SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ 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)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
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_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11:*
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/_/ Check box if any part of the fee is offset as provided by
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<PAGE>
PRELIMINARY COPY
INTERDIGITAL COMMUNICATIONS CORPORATION
781 Third Avenue
King of Prussia, Pennsylvania 19406-1409
Notice of Annual Meeting of Shareholders
to be held June 5, 1998
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of InterDigital Communications
Corporation (the "Company") will be held at the Valley Forge Hilton Hotel, King
of Prussia, Pennsylvania, on June 5, 1998, at 1:00 p.m. local time, for the
following purposes:
1. To elect one director of the Company;
2. To approve and authorize an amendment to the Company's Certificate of
Incorporation to increase the number of shares of Common Stock authorized for
issuance by the Company from 75,000,000 to 100,000,000.
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, 1998;
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
24, 1998 are entitled to notice of and to vote at the meeting.
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 30, 1998
<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 at the Valley Forge Hilton, King of
Prussia, Pennsylvania on June 5, 1998, 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 April 30, 1998. The
principal executive offices of the Company are located at 781 Third Avenue, King
of Prussia, Pennsylvania 19406-1409.
The record date for determining shareholders entitled to vote at the
Meeting has been fixed at the close of business on April 24, 1998 ("Record
Date"). As of such date, there were 48,___,___ shares of the Company's 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 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 as votes cast on a proposal and will have no effect on matters to be
voted upon.
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 nominee named below as director, FOR the increase in the number
of shares of Common Stock authorized, and 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, 1998, 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.
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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.
ELECTION OF DIRECTORS
(Proposal 1)
The Board presently consists of four members, divided into three classes
having a term of three years and until their successors are elected and
qualified. The Board has nominated one current director for election at the
Meeting for a term expiring at the year 2001 Annual Meeting of Shareholders and
until his successor is elected and qualified. Unless authority to vote for the
nominee 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 director
of the nominee named below. Although the Board does not contemplate that the
named nominee 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 two directors
having a term expiring at the year 2000 Annual Meeting of Shareholders and one
director having a term expiring at the 1999 Annual Meeting of Shareholders.
The following biographical information is furnished as to the nominees 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 2001 Annual Meeting
ROBERT S. ROATH, 55, has been a director of the Company since May 1997 when
he was elected by the Board to fill the vacancy created by the death of Harley
L. Sims in April 1997. Mr. Roath was Chief Financial Officer and Senior Vice
President of RJR Nabisco Inc. from April 1995 to April 1997 and Corporate
Controller and Senior Vice President at RJR Nabisco from September 1990 to April
1995. Mr. Roath has been a part-time consultant and Chairman of the Advisory
Board to LEK/Alcar, a shareholder value consulting firm, since May 1997.
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Members of the Board of Directors Continuing in Office
Term Expiring at 2000 Annual Meeting
D. RIDGELY BOLGIANO, 66, has been a director of the Company since 1981. He
has been a Vice President and Chief Scientist of the Company since April 1984,
and Acting President of InterDigital Patents Corporation ("IPC"), the Company's
wholly owned subsidiary since May 1996. He has been affiliated with the Company
in various capacities since 1974.
WILLIAM A. DOYLE, 49, became a director in May 1996, filling the vacancy
left by the resignation of William Burns. He has served as President of the
Company since November 1994. He was Executive Vice President, Chief
Administrative Officer, General Counsel and Secretary of the Company from
February 1994 to November 1994 and served as Vice President, General Counsel and
Secretary of the Company from March 1991 to February 1994.
Member of the Board of Directors Continuing in Office
Term Expiring at 1999 Annual Meeting
HARRY G. CAMPAGNA, 59, Chairman of the Board, has been a director of the
Company since April 1994. Mr. Campagna has been the President and Chairman of
the Board of Qualitex Co. for more than the past five years. Qualitex is a
manufacturer of press pads and related items for the garment, apparel and
textile industries.
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 and an Executive Committee.
The current members of the Audit Committee are Mr. Roath, Chairman and Mr.
