EXHIBIT 10.66

 

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InterDigital Communications Corporation

 

Annual Employee Bonus Plan

 

Purpose

 

This Annual Employee Bonus Plan (“Plan”) is designed to provide an effective
means to motivate and compensate eligible employees, on an annual basis, through
cash and stock award bonuses based on the achievement of business and individual
performance objectives during each calendar year (“Plan Year”). The Plan is
intended to be the Company’s primary vehicle for the granting of bonuses.
However, the Company may, in certain limited circumstances, grant bonuses
outside of this program, in the sole discretion of the Company.

 

The compensation contemplated under this Plan is considered “payment for
success” in that any payout under the Plan is subject to the achievement of
specific performance goals by the Company and by each individual during the Plan
Year. The Company believes that such compensation can be a highly effective form
of compensation that can enhance the employer - employee “stakeholder”
relationship. In addition, the Company hopes that by providing short-term
incentive compensation, the Company will motivate and increase the retention
rate among its employees which, in turn, will enhance the Company’s long-term
value.

 

Who Is Eligible?

 

All regular full-time or part-time employees1 will be eligible to receive a
bonus under the Plan, unless an employee: (i) is not working actively at the
time of the payout of the bonus or at least as of March 31st of the year
following the end of the Plan Year (unless such person was involuntarily
terminated other than for intentional wrongdoing after the end of the Plan Year,
but before the bonus was paid); (ii) was working actively for the Company for
less than ninety (90) days during the Plan Year, (iii) received an individual
performance appraisal rating of less than “2.75” (Meets Job Requirements) for
the Plan Year, or (iv) was involuntarily terminated for unsatisfactory
performance or misconduct, such determination to be made in the CEO’s sole
discretion (or the Compensation & Stock Option Committee in the case of Section
16 Officers) based upon documentary or other objective substantiation.

 

The Compensation & Stock Option Committee (“Compensation Committee”) may grant
exceptions to the above eligibility criteria in its sole discretion. In
addition, Employees who meet

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1 “Regular full-time” and “regular part-time” employees are defined in the
employee handbook and specifically exclude “seasonal/casual employees”, (which
are also defined in the employee handbook).

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the eligibility requirements set out above but were not regular full-time or
regular part-time employees for the full Plan Year will be paid any bonus on a
pro rata basis.2 Pro-rata will mean a percentage determined by the CEO or
President (in his discretion) within a range (specified below) based upon a
number of days within the Plan Year during which the employee was employed on a
regular, full-time or regular part-time, non-temporary basis at InterDigital.

 

Number of Days Employed

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   Pro-Rata Portion of Bonus to be Paid

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90 to 180 days

   25 to 50 %

181 to 270 days

   51 to 75 %

271 to 364 days

   76 to 100 %.

 

How Does the Plan Work?

 

Each employee is assigned a target bonus. The target bonus is a percentage of
the employee’s annual base salary in effect as of the end of the Plan Year. If
the Company or Department achieves certain business performance results, and the
employee achieves certain individual goals, the employee will receive the target
bonus. Company or Department business performance results will be measured
either based on the Company’s Annual Goals, as approved by the Compensation
Committee, for C.E.O., President, and Sr. Officers, and based on Departmental
Goals, as approved by the Department Head and COO, for all other levels of
employees. If the actual results of the Company or Department business
performance for the year exceed or fall short of the targets, then the target
bonus will be adjusted up or down, depending upon the level of business and
individual achievement. The specific adjustments and an example of how the bonus
is calculated is described below.

 

The business performance goals will be determined by the Compensation Committee
for the C.E.O., President and Sr. Officer levels and the business performance
goals for each Department will be determined by the Department Head and COO and
will be communicated to the employees, normally in the first quarter of each
Plan Year. The assessment of individual performance goals will be accomplished
through the employee’s annual performance rating. The business and individual
performance goals are intended to be reasonable “stretch” goals.

 

The impact of actual business or individual performance during the Plan Year on
the bonus paid varies between positions, with the bonus for the Company officers
being more dependant upon overall Company performance, while the bonuses for
management and non-management employees being more dependant upon individual
performance. The relative weighting of the business and individual performance
goals has been established based upon an estimation of the employee’s ability,
based on their position within the Company, to directly impact and be held
accountable for, his or her achievements and the Company’s overall performance.

