-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PUmy2Z6WM8uW+RXFPLRGYae/mY775kqcyPHoLDRENyf0SwjlX4ba4SQwBilaIHoT 9YH9IvwuNS9ERzLouZ32Ag== 0000912057-97-029619.txt : 19970912 0000912057-97-029619.hdr.sgml : 19970912 ACCESSION NUMBER: 0000912057-97-029619 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970902 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACACIA RESEARCH CORP CENTRAL INDEX KEY: 0000934549 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 954405754 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-34773 FILM NUMBER: 97673832 BUSINESS ADDRESS: STREET 1: 12 SOUTH RAYMOND AVENUE STREET 2: STE B CITY: PASADENA STATE: CA ZIP: 91105 BUSINESS PHONE: 8184496431 MAIL ADDRESS: STREET 1: 12 S RAYMOND AVENUE STREET 2: SUITE B CITY: PASADENA STATE: CA ZIP: 91105 S-3 1 FORM S-3 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ACACIA RESEARCH CORPORATION (Exact name of Registrant as specified in its charter) CALIFORNIA 95-4405754 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number)
12 SOUTH RAYMOND AVENUE PASADENA, CALIFORNIA 91105 (818) 449-6431 (Address, including zip code, and telephone number, including area code, of Registrants' principal executive offices) -------------------------- KATHRYN KING-VAN WIE, CHIEF OPERATING OFFICER ACACIA RESEARCH CORPORATION 12 SOUTH RAYMOND AVENUE PASADENA, CALIFORNIA 91105 (818) 449-6431 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- COPIES OF COMMUNICATIONS TO: D. STEPHEN ANTION, ESQ. O'MELVENY & MYERS LLP 400 SOUTH HOPE STREET LOS ANGELES, CALIFORNIA 90071-2899 (213) 669-6000 -------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement, subject to market conditions and certain contractual restrictions on transfer. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF NUMBER OF SECURITIES PROPOSED MAXIMUM PROPOSED MAXIMUM SECURITIES TO BE OF EACH CLASS OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF REGISTERED TO BE REGISTERED SECURITY(1)(2) PRICE(1) REGISTRATION FEE(2) Common Stock, no par value per share................ 120,600 $7.625 $919,575.00 $278.66
(1) Estimated solely for the purpose of calculating the registration fee. (2) Pursuant to Rule 457(c), the price of the Common Stock in is based upon the average of the high and low prices of the Common Stock on the Nasdaq National Market on August 25, 1997. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED _________, 1997 PROSPECTUS ACACIA RESEARCH CORPORATION 120,600 SHARES OF COMMON STOCK ------------------ THIS PROSPECTUS RELATES TO THE SALE BY SECURITYHOLDERS OF ACACIA RESEARCH CORPORATION (THE "COMPANY") OF UP TO AN AGGREGATE OF 120,600 SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE (THE "COMMON STOCK"), OF THE COMPANY. THE SHARES ARE ISSUABLE UPON EXERCISE OF AN AGGREGATE OF 120,600 OPTIONS (THE "OPTIONS") ISSUED TO ANN P. HODGES AND CHRISTOPHER D. HODGES (THE "SELLING SECURITYHOLDERS"). EACH OPTION IS EXERCISABLE FOR ONE SHARE OF THE COMPANY'S COMMON STOCK, AT AN EXERCISE PRICE OF $4.25 PER SHARE OF COMMON STOCK. THE SHARES MAY BE SOLD FROM TIME TO TIME AFTER EXERCISE OF THE OPTIONS BY THE SELLING SECURITYHOLDERS IN PRIVATELY NEGOTIATED TRANSACTIONS, IN BROKERS' TRANSACTIONS, TO MARKET MAKERS OR IN BLOCK PLACEMENTS, AT MARKET PRICES PREVAILING AT THE TIME OF SALE OR AT PRICES OTHERWISE NEGOTIATED. SEE "SELLING SECURITYHOLDERS" AND "PLAN OF DISTRIBUTION." THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE SHARES BEING SOLD BY THE SELLING SECURITYHOLDERS (ALTHOUGH IT WILL RECEIVE PROCEEDS OF $4.25 PER SHARE UPON EXERCISE OF OPTIONS BY SELLING SECURITYHOLDERS). THE COMPANY HAS AGREED TO BEAR THE EXPENSES INCURRED IN CONNECTION WITH THE REGISTRATION OF THE SHARES OFFERED BY THIS PROSPECTUS. THE SELLING SECURITYHOLDERS WILL PAY OR ASSUME BROKERAGE COMMISSIONS OR SIMILAR CHARGES INCURRED IN THE SALE OF THE SHARES OFFERED BY THIS PROSPECTUS. THE COMPANY'S COMMON STOCK IS TRADED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "ACRI." THE CLOSING SALE PRICE OF THE COMMON STOCK ON AUGUST 29, 1997, AS REPORTED BY NASDAQ, WAS $8.50 PER SHARE. ------------------------ THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1997. AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission"), Washington, D.C., a Registration Statement on Form S-3 under the Securities Act of 1933, as amended, with respect to the securities offered hereby. This Prospectus does not contain all of the information set forth in such Registration Statement and the exhibits thereto. For further information with respect to the Company, reference is hereby made to the Registration Statement and the exhibits thereto, which may be inspected without charge at the public reference facilities maintained at the principal office of the Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549 and at the Commission's regional offices at 7 World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained upon written request from the public reference section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Electronic registration statements made through the