Campagna. During 1997, 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, Chairman, and Mr. Roath. The
Compensation Committee held one meeting in 1997. Its
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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 consists of Mr. Campagna,
Chairman, Mr. Doyle and Mr. Roath. The Nomination and Search Committee held no
meetings in 1997. 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 six times during 1997. During 1997, 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
Under the Company's 1997 Stock Option Plan for Outside Directors (the "1997
Plan") each member of the Board who is not an officer or employee of the Company
(an "Outside Director")is entitled to receive an annual grant of non-qualified
stock options to purchase shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant. Except as to
1997, the grant is automatically made to each Outside Director upon the
conclusion of the Company's Annual Meeting of Shareholders in each year in an
amount equal to 16,000 multiplied by the number of years remaining in his term
as an Outside Director. With respect to automatic, non-discretionary grants made
in 1997, the 1997 Plan provided each Outside Director with a grant of 16,000
shares effective September 4, 1997, plus 16,000 shares multiplied by the number
of years remaining in his term as a director after the 1998 Annual Meeting of
Shareholders. All non-discretionary options granted under the 1997 Plan vest
annually on the date of each year's Annual Meeting of Shareholders at the rate
of 16,000 shares of Common Stock per year commencing on the date of the Annual
Meeting following the Annual Meeting of Shareholders at which the options were
granted. Prorated option grants are made to persons who served for a partial
year.
The provision for the non-discretionary option grants under the 1997 Plan
as described above superceded (effective September 1997) the terms of the
Company's 1995 Stock Option Plan for Employees and Outside Directors (the "1995
Plan") which provided automatic annual grants of non-qualified stock options to
purchase Common Stock to Outside Directors. Non-discretionary grants under the
1995 Plan were made on July 1 of each year at an exercise price equal to the
fair market value of the Common Stock on such date to Outside Directors who
served continuously from July 1 of the preceding year, and prorated option
grants were made for service for a partial year. The annual grant entitled each
Outside Director to purchase 12,000 shares of the Company's Common Stock, and
additional options were granted to Outside Directors to acquire
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2,000 shares for each committee of the Board on which the director served as
chairperson. In addition, each Outside Director who served as a member of any
Board committee (on which he does not also serve as chairman)received a
non-discretionary option grant to acquire 1,000 shares of Common Stock.
Outside Directors are also entitled to an annual monetary director fee,
payable on January 15 of each year, in the amount of $15,000 for a full calendar
year of service preceding the payment date ("Fee"). A pro rata portion of the
Fee is paid for service of less than a full year. Payment of the Fee for service
from January 15, 1997 through January 15, 1998 has been deferred in order to
conserve cash. The Company reimburses Outside Directors for certain expenses
incurred in attending Board and committee meetings.
In connection with his service as Chairman of the Board, Mr. Campagna was
also awarded a non-qualified stock option in 1997 to purchase 360,000 shares of
Common Stock (of which 60,000 are currently exercisable)at an exercise price of
$5.44, being equal to the fair market value on the date of grant. In connection
with his service as an Outside Director, Mr. Roath was also awarded a
non-qualified stock option in 1997 to purchase 45,000 shares of Common Stock (of
which 7,500 are currently exercisable)at an exercise price of $5.44, being equal
to the fair market value on the date of grant. The foregoing options vest in six
equal biannual installments over three years.
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. Executive 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 respect to fiscal 1997, all
Section 16(a) filing requirements applicable to the Reporting Persons were
complied with except as to Mr. Bolgiano who made one late filing with respect to
one transaction which occurred in 1996.
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 13 of this Proxy
Statement are not to be deemed to be "soliciting material" or to be "filed" with
the Commission, or to be subject to certain of the proxy rules or to the
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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, 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 1997 and the policies which it employed during such
period:
One of the most important duties of this Committee is to determine the
compensation of the Company's executive officers and one of its important goals
is to ensure that shareholder value is positioned as a primary driver and
motivator of executives. Accordingly, the Committee has established a
comprehensive approach toward ensuring the Company's executive compensation is
shareholder focused, appropriate, competitive and in compliance with its
independent oversight responsibilities.