 

[INTENTIONALLY LEFT BLANK]

 

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2 Employees who do not work a full Plan Year because they were out of work on an
approved leave of absence for part of the plan year (FMLA Leave, Medical Leave
independent of FMLA Leave, Personal Leave, or leave during which the employee
receives any STD, LTD or worker’s compensation payments) will also be paid any
bonus on a pro rata basis.

 

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The Annual Target Bonus for each band, and the associated weighting factors are
as follows:

 

Band

(In the event a Participant

changes bands during the

Plan Year, the Annual

Target Bonus will be

calculated based on the

Participant’s actual band at

year-end)

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   Annual Target
Bonus (% of base
salary)

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  Percentage of Bonus
Related to Business
Performance (either
Company or
Departmental)

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  Percentage of
Annual Target
Bonus Related to
Individual
Performance

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C.E.O.

   57%   75%   25%

President

   50%   75%   25%

Sr. Officer

   40%   75%   25%

Functional VP

   35%   75%   25%

Senior Director

   25%   60%   40%

Director/Functional Equivalent

   20%   60%   40%

Senior Manger/ Functional Equivalent

   15%   40%   60%

Manager/ Functional Equivalent

   10%   40%   60%

Non-Management

   4%/6%/8%
based on grade level   25%   75%

 

In each Plan Year, the portion of the Annual Target Bonus related to business
performance may be allocated among a number of business goals.

 

How Do Actual Business and Individual Performance Affect the Bonus to be Paid?

 

As described above, the bonus consists of two components: the bonus attributable
to business /departmental performance, and the bonus attributable to individual
performance. The impact of actual results as compared to business/departmental
and individual goals on any bonus to be paid is described below.

 

Business Goals. The calculation of the bonus payout for the business performance
will be based upon either Company’s actual business results measured against the
goals set by the Compensation Committee (for the C.E.O, President and Sr.
Officer) or the Department’s actual business results measured against the goals
set by the Department (for all other bands). If the Company or Department
achieves a specified goal, then 100% of the bonus related to that business goal
will be awarded. If actual results deviate from established business goals, then
the bonus payout amounts will be determined as follows:

 

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Results above the goal: If the Company/Department performance exceeds the
established business goals by a certain percentage (e.g., actual Company
earnings exceed an established goal by ten percent), then the payout of that
portion of the annual target bonus related to that business goal will be
increased by that percentage amount above the goal, up to a maximum of a 100%
increase over the bonus associated that goal. Thus, if actual Company/Department
performance on a particular goal exceeds the goal by 10%, then the target bonus
associated with that goal will be increased by 10%, see below:

 

Results

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   Percentage
Payout

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101%

   101 %

    ¯

   ¯  

200%

   200 %

 

Results below the goal: If the actual business performance falls short of an
established goal by a certain percentage (e.g., actual Company earnings are 10%
less than the earnings goal), then the bonus associated with that business goal
will be decreased by four times the percentage of the shortfall, with no bonus
being payable for a goal if the goal is missed by more than 20%. The sliding
scale for results below the target is given below:

 

Results

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   Percentage
Payout

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100%

   100 %

90%

   60 %

80%

   20 %

79%

   0 %

 

The Compensation Committee, in its sole discretion, can determine that a
business goal has been substantially met or has been met to a degree warranting
a higher pay-out than would otherwise be calculable under this Plan. For
example, the Compensation Committee may determine that one-time charges should
be disregarded in determining the pay-out under an earnings performance goal.

 

Individual Performance. The evaluation of the individual performance is the
responsibility of the employee’s supervisor using the Company’s performance
evaluation system. The payout of the bonus related to individual performance
will be based on the employee’s individual appraisal rating given pursuant to
the performance evaluation, as follows:

 

Appraisal Rating

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Percentage Payout of Bonus Related to

Individual Performance

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4.85 – 5.0

 

(Outstanding)

   140 %

4.70 – 4.84

 

( “ )

   135 %

4.55 – 4.69

 

(Exceeds Job Requirements)

   130 %

4.40 – 4.54

 

( “ )

   125 %

4.25 – 4.39

 

( “ )

   120 %

4.10 – 4.24

 

( “ )

   115 %

3.95 – 4.09

 

( “ )

   110 %

3.80 – 3.94

 

( “ )

   105 %

3.65 – 3.79

 

(Meets Job Requirements)

   100 %

3.50 – 3.64

 

( “ )

   95 %

3.35 – 3.49

 

( “ )

   90 %

3.20 – 3.34

 

( “ )

   85 %

3.05 – 3.19

 

( “ )

   80 %

2.90 – 3.04

 

( “ )

   75 %

2.75 – 2.89

 

( “ )

   70 %

        2.74 ¯

 

(Needs Improvement/Unsatisfactory)

   0 %

 

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When Will the Bonus Be Paid?