Electronic Data Gathering, Analysis and Retrieval System are publicly available through the Commission's Web site (http://www.sec.gov). Statements contained in the Prospectus as to the contents of any contract or other document referred to herein are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed (or incorporated by reference) as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Commission. Such reports and other information filed by the Company may be inspected and copied at the public reference facilities maintained by the Commission at the addresses shown above. Copies of such material can be obtained from the Public Reference Section of the Commission at the address shown above at prescribed rates or through the Commission's Web site. Reports and other information concerning the Company may also be inspected at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. The Company's Common Stock is traded on the Nasdaq National Market under the symbol "ACRI." Certain information, reports and proxy statements of the Company are also available for inspection at the offices of the Nasdaq National Market Reports Section, 1735 K Street, Washington, D.C. 20006. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed by the Company with the Commission, as noted below, are incorporated by reference into this Prospectus: (a) Annual Report on Form 10-K for the fiscal year ended December 31, 1996; (b) Amendment to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996; (c) Amendment No. 2 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996; (d) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; (e) Amendment to Quarterly Report on Form 10-Q/A for the quarter ended March 31, 1997; (f) Amendment No. 2 to Quarterly Report on Form 10-Q/A for the quarter ended March 31, 1997; (g) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; (h) Current Report on Form 8-K filed April 29, 1997; (i) Current Report on Form 8-K filed July 21, 1997; (j) the description of the Common Stock contained in the Company's Registration Statement on Form 8-A filed with the Commission on or about May 11, 1995 and Amendment No. 1 to Form 8-A on Form 8-A/A filed June 5, 1995. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering of the Selling Securityholder Securities, shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing such documents. Any statement contained herein or in any document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. 2 Any such statement so modified or superseded shall not be deemed to constitute a part of this Prospectus, except as so modified or superseded. The Company hereby undertakes to provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus has been delivered, upon the written or oral request of such person, a copy of any or all of the documents referred to in "Incorporation of Certain Information by Reference" which have been or may be incorporated in this Prospectus by reference, other than exhibits to such documents. Requests for such copies should be directed to the Secretary at Acacia Research Corporation, 12 South Raymond Avenue, Pasadena, California 91105. 3 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN. INVESTORS SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." THE COMPANY Acacia Research Corporation, a California corporation (the "Company"), is a capital management company that provides investment advisory services, and also provides management services to and makes direct investments in emerging corporations. The Company's operations are comprised of two lines of business: (i) investment advisor to domestic and offshore private investment funds; and (ii) investing in and developing start-up business ventures. The Company is diversified and each business segment is operated independently. See "Risk Factors--No Assurance of Success." The Company currently manages two domestic private investment partnerships whose limited partners are required to be "accredited investors," under Regulation D promulgated under the 1933 Act. The Company is also the investment advisor to two offshore private investment corporations. Client funds are invested primarily in large-cap U.S. equities. The Company may manage additional private investment partnerships and offshore private investment corporations in the future. See "Risk Factors--Risks Associated with the Money Management Business; Profitability Uncertain." The Company also participates in the formation of emerging or start-up companies in various business fields by arranging for and contributing capital and providing management assistance. Potential ventures are evaluated based on the ability of the business to become viable and reach a significant milestone with the Company's initial investment. See "Risk Factors--Risks Associated with the Emerging Companies." The Company has significant economic interests in five companies that it has formed, taking an active role in each company's growth and advancement. These emerging companies are: (i) Soundview Technologies Incorporated ("Soundview