The Committee is guided by the following executive compensation objectives
of the Company:
|_| To attract highly qualified executive and management talent within the
international wireless telecommunications products and services
industry;
|_| To retain top performers especially through rapid industry changes and
to ensure future management continuity of the existing successful
team;
|_| To create a business environment of company-wide team focus and spirit
while maintaining entrepreneurialism and innovation, ensuring superior
customer service, and achieving maximum success for shareholders;
|_| To provide for overall total compensation opportunities for
InterDigital's executives which are consistent with performance
achieved, and appropriate with shareholder returns achieved;
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|_| To maintain conservative fixed costs associated with cash compensation
and to emphasize equity sharing for driving long-term performance and
related compensation awards; and
|_| To strive for achieving competitiveness, appropriateness, fairness and
soundness in the overall executive compensation program's
implementation and administration.
Executive compensation consists primarily of four components: base salary,
annual (performance-based) compensation, equity incentives and executive
benefits. Compensation of the Company's Chief Executive Officer ("CEO") has
historically been based on the same components. The Company and its former CEO,
Mr. Webb, severed their relationship effective June 1997 and the Board has
decided not to fill the CEO position in the near future. Since Mr Webb's salary
and benefits during the period in which he served in that capacity were not
increased from the date he started and no bonus or equity awards were made to
him in 1997, this Committee's report is limited to compensation of the Company's
other executive officers.
Base Salary
The Company's policy is to set base salaries for each executive officer
position in the upper middle range of scales for equivalent jobs with other
similarly situated industrial employers. The Company has used compensation
studies and the services of Ernst & Young to monitor the Company's competitive
compensation status, and to recommend salary ranges and compensation changes to
the Committee.
Executive Officers are reviewed annually by their superiors, and the Board.
Generally, salary adjustments for executive officers are determined by the
quality of their individual performance, changes in the nature of their
responsibilities, and the relationship of their salary to their established
salary range. However, due to the Company's financial position and in an effort
to conserve cash, there were no salary increases granted to executive officers
in 1997.
Annual Performance Based Compensation
Annual performance based compensation may be awarded to an executive if one
or more of the following goals are achieved: (1) corporate goals including
financial, non-financial and strategic initiatives, (2) operating business
unit/departmental area goals, and (3) individual contribution goals. Most or all
of an executive's annual performance based awards can be primarily based on
overall corporate wide performance, if deemed appropriate.
In particular, performance compensation is awarded for sales and marketing
efforts upon the attainment of certain specified
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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. The
Company also had a Sales Incentive Plan in effect during 1997 which provides for
fixed commission awards based on net sales under which certain executives of the
Company were eligible to participate.
The Company does not presently have a bonus plan for executives although
the Committee may retain a compensation consultant to advise it on incentive
compensation matters in addition to general compensation matters and may, in its
discretion, adopt a formal executive bonus plan in the future.
No annual performance based compensation has been awarded to executives in
fiscal 1997 other than awards made for sales and marketing efforts in prior
years.
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 options and non-qualified 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. All incentive stock options and 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.
In 1997, the Committee relied more heavily on the grant of stock options as
a major component of executive compensation. The Committee was able use this
method of compensation without seeking an increase in the number of authorized
shares in any existing plan or instituting any new option plan due to the number
of outstanding options (held by both executives and employees) which expired or
were canceled in recent years.
Executive Benefits
The Company has not relied on executive benefits and retirement programs as
a major component of its compensation packages for executives. As part of its
overall strategy and guidelines, however, the Committee has determined that
executive benefits and retirement programs will be targeted at the competitive
50th percentile of the marketplace and focused upon enhancing and ensuring the
health and welfare and retirement needs of executives.
