exv10w1






EXHIBIT 10.1




InterDigital

Long-Term Compensation Program




Terms and Conditions



The Company implemented the Long-Term Compensation Program (the “Program”) to encourage management
and executive level employees to exercise their best efforts toward ensuring the success of the
Company. All regular full-time and regular part-time employees (as defined in the Employee
Handbook), at or above a manager or technical equivalent level, are eligible to participate in the
Program.




Compensation Components. As further described below, the Program consists of two compensation
components: (1) a Long-Term Incentive providing performance-based cash bonuses (the “LTI”), and (2)
an award of restricted stock units (“RSUs”).




The LTI component of the Program rewards grantees based on the Company’s achievement of performance
goals established/approved by the Compensation Committee of the Board of Directors.




The RSU awards provide recipients with an opportunity to share in the growth of the Company’s value
in the marketplace and rewards participants based on the achievement of performance goals
established by the Compensation Committee. An RSU is a contractual right to receive a share(s) of
InterDigital Common Stock after completion of a specified time period and, in the case of the
performance-based RSUs, the achievement of certain goals within a specified period.




Program Cycle. The Program consists of overlapping RSU and LTI cycles, each of which are generally
three years in length and recur every other year (a “Program cycle”).




LTI Cash Bonuses. Each participant’s LTI cash bonus target is established as a percentage of the
participant’s annual base salary. Any payout under the LTI is determined by the Compensation
Committee based on the Company’s achievement of certain performance goals, as established at the
start of each Program cycle and measured at the end of each Program cycle. The cash LTI payout may
exceed or be less than the targeted amount, depending on the level of achievement of the
performance goals. No payout may be made if the Company fails to meet the minimum performance
criteria established for the goals during the Program cycle. To be eligible for a cash payout, an
employee must remain continuously employed by the Company (or an Affiliate of the Company) through
the end of the Program cycle and must continue to be employed at least until the time the LTI
payout is made. For purposes of this Program, an Affiliate means any other individual,
corporation, partnership, association, trust or other entity that, directly or indirectly, is in
control of or is controlled by or is under common control with the Company. Payout of the LTI cash
bonus will be made no later than March 15 of the year following the end of each Program cycle.




RSU Terms. For all non-executives, 25% of the total equity award will be in the form of
performance based RSUs (“performance shares”) and 75% will be in the form of time-based RSUs. For
all executive level participants, 50% of the total equity award will be in the form of performance
shares and 50% will be in the form of time-based RSUs. Participants will receive an RSU Award
Agreement setting forth the terms of each RSU grant along with a copy of the prospectus for the
Plan. In the event of any conflict between this summary and the RSU award agreement, the RSU award
agreement will govern.




Time-based RSU awards




For all non-executives, the time-based RSUs granted in connection with each three-year Program
cycle will vest in equal increments on each successive January 1 over the three-year period. For
example, RSUs granted at the beginning of the Program cycle that began in January 2009 will vest as
follows: 25% (one-third) of the total time-vested RSUs on January 1, 2010, 25% on January 1, 2011
and 25% on January 1, 2012. For all executive level participants, the time-based RSUs granted in
connection with each Program cycle will vest 100% at the end of each Program cycle. Settlement for
time-vested RSUs will occur on the first business day following the applicable vest date.




 









 








Performance based RSU awards




For all Program participants, the performance shares will vest following the end of the three-year
Program cycle in conjunction with a determination by the Compensation Committee that at least
minimum level of performance was achieved relative to the performance goals associated with that
cycle. Settlement will occur for any such performance based RSUs as soon as practicable following
vesting as described above, but in no event later than March 15 of the year in which the relevant
cycle ends. To be entitled to the shares underlying the performance based RSUs, the participant
must remain employed through the end of the Program cycle and also through the date settlement
occurs, based on the Compensation Committee’s determination that at least a minimum level of
performance was achieved.




New Program Participants. An employee promoted to a level which qualifies for participation in the
Program for the first time or an employee that is newly hired within the first two years of a
three-year Program cycle, will be eligible to receive a pro-rata LTI cash bonus and RSU award. The
pro-rata target LTI cash bonus and RSU award will be determined based on the amount of time (number
of pay periods) remaining in each cycle. For example, a non-executive employee hired October
1st of the first year of a three year Program cycle, would be eligible to receive 3/12
of that year’s Program eligibility plus full-year eligibility for the second and third years of the
Program cycle. The LTI (cash) and RSU awards will be paid out and vest respectively, as described
under the sections entitled “LTI Cash Bonuses” and “RSU Terms.”




Promotion during Program Cycle. If an employee is promoted within the first six months of the
start of a Program cycle and such promotion results in an accompanying increase in the Program
payout target (LTI target and RSU award), the benefit of the Program target increase will be
realized retroactive to the beginning of such Program cycle. If an employee is promoted at any
other time during a Program cycle and such promotion results in an accompanying increase in the
Program payout target (LTI target and RSU award), the benefit of the Program target increase will
be realized at the beginning of the next applicable Program cycle unless the Compensation
Committee, in its sole discretion, authorizes an adjustment at a different time.