Technologies"); (ii) Greenwich Information Technologies LLC ("Greenwich Information Technologies"); (iii) MerkWerks Corporation ("MerkWerks"); (iv) CombiMatrix Corporation ("CombiMatrix"); and (v) Whitewing Labs, Inc. ("Whitewing"). Soundview Technologies, Greenwich Information Technologies, MerkWerks, CombiMatrix, and Whitewing are collectively referred to hereinafter as the "Affiliates." See "Risk Factors" for risks associated with each individual Affiliate. Soundview Technologies was formed in 1996 and owns intellectual property related to the telecommunications field, which includes audio and video blanking systems, also known as V-chip technology. Soundview Technologies has developed a V-chip retrofit device, the V Chip Converter-TM-, for use in televisions already in existence that will be "deaf" to V-chip signals. Soundview Technologies has begun to pursue business opportunities with television manufacturers, chip manufacturers, and television accessory companies about efficient and cost-effective methods of commercializing its technology. Soundview Technologies has incurred substantial losses and has not had any revenues to date. Greenwich Information Technologies was formed in 1996 and is the exclusive marketing and licensing agent for several patents relating to video-on-demand and audio-on-demand technology (also known as "information-on-demand"). To date, Greenwich Information Technologies has incurred substantial losses and has not had any revenues. MerkWerks was formed in 1995 and is currently developing a software utility product for use with CD-Recorder, or CD-R, computer drives. The initial version of the product, CD WonderWriter-TM-, will be for the Macintosh platform. MerkWerks anticipates adapting this software for Microsoft-Registered Trademark-Windows-TM- platform. To date, MerkWerks has incurred substantial losses and has not had any revenues. 4 CombiMatrix was formed in 1996 and is engaged in a highly specialized and focused research effort to streamline the drug-discovery process. CombiMatrix is in a developmental stage, has incurred substantial losses and has not generated any revenues to date. Whitewing was formed in 1993 and develops and markets a line of nutritional supplement products. Whitewing conducted an initial public offering of its common stock in February 1996. Whitewing stock and warrants trade on the Nasdaq Small Cap Market under the symbols "WWLI" and "WWLI-W," respectively. Development of emerging businesses is subject to all of the problems, expenses, delays and risks inherent in the establishment of a new business enterprise, many of which are beyond the Company's ability to control, including uncertain market conditions and the absence of an operating history. Moreover, the Company expects to encounter competition in the area of business opportunities from other entities having similar business objectives, such as venture capital funds. Many of these potential competitors may possess greater financial, technical, human and other resources than the Company. Accordingly, there can be no assurance that the Company's plan of operations will be successful or that the Company will be able to achieve or maintain profitable operations. See "Risks Factors--No Assurance of Success" and "Risks Associated with the Emerging Companies." The Company has never paid any cash dividends on its Common Stock and does not anticipate that it will pay dividends in the foreseeable future. Instead, the Company intends to apply any earnings to the development and expansion of its business. The Company was incorporated in the State of California on January 25, 1993, and conducted its initial public offering on June 15, 1995. The Company's Common Stock trades on the Nasdaq National Market System ("Nasdaq") under the symbol "ACRI." The Company maintains its executive offices at 12 South Raymond Avenue, Pasadena, California 91105 and its telephone number is (818) 449-6431. 5 RECENT DEVELOPMENTS On July 6, 1997, the Company acquired majority ownership of Soundview Technologies through the purchase of 35% of the outstanding common stock of Soundview Technologies from two of the founders and principal shareholders of Soundview Technologies. The Company paid a purchase price for the Soundview shares of $500,000 cash, notes in the aggregate principal amount of $900,000 due November 1, 1997 (the "Notes") and 400,000 shares of the Company's common stock. Prior to this transaction, the Company owned 16.4% of the outstanding shares of common stock of Soundview Technologies. Following the transaction, the Company owns 51.4% of the outstanding shares of Soundview Technologies. In order to secure repayment of the Notes, the Company pledged certain of its acquired shares of Soundview Technologies, which are to be transferred back to the two selling shareholders in the event the Company defaults on the repayment of the Notes. In addition, the Company granted the two selling shareholders certain registration rights with respect to the 400,000 shares of the Company's common stock. FORWARD-LOOKING STATEMENTS This Prospectus contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of the Company's plans and objectives for future operations, assumptions underlying such plans and objectives and other forward-looking statements included in this Prospectus. Such statements may be identified by the use of forward-looking terminology such as "may," "will," "expect," "believe," "estimate," "anticipate," "intend," "continue," or similar terms, variations of such terms or the negative of such terms. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Factors which could cause such results to differ materially from those described in the forward-looking statements include those set forth below. RISK FACTORS THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE A HIGH DEGREE OF RISK. PRIOR TO MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS IN THE COMPANY'S SECURITIES SHOULD GIVE CAREFUL CONSIDERATION TO, AMONG OTHER THINGS, THE RISK FACTORS SET FORTH BELOW. NO ASSURANCE OF SUCCESS: The Company's operations are comprised of two lines of business: (i) management of private investment funds; and (ii) investing in start-up business ventures. The Company's business operations are subject to numerous risks associated with managing investment funds and establishing new business ventures. Continued implementation of the plan of operations of the Company and each of the Company's new business ventures will be subject to all of the problems, expenses and uncertainties inherent in the establishment of new business enterprises, many of which are subject to outside influences over which the Company has no control, including technological advances and product obsolescence, uncertain market acceptance, increased levels of competition, increases in operating costs including costs of supplies, personnel, and equipment, reduced margins caused by competitive pressures and changes in general economic conditions and governmental regulation imposed under federal, state or local laws. There can be no assurance that the Company's new business ventures will be able to market any product on a commercial scale, that these new business ventures will ever achieve or maintain profitable operations or that they, or the Company, will be able to remain in business. 6 RISKS ASSOCIATED WITH THE MONEY MANAGEMENT BUSINESS; PROFITABILITY UNCERTAIN: Although management of the Company has had extensive experience in the investment industry, the Company itself is a recently formed business entity and has a short history of operations and only limited revenues. The Company currently manages two domestic partnership funds and two offshore investment funds. The Company invests a portion of its own funds in the domestic partnership funds as a general partner. The Company does not invest Company funds in the offshore investment funds. From its inception through June 30, 1997, the Company has received approximately $370,000 in aggregate performance and management fees from managing the four investment funds. The Company is attempting to increase the assets invested in the various funds it manages. There can be no assurance as to the level of additional capital that the Company will be able to raise for its investment funds. The Company has formulated its plan of operations based on certain assumptions regarding the potential monies that will be invested in its funds under management and the anticipated performance of, and profits that can be realized by, these funds. Although these assumptions are based on the best estimates of management, there can be no assurance that these assessments will prove to be correct. Any future success of the Company will depend upon many factors, including factors which may be beyond the control of the Company or which cannot be predicted at this time. These factors include the amount of assets under management in the Company's investment funds, the performance of those funds, the overall performance of the equity markets in the United States, the success of the Company's stock selecting strategy and other factors. The Company's income from managing the investment funds is comprised of fixed management fees, as well as performance fees which are based on the performance of each individual fund, as the Company receives a percentage of the profit earned by each fund. POTENTIAL FLUCTUATIONS IN THE FUTURE RESULTS OF OPERATION OF THE COMPANY: The Company's operating results may vary significantly from quarter to quarter due to a variety of factors including the amount of money invested in the private investment funds managed by the Company, the performance of such investment funds, the results of operations of the Affiliates, the nature and timing of investments in new businesses by the Company and the timing of the sales of securities of the Affiliates. The Company also expects to incur significant start-up expenses in pursuing and developing new business ventures. To date, the Company has lacked a consistent source of recurring revenue and most of its revenues have come from sales of securities of