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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
Robert S. Roath
April 15, 1998
Summary Compensation Table
The following table sets forth certain information concerning the annual
and long-term compensation paid to or for (i)each person who served as the
Company's Chief Executive Officer during the fiscal year ended December 31,
1997, (ii) the Company's four most highly compensated other executive officers
whose total annual salary and bonus exceeded $100,000 in 1997 and (iii) one
additional individual who is an executive officer of InterDigital Patents
Corporation, a wholly owned subsidiary of the Company (collectively, the "Named
Officers"), for services rendered to the Company and its subsidiaries during
fiscal years 1995, 1996 and 1997:
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<TABLE>
<CAPTION>
Long-Term
Compensation
-------------------------
Annual Compensation Awards
------------------------------------------ -------------------------
Other Securities All Other
Name and Annual Underlying Compen-
Principal Compensation Options/ sation
Position Year Salary Bonus(1) ($)(2) SARs (#) (3)
--------- ---- -------- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gregory E. Webb 1997 $109,375 $0 -- 0 $143,322
Chief Executive Officer 1996 $ 53,977 $0 $ 40,743(4) 250,000 $ 390
(To June 1997)
William A. Doyle 1997 $220,000 $0 $0 200,000 $ 2,432
President 1996 $186,667 $0 $0 40,000 $ 800
1995 $170,000 $ 68,000 $0 0 $ 19,894
Howard E. Goldberg 1997 $190,000 $0 -- 75,000 $ 3,905
Executive Vice President 1996 $146,667 $0 $160,000(5) 30,000 $ 979
General Counsel and 1995 $125,000 $ 50,000 $ 34,437(6) 50,000 $ 9,042
Secretary
Mark Lemmo 1997 $170,000 $0 $222,522(7) 136,500 $ 2,175
Executive Vice President 1996 $140,000 $0 $ 75,000(8) 30,000 $ 211
(Since May 1996) 1995 $125,942 $ 75,000 $0 1,500 $ 20,456
Charles R. Tilden 1997 $155,555 $0 $0 75,000 $ 1,534
Senior Vice President 1996 $ 19,374 $0 $0 90,000 $ 0
(Since October 1996)
D. Ridgely Bolgiano 1997 $125,000 $0 $0 151,500 $ 3,465
Vice President and 1996 $111,667 $0 $0 30,000 $ 2,294
Chief Scientist, Acting 1995 $105,000 $292,000(9) $0 0 $ 2,246
President of InterDigital
Patents Corporation
</TABLE>
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(1) Amounts listed as bonuses for fiscal 1995 were accrued but not paid until
1996 for each Named Officer.
(2) As permitted by rules established by the Commission, no amounts are shown
with respect to certain "perquisites" where such amounts do not exceed the
lesser of 10% of bonus plus salary or $50,000.
(3) Amounts listed under "All Other Compensation" for 1997 represent the dollar
value of insurance premiums with respect to term life insurance (Webb
$1,728; Doyle $974; Goldberg $2,115; Lemmo $418; Tilden $372; Bolgiano
$3,465), 401-K matching (Webb $969; Doyle $1,458; Goldberg $1,790; Lemmo
$1,757; Tilden $1,162) and in the case of Mr Webb $140,625 in severance in
connection with his resignation.
(4) In connection with his move to join the Company in October 1996, the
Company reimbursed Mr. Webb for certain relocation expenses in the amount
of $40,743.
(5) Amount listed represents commissions related to a transaction completed in
1996.
(6) Amount listed includes $33,187 in commissions related to certain
transactions completed in 1995.
(7) Amount listed represents commissions related to various transactions
completed in 1996 but not paid until 1997 and a transaction completed in
1997.
(8) Amount listed represents commissions related to a transaction completed in
1996.
(9) A portion ($250,000) of Mr. Bolgiano's bonus was awarded in settlement of
all claims for payment under the IPC Executive Bonus Plan and in
consideration of any claims Mr. Bolgiano would otherwise have asserted
under such Plan which was terminated in 1995.
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Each of Messrs. Doyle, Goldberg, Lemmo, Tilden and Webb have entered into
employment agreements with the Company (the "Employment Agreements")that provide
severance pay benefits, among other things, in certain events of termination of
employment. Certain of these agreements generally provide for the payment of
severance up to a maximum of one year's salary and up to a maximum of one year's
continuation of medical and dental benefits. In certain of these agreements, in
the event of a termination following a change of control, which is defined as
the acquisition, including by merger or consolidation, or by the issuance by the
Company of its securities, by one or more persons in one transaction or a series
of related transactions, of more than fifty percent of the voting power
represented by the outstanding stock of the Company, the employee would
generally receive two years salary and the immediate vesting of all stock
options.
The Employment Agreements (executed between October 1996 and May 1997)
provide annual salaries of said Executive Officers as follows: Doyle $220,000;
Goldberg $190,000; Lemmo $170,000; Tilden, $155,000, and Webb $250,000.