Effect of Termination of Employment. In general, any benefits from the Program are forfeited upon
termination of employment by the participant (i.e., the participant voluntarily resigns from
employment). Benefits may be vested to some degree, as explained below, where the participant’s
employment terminates due to his or her death, “disability,” “retirement,” or as a result of the
termination of employment by the Company other than for “cause” (each as defined below).




Partial vesting of time-based RSUs: If a participant’s employment terminates during a year
due to death, disability, or retirement, or is terminated by the Company without cause, time-based
RSUs that would have become vested at the end of that year become vested on a pro-rata basis based
on the portion of the year the participant was employed. Time-based RSUs that would have become
vested at the end of subsequent years are forfeited entirely. The settlement of a participant’s
time-based RSUs that become vested as described above will occur as soon as administratively
practical after termination of employment.




Partial vesting of performance based RSUs and LTI Cash Bonus: If a participant’s
employment terminates for any reason during the first year of a three year Program cycle, the
participant forfeits eligibility to receive any LTI cash bonus and all performance based RSUs
associated with that Program cycle. If, however, during the second or third year of a Program
cycle, a participant’s employment with the Company terminates due to his or her death, disability,
or retirement, or is terminated by the Company without cause, the participant will be eligible to
earn a pro-rata portion of the LTI cash bonus and performance-based RSUs. The pro-rata portion
will be determined by multiplying both the amount of the LTI cash bonus and the number of
performance based RSUs awarded under the Program by a fraction equal to the portion of the Program
cycle that has transpired prior to the cessation of employment over the entire Program cycle. The
conditions for vesting of both the performance based RSUs and the LTI cash bonus in such event will
be the same as set forth above except with respect to the condition of continuous employment. Any
pro-rata cash payment or vesting of performance based RSUs will be made to the employee (or, if
applicable, the employee’s estate) at the same time the cash bonus payments and settlement of the
RSUs would have taken place if the participant had remained employed, as described above.




NOTE: To the extent an LTI payment or settlement of performance based RSUs is determined to be a
form of nonqualified deferred compensation subject to Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), payment may be delayed to a date that is at least six months
following the participant’s termination of employment to the extent it is determined to be
necessary to avoid the detrimental tax treatment applicable to




 









 








deferred compensation benefits that are not fully compliant with the distribution rules of Code
Section 409A. This will only be applicable to participants who are determined to be “specified
employees” as that term is defined for purposes of Code Section 409A.




For purposes of the Program:





* “cause” means: (a) willful and repeated failure of an employee to perform substantially
his or her duties (other than any such failure resulting from incapacity due to physical or
mental illness); (b) an employee’s conviction of, or plea of guilty or nolo contendere to, a
felony which is materially and demonstrably injurious to the Company or an Affiliate; (c)
willful misconduct or gross negligence by an employee in connection with his or her
employment; or (d) an employee’s breach of any material obligation or duty owed to the
Company or an Affiliate.




* “disability” means: (a) a disability entitling the employee to long-term disability
benefits under the applicable long-term disability plan of the Company (or an Affiliate if
employee is employed by such Affiliate); or (b) if the employee is not covered by such a
plan, a physical or mental condition or illness that renders the employee incapable of
performing his or her duties for a total of 180 days or more during any consecutive 12-month
period.




* “retirement” means resignation after attaining a combination of age plus years of service
at the Company (and Affiliates) equal to 70.



Effect of a Terminating Event. If a Terminating Event (meaning either a Change of Control, as
defined below, or a liquidation of the Company) occurs during a Program cycle and while an employee
is actively employed by the Company, then:





* immediately prior to (but contingent on the occurrence of) that Terminating Event, all
time-based RSUs will become fully vested and a distribution of InterDigital shares with
respect to those RSUs will be made;




* at the same time, performance-based RSUs will become fully vested to an extent that is
equal to the greater of (i) the portion of the employee’s performance-based RSUs that would
become vested at the target level, or (ii) the level of performance achieved at the time of
the Terminating Event; and




* an early payment of the employee’s LTI cash bonus will be made in an amount equal to the
greater of (i) the employee’s target LTI cash bonus, or (ii) the level of performance
achieved at the time of the Terminating Event. Payment of this amount will be made not
later than 30 days after the Terminating Event.