the Affiliates. POTENTIAL FLUCTUATIONS IN FUTURE RESULTS OF OPERATIONS OF THE AFFILIATES: To date, Whitewing has experienced substantial operating losses and its operating results have varied significantly from quarter to quarter due to a variety of factors. For further information regarding the nature of and the fluctuations in Whitewing's operating results, potential investors are directed to review Whitewing's filings under the Exchange Act, available from the SEC. CombiMatrix, MerkWerks, Greenwich Information Technologies and Soundview Technologies have generated no revenues to date. The Company anticipates that any results of operations of these Affiliates are likely to vary significantly as a result of a number of factors, including the timing of new product introductions by each of these Affiliates, the novelty of the technology owned by these Affiliates, the strength of each of these Affiliates' intellectual property rights, each Affiliate's ability to exploit its technology, the volume and timing of orders received, product line maturation, the impact of price competition, and each Affiliate's ability to access distribution channels. Many of these factors are beyond the control of the Affiliates. There can be no assurance that any Affiliate will experience growth in the future or be profitable on an operating basis in any future period. 7 RISKS ASSOCIATED WITH THE EMERGING COMPANIES: Involvement in emerging companies is marked by a high degree of risk, including difficulties in selecting ventures with viable business plans and acceptable likelihoods of success and future profitability. There is a high probability of loss associated with investments in start-ups. Identifying and developing each new business opportunity also requires the Company to dedicate significant amounts of financial resources, management attention and personnel, with no assurance in any individual case that these expenditures will prove fruitful. The Company generally invests in start-up ventures with no operating histories, unproven technologies and products and, in some cases, the need for identification and implementation of experienced management. Because of the uncertainties and risks associated with such start-up ventures, investors in the Company should expect substantial losses associated with failed ventures. In addition, markets for venture capital in the United States are increasingly competitive. As a result, the Company faces potential losses of business opportunities and possible deterioration of the terms of available financings and equity investments in start-up ventures. Furthermore, the Company may lack financial resources to fully fund additional ventures in which it could participate and the Company as well as its Affiliates may be dependent upon external financing to provide sufficient capital. UNCERTAINTY OF EMERGING COMPANIES; LACK OF MARKET ACCEPTANCE OF PRODUCTS: COMBIMATRIX. CombiMatrix is developing technologies involving combinatorial chemistry, which could represent significant improvements over existing technologies in the speed and cost-effectiveness of drug discovery. The Company's investment in CombiMatrix is subject to the risks associated with new technologies, including the viability of the technology, unknown market acceptance, difficulties in obtaining financing, the strength of its intellectual property protection, increasing competition, and the ability to convert technology into revenues. In addition, because the technologies critical to the success of this industry are in their infancy, no assurances can be given that CombiMatrix will be able to successfully implement its technologies. In the event its technologies prove to be successful, CombiMatrix intends to pursue collaborations with pharmaceutical companies, which may include the licensing of CombiMatrix's screening libraries and possibly the licensing of internally developed chemical compounds. No assurances can be given that CombiMatrix, even if successful in developing its technologies, would be able to successfully implement the collaborative efforts with pharmaceutical companies. CombiMatrix intends to vigorously protect its intellectual property rights. There can be no assurance, however, that CombiMatrix's pending patent applications will issue or that a third party will not violate, or attempt to invalidate, CombiMatrix's intellectual property rights, possibly forcing CombiMatrix to expend substantial legal fees. Successful challenges to certain of CombiMatrix's patents, if issued, would materially adversely affect CombiMatrix's business, operating results and financial condition. There can be no assurance that certain aspects of CombiMatrix's technology will not be reverse-engineered by third parties without violating CombiMatrix's proprietary rights. CombiMatrix's existing protections also may not preclude competitors from developing products with features and prices similar to or better than those of CombiMatrix. GREENWICH INFORMATION TECHNOLOGIES. Greenwich Information Technologies is the exclusive marketing and licensing agent for a number of domestic and international patents and other intellectual property pertaining to information-on-demand systems. Although Greenwich Information Technologies believes that it has marketing and licensing rights to enforceable patents, no assurances can be given that other companies will not challenge the underlying patents to these rights or develop competing technologies that do not infringe such patents. Furthermore, whether or not competing products emerge, it is uncertain whether and to what extent Greenwich Information Technologies will be able to profitably market and license its rights to the information-on-demand technology. 