Under the terms of his Employment Agreement with the Company, Mr. Webb is
to be paid severance equal to his annual salary of $250,000, together with a
continuance of medical and dental benefits (expected to total approximately
$5,300) until June 8, 1998. He is also subject, under said Agreement, to a one
year covenant not to compete.
Pursuant to action by the Board, Mr. Bolgiano is paid a salary of $125,000.
In addition, Mr. Bolgiano has entered a Severance Benefit Agreement with the
Company having an eighteen month term beginning April 1996 which provide that if
employment is terminated for any reason other than death, resignation,
disability or for cause, the Company will continue to pay salary and related
benefits as if he were still employed for the term of the Agreement. The
Agreement also provides that employment will be deemed constructively terminated
upon any significant adverse change in his authority resulting in a reduction of
base salary or any required geographic relocation.
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 1997 and
unexercised stock options held by them at the end of fiscal 1997.
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Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------
Number of % of Total Potential Realizable Value
Securities Options/SARs at Assumed Annual Rates
Underlying Granted to of Stock Price Appreciation
Options/ Employees in Exercise for Option Term(1)
SARs Last Fiscal or Base Expiration ----------------------------
Name Granted (#) Year Price Date 5% 10%
---- ----------- ------------ -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gregory E. Webb 0 0 $-- -- $0 $0
William A. Doyle 200,000 10.27% $5.44 09/21/07 $683,686 $1,732,458
Howard E. Goldberg 75,000 3.85% $5.44 09/21/07 $256,382 $ 649,672
Mark Lemmo 60,000 3.08% $5.69 03/19/07 $214,536 $ 543,634
1,500 .08% $5.50 09/03/07 $ 5,187 $ 13,143
75,000 3.85% $5.44 09/21/07 $256,382 $ 649,672
1,500 .08% $4.375 12/04/07 $ 4,126 $ 10,454
Charles R. Tilden 75,000 3.85% $5.44 09/21/07 $256,382 $ 649,672
D. Ridgely Bolgiano 1,500 .08% $5.625 06/18/07 $ 5,304 $ 13,441
150,000 7.7% $5.44 09/21/07 $512,765 $1,299,344
1,500 .08% $5.375 12/04/07 $ 4,126 $ 10,454
</TABLE>
(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.
12
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-the-Money
Options/SARs at Options/SARs at
Shares FY-End (#) FY-End($)(1)
Acquired On Value -------------------------- -------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gregory E. Webb ....... 0 $0 0 0 $ 0 $0
William A. Doyle....... 0 $0 211,667 186,667 $2,000 $0
Howard E. Goldberg..... 0 $0 192,500 77,500 $ 0 $0
Mark Lemmo............. 0 $0 97,000 117,500 $ 0 $0
Charles R. Tilden...... 0 $0 42,500 122,500 $ 0 $0
D. Ridgely Bolgiano.... 0 $0 90,300 140,000 $6,100 $0
</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, 1997.
Shareholder Return Performance Graph
The following graph compares for years 1993 through 1997 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").
<TABLE>
<CAPTION>
[IN THE PRINTED VERSION THE GRAPHIC CHART DEPICTS THE FOLLOWING]
12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
InterDigital Communications Corporation 100.0 56.8 79.7 156.2 125.8 64.9
AMEX Stock Market (US Companies) 100.0 117.6 109.6 141.0 143.3 179.2
AMEX Stocks (SIC 3660-3669 US Companies) 100.0 85.6 90.7 162.2 124.1 106.5
Communications Equipment
</TABLE>
13
<PAGE>
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 31, 1992 (the
last trading day in 1992), 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.
Security Ownership Of
Certain Beneficial Owners
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of January 29, 1998, by each person
known to the Company to be the beneficial owner of more than 5% of any class of
the Company's outstanding Common Stock. The following information is based
solely upon such shareholder's Schedule 13G, Amendment No. 2, dated January 29,
1998, as filed with the Securities and Exchange Commission.