 

Bonuses will normally be paid under the Plan between February 15 and March 31 of
the year following each Plan Year.

 

An Example of How the Bonus is Calculated

 

Assume an entry level management employee is earning a base salary of $50,000
and is employed for the full Plan Year. The employee has an annual target bonus
of 10% of base salary ($5000). The Department previously established two
business targets of equal weight for the Plan Year. The actual results for the
first goal were 4% below the goal.; the actual results for the second goal were
2% above the goal. The employee achieves an individual performance appraisal of
“3.4”. The employee’s bonus would be calculated as follows:

 

    A

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  B

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  C

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  AxC

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Performance Factor

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  Percentage of
Bonus
Relating to
Performance
Factor

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  Result as a
Percentage
of Goal

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Percentage

Payout

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  Weighted Result

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Goal One   20%   96%   84% (1 to 4 ratio)   16.80%
(84% x 20%) Goal Two   20%   102%   102% (1 to 1 ratio)   20.40%
(102% x 20%) Individual Performance   60%   90%   90%   54%
(60% x 90%) Total   100%   N/A   N/A   91.20% Bonus Calculation   Base Salary x
Weighted Result x Annual Target Bonus = Bonus to be paid
$50,000 x 91.20% x 10% = $4,560

 

Who Will Receive Bonus Payments in Common Stock?

For the CEO, President, Sr. Officer, and Functional Vice President bands or
technical equivalent positions (ie - “Fellow”), the Compensation Committee may,
in its discretion, pay up to 30% of the bonus in restricted common stock
pursuant to the 1999 Restricted Stock Plan, as amended.

 

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If restricted common stock is to be paid in lieu of cash, the number of shares
to be granted will be calculated as follows:

 

Number of Shares =

 

Up to 30% of Bonus

        Closing Common Stock Price             on the Date Prior to the Grant as
                reported in the Wall Street Journal

 

The Company will reimburse the employee, on a grossed-up basis, for any tax
liability (including, in the event of a Change of Control, any excise tax
liability under Section 4999 of the IRS Code or any successor provision that may
apply to such Restricted Stock payment) associated with the grant of restricted
stock. Tax liability will be calculated using maximum tax rates. The stock will
be registered but will be subject to a two-year holding period. The Company will
not impose any other material restrictions (other than those set out in the 1999
Restricted Stock Plan or required by law) or forfeiture provisions, including no
forfeiture provisions applicable to termination of employment except in the case
of termination during the two-year holding period for intentional wrongdoing.

 

Miscellaneous

 

The establishment of this Plan, any provisions of this Plan, and/or any action
of the Compensation Committee or any Company officer with respect to this Plan,
does not confer upon any employee the right to continued employment with the
Company. The Company reserves the right to dismiss any employee at will (at any
time, with or without prior notice, with or without cause), or otherwise deal
with an employee to the same extent as though the Plan had not been adopted.

 

The Company may, at its discretion, provide for any federal, state or local
income tax withholding requirements and Social Security or other tax
requirements applicable to the accrual of payment of benefits under the Plan,
and all such determinations shall be final and conclusive.

 

The resolution of any questions with respect to payments and entitlements
pursuant to the provisions of this Plan shall be determined by the Compensation
Committee, in its sole discretion, and all such determinations shall be final
and conclusive.

 

This Plan may be terminated or revoked by the Compensation Committee, at its
sole discretion, at any time and amended by the Compensation Committee, at its
sole discretion, from time to time without the approval of any employee provided
that such action does not reduce the amount of any Bonus payment below an amount
equal to the amount that would have been payable to the eligible employee with
respect to the Plan Year in which the termination, revocation or amendment of
the Plan occurs under the terms of the Plan as in effect immediately prior to
such termination, revocation or amendment, applied on a pro-rata basis.

 

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Amended by the Compensation & Stock Option Committee on 9/30/2004.

 

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