8 SOUNDVIEW TECHNOLOGIES. Soundview Technologies was formed in March 1996 to commercialize patent rights of a method of video and audio blanking technology, also known as V-chip technology, that screens objectionable television programming and blocks it from the viewer. Although Soundview Technologies believes that it owns an enforceable patent on its technology, no assurances can be given that other companies will not challenge Soundview Technologies' patent rights or develop competing technologies that do not infringe Soundview Technologies' patent. Additionally, whether or not competing products emerge, it is uncertain whether and to what extent Soundview Technologies will be able to profitably exploit its technology. MERKWERKS. MerkWerks was formed in September 1995 as a software development company, whose first product will be software for use with CD-recordable disk drives for Macintosh platforms. MerkWerks is in the developmental stage and, to date, has not completed the development of any products or generated any revenues. Although MerkWerks anticipates that development of its first software product will be completed shortly and that its first product may be marketed, through license or sale, in 1997, no assurances can be given that MerkWerks will ever be able to successfully market its products or that a market for such products will develop. The success of MerkWerks' software depends on its acceptance by original equipment manufacturers (OEMs) that produce CD-recordable disk drives. MerkWerks strategy is to convince these OEMs of the utility of MerkWerks' software so that the OEMs will install such software in the CD-recordable disk drives prior to their sale to the end-user, which will generate license fees for MerkWerks and generate market acceptance of MerkWerks' platform. No assurances can be given that MerkWerks' software will gain the acceptance of OEMs or ever be incorporated into CD-recordable disk drives. MerkWerks' initial software release will be designed for use with the Macintosh platform. In addition, MerkWerks anticipates adapting its software to the Windows platform. However, it is uncertain whether MerkWerks will be successful in adapting its software to the Windows platform, and, if successful, whether a viable market will develop for this product. UNCERTAIN REVENUES OF AFFILIATES: CombiMatrix, MerkWerks, Greenwich Information Technologies and Soundview Technologies have generated no revenues to date and have had substantial losses. Although each of these companies is developing products for marketing and commercial sale, either through direct sales or licensing, no assurances can be given that any of these companies will ever generate meaningful revenues or will ever be profitable. AFFILIATES' NEED FOR ADDITIONAL CAPITAL; SUBSEQUENT FINANCINGS: To date, the Affiliates have primarily relied upon the sale of equity securities, including sales to the Company and certain loans from the Company, to generate the funds needed to finance the implementation of their plans of operations. The Affiliates may be required to obtain additional financing through bank borrowings, debt or equity financings or otherwise, or curtail such activities. No assurance can be given that the Affiliates will continue to be able to obtain financing or will obtain financing on favorable terms. LACK OF MANAGEMENT; NEED FOR MARKETING AND SALES PERSONNEL: CombiMatrix, MerkWerks, Greenwich Information Technologies and Soundview Technologies have generated no revenues to date. There can be no assurance these companies will be able to meet their anticipated working capital needs for developing their products. Failure to properly develop these products will prevent these companies from generating meaningful product sales. Further success in developing commercially viable products will create the need for these companies to expand their management personnel. Some of these companies will require the Company's assistance in identifying and implementing 9 experienced management teams and no assurances can be given that these companies will be successful in assembling qualified and effective management teams. Additionally, unlike Greenwich Information Technologies and Soundview Technologies, which intend to primarily license their respective technologies to third parties for commercial exploitation, CombiMatrix and MerkWerks