Name and Address of Amount and Percent of
Beneficial Nature of Common Stock
Owner Ownership(1) Outstanding
------------------- ------------ ------------
Heartland Advisors,Inc................ 8,644,300 17.9%
790 North Milwaukee Street
Milwaukee, WI 53202
(1) Heartland Advisors, Inc. has sole voting and dispositive power as to
8,206,100 shares and sole dispositive, but no voting power as to 438,200
shares. All of such shares are held in various investment advisory accounts
of Heartland Investors. The interests of one such account, Heartland Value
Fund, a series of Heartland Group. Inc., a registered investment company,
relate to more than 5% of the class.
Security Ownership Of Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of April 1, 1998, by each of the
Company's directors, by each of the Named Officers, and by all executive
officers and directors of the Company as a group. Unless otherwise indicated,
the shareholders
14
<PAGE>
listed possess sole voting and investment power with respect to the shares
listed.
<TABLE>
<CAPTION>
Percent of
Name of Amount and Common Stock
Beneficial Nature of Outstanding (if
Owner Ownership(1) greater than 1%)(2)
---------- ------------ -------------------
<S> <C> <C>
D. Ridgely Bolgiano............................... 301,177 --
Harry G. Campagna ................................ 306,724 (3) --
William A. Doyle.................................. 214,641 --
Howard E. Goldberg................................ 195,417 (3) --
Mark Lemmo........................................ 97,934 --
Robert S. Roath................................... 12,616 --
Charles R. Tilden................................ 43,500
Gregory E. Webb .................................. 0 --
All directors and officers as a group (8 persons) 1,172,009 (3) 2.4 %
</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 April 1, 1998 or will become
exercisable within 60 days of such date: Mr. Bolgiano, 202,550; Mr.
Campagna, 276,724; Mr. Doyle, 211,667; Mr. Goldberg, 192,500; Mr. Lemmo,
97,000; Mr. Roath, 8,616; Mr. Tilden, 42,500; Mr. Webb, 0; all directors
and executive officers as a group, 2,063,114.
(2) Based upon 48,275,776 shares of Common Stock issued and outstanding at
April 1, 1998.
(3) Investment and voting power with respect to certain of such securities 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.
Compensation Committee Interlocks
and Insider Participation
During 1997 the following directors served on the Compensation and Stock
Option Committee of the Board: Mr. Campagna and Mr. Cacioppo, who resigned from
the Board in September 1997. Neither of the aforementioned Committee members was
an officer or employee of the Company or any of its subsidiaries during 1997, or
was formerly an officer of the Company or any of its subsidiaries.
APPROVAL AND AUTHORIZATION OF AN AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION
(Proposal 2)
The authorized capital stock of the Company consists of 75,000,000 shares
of Common Stock, $0.01 par value, 48,275,776 of which were outstanding as of
April 1, 1998 and 14,398,600 shares of Preferred Stock, $0.10 par value, of
which 102,162 shares of $2.50 Cumulative Convertible Preferred Stock were
outstanding as of April 1, 1998. In addition as of April 1, 1998, approximately
(i) 12,728,000 shares of Common Stock were reserved for issuance under
15
<PAGE>
the Company's stock option and employee stock purchase plans,(ii) 3,574,000
shares of Common Stock were reserved for issuance upon exercise of outstanding
warrants, and (iii) 8,000,000 shares were reserved for issuance through December
11, 1998 under the terms of an option granted to Alcatel.
The Board of Directors considers the proposed increase of 25,000,000 in the
number of authorized shares of Common Stock necessary to give the Company the
ability to pursue future corporate opportunities such as financing, business
acquisitions and strategic alliances as well as for other general corporate
purposes, including employee stock options. The Board of Directors believes that
the availability of such additional shares of Common Stock would enable the
Company to act promptly to take advantage of various corporate opportunities as
they arise, without the delay or cost of calling a special meeting of
shareholders (unless otherwise required by applicable law or the rules of any
stock exchange on which the Company's Common Stock might then be listed).
Except with regard to the stock purchase option granted to Alcatel
described below, the Company does not currently have any agreements with respect
to the issuance of its Common Stock relating to capital raising, acquisitions or
alliance relationships; however, the Company may explore financing alternatives
and business acquisitions which involve the issuance of Common Stock or
securities convertible into Common Stock. In addition, since the Company is
committed to enhancing the long-term strategic value and the synergies of its
relationship with its other strategic partners, the Company may consider
granting additional options to purchase Common Stock to other existing or future
strategic partners.
