IDCC

Business Context and Reporting Period

This Form 8-K Current Report, dated March 5, 2015 (with the indenture dated March 11, 2015), details a material definitive agreement entered into by InterDigital, Inc. The filing reports the issuance of senior convertible notes, the execution of convertible note hedge transactions, and the sale of warrants to manage dilution and fund corporate activities.

Key Financial Metrics

• Debt Issuance: $316 million aggregate principal amount of 1.50% Senior Convertible Notes due 2020.
• Net Proceeds: Approximately $307.0 million after deducting fees and estimated offering expenses.
• Interest Rate: 1.50% per year, payable semi-annually in cash.
• Conversion Terms: Initial conversion rate of 13.8172 shares per $1,000 principal amount (approx. $72.37 per share).
• Stock Repurchase: Approximately $43.6 million used to repurchase common stock at $53.61 per share.
• Hedge Transaction Costs: Approximately $59.4 million total ($51.7 million on March 5 and $7.7 million on March 9).
• Warrant Proceeds: Approximately $42.9 million total ($37.3 million on March 5 and $5.6 million on March 9).

Material Changes and Transactions

The Company executed a complex capital raise involving three primary components:

1. Convertible Notes: Issued $316 million in notes via private placement to qualified institutional buyers. The notes mature on March 1, 2020, and are senior unsecured obligations.
2. Convertible Note Hedge: Entered into transactions covering approximately 4.4 million shares (3.8 million + 0.6 million) to offset potential dilution or cash payments upon conversion if the stock price exceeds the strike price.
3. Warrant Sales: Sold warrants to acquire approximately 4.4 million shares at a strike price of approximately $88.46 per share. These warrants become exercisable in tranches starting in June 2020.

Outlook, Risks, and Management Commentary

Use of Proceeds: The Company utilized a portion of the net proceeds and warrant proceeds to fund the cost of the convertible note hedge transactions. Approximately $43.6 million was immediately used for share repurchases. Remaining proceeds are designated for general corporate purposes, including potential retirement of outstanding indebtedness.

Risks and Contingencies:

• Dilution: The warrant transactions may have a dilutive effect on earnings per share if the market value of the stock exceeds the $88.46 strike price upon exercise.
• Events of Default: Includes failure to pay principal or interest, bankruptcy, or failure to pay indebtedness exceeding $15 million for the Company or significant subsidiaries.
• Subordination: The Notes are effectively subordinated to future secured indebtedness and structurally subordinated to subsidiary liabilities.
• Repurchase Rights: Holders may require the Company to repurchase notes at 100% of principal plus accrued interest if a "fundamental change" occurs.

Key Facts for Investor Verification

• Verify the total net proceeds of $307.0 million and the specific allocation of funds toward hedge costs versus general corporate use.
• Confirm the impact of the $59.4 million hedge cost and $42.9 million warrant proceeds on the Company's immediate cash flow and balance sheet.
• Review the conversion price of $72.37 and the warrant strike price of $88.46 to assess potential future dilution scenarios.
• Monitor the Company's ability to meet the semi-annual cash interest payments of 1.50% on the $316 million principal.
• Check for any subsequent "fundamental change" events that could trigger mandatory repurchase obligations.