currently intend to develop, manufacture, market and sell, and in the case of CombiMatrix license, their respective products directly to customers. Because CombiMatrix and MerkWerks have not completed the research and development of their products, they have not hired marketing and sales personnel or finalized strategic marketing plans. There can be no assurance that CombiMatrix and MerkWerks will be able to attract and retain qualified marketing and sales personnel or that any marketing efforts undertaken by the companies will be successful. DEPENDENCE ON KEY PERSONNEL; NEED TO RETAIN PERSONNEL: The Company's success will depend on its ability to attract, retain and motivate the qualified personnel that will be essential to the Company's current plans and future development. The competition for such personnel is intense and there can be no assurance that the Company will be successful in retaining its existing key employees or in attracting and retaining the required additional personnel. In particular, the success of the Company and each Affiliate will also be greatly determined by the retention, motivation and success of the individuals discussed in the following paragraphs regarding the Company and its Affiliates: THE COMPANY. The Company's success will depend to a significant extent upon the continued services of Paul R. Ryan, the Company's President and Chief Executive Officer, who also serves as a co-general partner of the two domestic private investment partnerships and as portfolio manager for the two offshore investment funds. The Company does not maintain key person life insurance coverage with respect to Mr. Ryan. COMBIMATRIX. CombiMatrix's success will depend to a significant extent upon the continued services of, CombiMatrix's Vice President--Research and Development. The Company maintains key person life insurance coverage with respect to this individual in the amount of $1,000,000. GREENWICH INFORMATION TECHNOLOGIES. Greenwich Information Technologies' success will depend to a significant extent upon the continued services of H. Lee Browne, Greenwich Information Technologies' President and Chief Executive Officer (and a major shareholder in the Company). Neither Greenwich Information Technologies nor the Company maintains key person life insurance coverage with respect to Mr. Browne. SOUNDVIEW TECHNOLOGIES. Soundview Technologies' success will depend to a significant extent upon the continued services of H. Lee Browne, Soundview Technologies' President and Chief Executive Officer, and David Schmidt, Soundview Technologies' Vice President and Director of Technology. Neither Soundview Technologies nor the Company maintains key person life insurance coverage with respect to Mr. Browne or Mr. Schmidt. MERKWERKS. MerkWerks' success will depend to a significant extent upon the continued service of James Merkle, Jr., MerkWerks' President. The Company currently maintains key person life insurance coverage with respect to Mr. Merkle in the amount of $1,000,000. 10 COMPETITION FACING THE COMPANY'S MONEY MANAGEMENT BUSINESS: Competition in the investment markets and among providers of investment management services is intense. Some of these competing providers have greater financial, marketing and other resources, as well as greater research capabilities than the Company. The Company believes that its products and services are differentiated from those of its competitors and well-suited for the investment marketplace. However, there can be no assurance that the Company will prove successful in its efforts to attract the desired amount of funds for investment in the funds managed by the Company. COMPETITION FACING THE AFFILIATES: WHITEWING. The markets for Whitewing's products are intensely competitive. The nutritional supplements market is characterized by frequent product introductions, short product life cycles, rapid price declines and eroding profit margins and evolving customer preferences. In each of its product lines, Whitewing competes and is expected in the future to compete with a large number of companies with significantly greater financial and other resources. Many of Whitewing's current and potential competitors have significantly greater name recognition, research capabilities and financial and technical resources than Whitewing, and many have longstanding positions and established brand names in their markets. COMBIMATRIX. The pharmaceutical and biotechnology industries are subject to intense competition and rapid and significant technological change. Many organizations are actively attempting to identify and optimize compounds and build libraries for potential pharmaceutical development. CombiMatrix will compete directly with the research departments of pharmaceutical companies, biotechnology companies, other combinatorial chemistry companies, and research and academic institutions. Many of these competitors have greater financial and other resources, and more experience in research and development, than CombiMatrix. Historically, pharmaceutical companies have