In connection with the Company's strategic agreement with Alcatel dated
March 12, 1998, the Company has granted Alcatel an option to purchase, in whole
and not in part, $22,000,000 of the Company's Common Stock. Such option expires
on December 11, 1998. The option agreement provides that any restrictions
associated with Alcatel's holding of the shares and related stock purchase
discounts, together with other terms and conditions shall be subject to
negotiation prior to the purchase. The actual number of shares which may be
acquired by Alcatel pursuant to an exercise of its option to purchase
InterDigital Common Stock is thereby presently indeterminable, being determined
at the time of final negotiation of purchase terms based upon several factors
including (i) the net per share purchase price of the Common Stock at any date
relevant to the transaction based upon factors such as the prevailing market
price of the Common Stock and agreed restriction and discount factors, and (ii)
specific additional negotiated terms and conditions.
The Alcatel option requires that the Company reserve for issuance a
sufficient number of shares of its Common Stock to effect delivery against
Alcatel's purchase. In determining the minimum number of shares to be so
reserved, the Alcatel option terms require that the calculation of the
prospective per share purchase price, for reserve purposes only, be based upon
the lowest per share closing price during the period from December 11, 1997 to
16
<PAGE>
March 11, 1998, resulting in a required reserve of 8,000,000 shares of Common
Stock.
The Board of Directors has adopted a resolution approving an amendment to
the Company's Articles of Incorporation to effect the aforementioned increase,
subject to shareholder approval. Upon shareholder approval, all 25,000,000
additional authorized shares would be issuable at the discretion of the Board
without further shareholder action, unless such approval is required by law.
Upon shareholder approval, the first paragraph of Article Five of the
Company's Articles of Incorporation would be amended to read as follows:
'The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) 100,000,000 shares of
Common Stock, $.01 par value per share ("Common Stock"), and 14,398,600
shares of Preferred Stock, $0.10 par value per share ("Preferred Stock").'
The additional shares of Common Stock to be authorized would have rights
identical to the currently authorized Common Stock of the Company. Any future
issuance of additional authorized shares of Common Stock, if made other than on
a pro rata basis, would reduce the current stockholders' proportionate interests
in the Company and could therefore have a dilutive effect on their financial and
voting interests.
The Board recommends a vote FOR Proposal 2 to amend the Articles of
Incorporation to increase the number of authorized shares of Common Stock to
100,000,000 shares.
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, 1998. 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.
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 1998, but the
17
<PAGE>
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 December 31, 1998 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, 1997. REQUESTS FOR EXHIBITS,
FOR WHICH THE COMPANY WILL IMPOSE A CHARGE, SHOULD BE DIRECTED IN WRITING TO
HOWARD E. GOLDBERG, SECRETARY, INTERDIGITAL COMMUNICATIONS CORPORATION, 781
THIRD AVENUE, KING OF PRUSSIA, PENNSYLVANIA 19406-1409.
By Order of the Board of Directors
Howard E. Goldberg, Secretary
King of Prussia, Pennsylvania
April 30, 1998
18
<PAGE>
INTERDIGITAL COMMUNICATIONS CORPORATION
Proxy Solicited On Behalf Of The Board of Directors
The undersigned, revoking all previous proxies, hereby appoints Harry G.
Campagna, William A. Doyle 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 on the reverse side of this proxy card 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 June 5, 1998, and at any adjournment
or postponement thereof.
Please date and sign your Proxy on the reverse side and return it promptly.
<PAGE>
1. Election of Directors:
For the nominee Withhold Authority to vote for
----- listed below ----- the nominee listed below
Nominee: For a three-year term expiring at the year 2001
Annual Meeting: Robert S. Roath
2. Authorize an amendment to the Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 75,000,000 to 100,000,000:
For Against Abstain
----- ----- -----
3. Ratification of Arthur Andersen LLP as independent accountants for the year
ending December 31, 1998:
For Against Abstain
----- ----- -----
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEE
FOR DIRECTOR LISTED ABOVE, "FOR" AN AMENDMENT OF THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
75,000,000 TO 100,000,000 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.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT.
Date: , 1998
---------------
- --------------------------------------------------
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.
