InterDigital Inc (IDCC)

[rmarchma]

Jimlur two corrections re Harry's loan

First, of course the SEC documents do not say that Harry "saved" the company. But Harry himself implied something to that affect at the 2003 ASM. He was trying to justify his compensation, and referred back to that loan in 1994. Second correction is that Harry was repaid the $112,500 principal of the loan in Cash. He accepted stocks warrants in lieu of cash for the rather small amount of associated interest on the loan, which I previously calculated to be around $5,000 of interest. A couple of reposts on this issue from back in 2003 as follows:

Posted by: rmarchma
In reply to: Jim_Charts who wrote msg# 31582
Date:6/7/2003 1:05:38 PM
Post # of 106896

Ge_Jim haven't you heard how Harry saved IDCC from financial ruin, and how we shareholders should forever be indebted to him, and that we should continue to give him free shares of restricted stock and stock options/warrants each year? A repost of the facts as follows:

Posted by: Data_Rox
In reply to: rmarchma who wrote msg# 23887
Date:5/9/2003 4:13:43 PM
Post #of 31582

Ronny....here's a start

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.

http://www.investorshub.com/boards/read_msg.asp?message_id=990671

(My Note: This is what Harry was referring to at the ASM. Harry loaned the company $112,500 at 11%. He was repaid all the loan principal within 5 months. In lieu of interest, which I calculate to be a little over $5,000, he received warrants to purchase 15,000 shares of IDCC stock at an exercise price of $2.50 per share. We should all be very thankful for Harry, and should continue to give him millions of dollars worth of IDCC stock each year.)

Posted by: rmarchma
In reply to: JimLur who wrote msg# 31658
Date:6/8/2003 3:06:15 PM
Post # of 106896

Jimlur re HARRY’s compensation

I think you are missing the gist of my post. What Mr. Campagna did for IDCC back in 1994 does not constitute what I would call risking his personal fortune to “save” IDCC from possible bankruptcy as many thought. People over the years have attached much more importance to this act than what appears to be justified by the facts of the situation. HARRY did Not infuse IDCC with a whole lot of cash, just a relatively minor short-term loan. Nor did he lose anything in the transaction, as he was repaid the loan amount in very short order. Then he made a very wise decision to accept 15,000 warrants rather than receiving a meager amount of loan interest in cash. Mr. Campagna came out of this so-called salvation deal smelling like a rose. For HARRY to use this event to try and justify his compensation over the years just does not hold water.

The next main point is does Mr. Campagna’s “part-time” services as Chairman of the Board justify the stock-based compensation that he has received since becoming board chairman in May 1996, seven years ago. He is really compensated much more than any other person at IDCC. As of the date of the latest proxy, Mr. Campagna still owned 305,000 Restricted Stock Units (RSU) and 651,725 stock options and warrants. The restricted stock is absolutely free to Mr. Campagna, he does not even pay a strike price for the restricted stock. He received 50,000 RSUs in 2003, and 75,000 RSUs in 2002. At the current price, those 305,000 outstanding RSUs as of the proxy date are worth over $8 million.

I don’t know the actual exercise price of Mr. Campagna’s options, but the average strike price of all outstanding options according to the latest 10K is a little over $12. Therefore HARRY’s Unrealized Gain from the outstanding options as of the proxy date maybe about $14.50 per share at today’s price ($26.50 - $12 assumed strike price) x 651,725 equals almost another $9.5 million. HARRY had also SOLD a good bit of IDCC stock prior to the proxy date, which are Not even included in these calculations. Has HARRY’s contributions to IDCC really been worth this much and much more than anyone else, or is his compensation clearly excessive in relation to his contributions? I’ll let you be the judge of that.