased
upon exercise) may hereafter designate in writing to the Company. Any such
notice shall be deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, registered or certified, and deposited, postage
and registry or certification fee prepaid, in a post office or branch post
office regularly maintained by the United States Postal Service. It shall be the
obligation of each Optionee and each transferee holding Shares purchased upon
exercise of an Option to provide the Secretary of the Company, by letter mailed
as provided herein, with written notice of his or her direct mailing address.
SECTION 24. NO ENLARGEMENT OF OPTIONEE RIGHTS.
This Plan is purely voluntary on the part of the Company, and the
continuance of the Plan shall not be deemed to constitute a contract between the
Company and any Optionee, or to be consideration for or a condition of the
employment or service of any Optionee. Nothing contained in this Plan shall
A-11
<PAGE>
be deemed to give any Optionee the right to be retained in the employ or service
of the Company or any Subsidiary, or in the case of Outside Directors, obligate
the Company to nominate any Participant for election as a director, or to
interfere with the right of the Company or any Subsidiary to discharge or retire
any Optionee thereof at any time, subject to applicable law. No Optionee shall
have any right to or interest in Options authorized hereunder prior to the grant
thereof to such Optionee, and upon such grant he shall have only such rights and
interests as are expressly provided herein, subject, however, to all applicable
provisions of the Company's Certificate of Incorporation, as the same may be
amended from time to time.
SECTION 25. INVALID PROVISIONS.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee or Board fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Board.
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
SECTION 26. APPLICABLE LAW.
This Plan shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
SECTION 27. PLAN ADOPTION AND TERM.
(a) This Plan shall become effective upon the later to occur of (i) its
adoption by the Board and (ii) its approval by the Company's stockholders at an
Annual Meeting of Stockholders.
(b) Subject to the provisions herein relating to amendment or
discontinuance, this Plan shall terminate ten years from its effective date as
determined by subparagraph (a) above.
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<PAGE>
INTERDIGITAL COMMUNICATIONS CORPORATION
Proxy Solicited On Behalf Of The Board of Directors
The undersigned, revoking all previous proxies, hereby appoints William A.
Doyle, William J. Burns and Howard E. Goldberg, and each of them acting
individually, as the attorney and proxy of the undersigned, with full power of
substitution, to vote, as indicated below and in their discretion upon such
other matters as may properly come before the meeting, all shares which the
undersigned would be entitled to vote at the Annual Meeting of the Company to
be held on May 31, 1995, and at any adjournment or postponement thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF THE
NOMINEES FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF, "FOR" THE ADOPTION OF
THE COMPANY'S 1995 STOCK OPTION PLAN FOR EMPLOYEES AND OUTSIDE DIRECTORS AND
"FOR" RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS. THIS PROXY ALSO DELEGATES DISCRETIONARY
AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Please date and sign your Proxy on the reverse side and return it promptly.
<PAGE>
__________ [X] Please mark
COMMON your votes
as this
1. Election of Directors:
<TABLE>
<S> <C> <C>
For the nominees Withhold Authority Nominees: For a three-year term expiring at the 1998 Annual Meeting:
listed to the right to vote for the nominees Harley L. Sims, Barney J. Cacioppo
listed to the right
[ ] [ ] (Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the line below.)
_______________________________________________________________________
</TABLE>
2. The adoption of the Company's 1995 Stock Option Plan for Employees and
Outside Directors, as set forth in the Proxy Statement:
For [ ] Against [ ] Abstain [ ]
3. Ratification of Arthur Andersen LLP as independent accountants for the year
ending December 31, 1995:
For [ ] Against [ ] Abstain [ ]
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT.
Date: _________________________ , 1995
______________________________________
Signature of Shareholder
______________________________________
Signature of Shareholder
NOTE: PLEASE SIGN THIS PROXY EXACTLY
AS NAME(S) APPEAR ON YOUR STOCK
CERTIFICATE. WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE ADD YOUR TITLE AS SUCH, AND IF
SIGNER IS A CORPORATION, PLEASE SIGN
WITH FULL CORPORATE NAME BY A DULY
AUTHORIZED OFFICER OR OFFICERS AND
AFFIX THE CORPORATE SEAL. WHERE STOCK
IS ISSUED IN THE NAME OF TWO (2) OR
MORE PERSONS, ALL SUCH PERSONS SHOULD
SIGN.