For purposes of the Program:





	 	•	 	“Change of Control” means the first to occur of any of the following events:






(a) Any “person,” as such term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”) (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the Company, or
any company owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
acquires voting securities of the Company and immediately thereafter is a “50%
Beneficial Owner.” For purposes of this provision, a “50% Beneficial Owner” shall
mean a person who is the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company’s then-outstanding voting
securities;




(b) During any period of two consecutive years commencing on or after the Effective
Date, individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person (as defined above) who
has entered into an agreement with the Company to effect a transaction described in
subsections (a), (c), (d) or (e) of this definition) whose election by the Board or
nomination for election by the Company’s shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either were



 









 






directors at the beginning of the period or whose election or nomination for
election was previously so approved (the “Continuing Directors”) cease for any
reason to constitute at least a majority thereof;




(c) The shareholders of the Company have approved a merger, consolidation,
recapitalization, or reorganization of the Company, or a reverse stock split of any
class of voting securities of the Company, or the consummation of any such
transaction if shareholder approval is not obtained, other than any such transaction
which would result in at least 50% of the combined voting power of the voting
securities of the Company or the surviving entity outstanding immediately after such
transaction being beneficially owned by the persons who were shareholders of the
Company immediately prior to the transaction in substantially the same proportion as
their ownership of the voting power immediately prior to the transaction; provided
that, for purposes of this Section 3.7(c), such continuity of ownership (and
preservation of relative voting power) shall be deemed to be satisfied if the
failure to meet such 50% threshold (or to substantially preserve such relative
ownership of the voting securities) is due solely to the acquisition of voting
securities by an employee benefit plan of the Company, such surviving entity or a
subsidiary thereof; and provided further, that, if consummation of the corporate
transaction referred to in this Section 3.7(c) is subject, at the time of such
approval by shareholders, to the consent of any government or governmental agency or
approval of the shareholders of another entity or other material contingency, no
Change in Control shall occur until such time as such consent and approval has been
obtained and any other material contingency has been satisfied;




(d) The shareholders of the Company accept shares in a share exchange in which 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
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;




(e) The shareholders of the Company have approved a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets (or any transaction having a similar
effect); provided that, if consummation of the transaction referred to in this
Section 3.7(e) is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency or approval of the shareholders of
another entity or other material contingency, no Change in Control shall occur until
such time as such consent and approval has been obtained and any other material
contingency has been satisfied; and




(f) Any other event which the Board determines shall constitute a Change in Control
for purposes of this Plan.



Taxation of Awards. The following is a brief description of the federal income and employment tax
treatment of Program awards. The rules governing these awards are complex and their application
may vary depending upon individual circumstances. Moreover, statutory and regulatory provisions
and their interpretations are subject to change. Employees are, therefore, encouraged to consult
with a personal tax advisor regarding the tax consequences of participation in the Program.




For federal income and employment tax purposes, the full amount of any LTI cash bonus will be
taxable at the time the cash is paid, and will be subject to applicable income and wage tax
withholding requirements.




For federal income tax purposes, the value of shares distributed in respect of RSUs will be
recognized as ordinary income at the time the shares are distributed based on the value of those
shares at that time. If LTI payment or settlement of RSUs is delayed (e.g., in the case of later
payments for certain mid-Program cycle employment terminations), the value of the shares subject to
RSUs may be taxed at the time the RSUs vest, based on the value of those shares at that time.
Further information regarding the taxation of RSUs is contained in the Plan prospectus.




Future Program Cycles. While the Company reserves the right to alter or discontinue the Program at
any time, its present intent is to continue the Program for future cycles. The Company expects
future Program cycles to include




 









 








both an LTI component and an RSU component. If an employee is eligible to participate in a future
Program cycle, additional information will be distributed at the start of that cycle.




Administration. The Program is administered by the Compensation Committee. The Compensation
Committee has the right to terminate or amend the Program and its components at any time for any
reason. The Compensation Committee also has the authority to select employees to receive
awards, to create, amend and rescind rules regarding the operation of the Program, to determine
whether LTI and/or performance share goals have been achieved, to reconcile inconsistencies, to
supply omissions and to otherwise make all determinations necessary or desirable for the operation
of the Program. The Compensation Committee may delegate the authority to amend the Program to one
or more officers of the Company, provided, however, that any amendment of the Program that is a
“material amendment” (as determined pursuant to NASDAQ Stock Market Rule 5635(c) and the
interpretive material thereunder) must be approved by the Compensation Committee or by a majority
of the Company’s independent directors, as defined for purposes of such rule.




Election to Defer Settlement of RSUs. Participants who are eligible to defer settlement of their
RSUs must make such election in the calendar year preceding the date of grant of the RSUs to be
deferred. All determinations regarding eligibility to defer settlement of RSUs shall be made by
the Company, in its sole discretion. Where deferral of settlement of RSUs is linked to payment
following termination of employment of the participant, settlement of the RSUs may be delayed until
at least six months following the participant’s termination of employment if that is necessary to
avoid tax penalties under Code Section 409A. This will only be applicable to participants who are
determined to be “specified employees” as defined for purposes of Code Section 409A.




No Assignment. An employee may not assign, pledge or otherwise transfer any right relating to a
cash or RSU award under the Program and any attempt to do so will be void.




No Right to Continued Employment. Participation in the Program does not give any employee any
right to continue in employment or limit in any way the right of the Company to terminate
employment at any time, for any reason.




Questions. Please contact Gary Isaacs, Chief Administrative Officer, at 610-878-5721 with any
questions regarding the Program.




June 2009