maintained close control over their research activities, including the synthesis, screening, and optimization of chemical compounds. Many of these companies, which represent the greatest potential market for CombiMatrix's services and compounds, are developing combinatorial chemistry and other methodologies to improve productivity. In addition, these companies may already have large collections of compounds previously synthesized or ordered from chemical supply catalogs or other sources against which they may screen new targets. Other sources of compounds include compounds extracted from natural products, such as plants and microorganisms, and compounds created using rational drug design. Academic institutions, governmental agencies and other research organizations are also conducting research in areas in which CombiMatrix is working, either on their own or through collaborative efforts. CombiMatrix anticipates that it will face increased competition in the future as new companies enter the market and advanced technologies become available. CombiMatrix's processes may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of CombiMatrix's competitors. The existing approaches of CombiMatrix's competitors or new approaches or technology developed by CombiMatrix's competitors may be more effective than those developed by CombiMatrix. GREENWICH INFORMATION TECHNOLOGIES. Although Greenwich Information Technologies believes that it has marketing and licensing rights to enforceable patents and other intellectual property relating to video and audio on demand, no assurances can be given that other companies will not develop competing technologies that offer better or less expensive alternatives to those offered by Greenwich Information Technologies. In the event a competing technology emerges, Greenwich Information Technologies would expect substantial competition. Potential competitors could have significantly greater research capabilities and financial and technical resources than Greenwich Information Technologies, and some could have established brand names in the market for such products. 11 SOUNDVIEW TECHNOLOGIES. Soundview Technologies believes that its V-chip technology is protected by enforceable patent rights. However, no assurances can be given that other companies will not develop competing technologies that offer better or less expensive alternatives to those offered by Soundview Technologies. Many potential competitors could have significantly greater research capabilities and financial and technical resources than Soundview Technologies, and some could have established brand names in the market for television products. MERKWERKS. There are currently approximately 25 CD-recordable disk drive software packages on the market. MerkWerks' first product is not yet complete or ready for sale. Thus, the acceptance of MerkWerks' software in the market is unproven and speculative. The markets for software products are intensely competitive and are characterized by rapid changes in technological standards. MerkWerks faces competition from large companies with substantial technical, marketing and financial resources, allowing them to aggressively develop, enhance and market competing products. These advantages may allow competitors to dominate distribution channels and to respond more quickly than MerkWerks to emerging technologies or to changing customer requirements. Numerous actions by these competitors, including price reductions and product giveaways, increased promotion, the introduction of enhanced products and product bundling could have a material adverse effect on MerkWerks ability to develop and market its software products and on MerkWerks business, financial condition and operating results. PROPRIETARY TECHNOLOGY: The success of the business of CombiMatrix, Greenwich Information Technologies, Soundview Technologies, and MerkWerks relies, to varying degrees, on proprietary technology and the protection and exclusivity thereof. CombiMatrix, Greenwich Information Technologies, and Soundview Technologies will depend largely on the protection of enforceable patent rights. CombiMatrix currently has an application on file with the United States Patent and Trademark Office seeking a patent on its core technology, while Greenwich Information Technologies and Soundview Technologies have patent or rights to patents that have been issued as well as have additional patents pending. MerkWerks intends to rely on a combination of statutory and common law, copyright, trademark and trade secret law, and licensing agreements to protect its software product. In addition to the protection that may be afforded by patents and the various laws protecting proprietary rights, the Affiliates enter into confidentiality agreements with certain third parties and to generally limits access to information relating to their intellectual property. Despite these precautions, third parties may be able to gain access to and use their intellectual property to develop similar competing technologies and/or products. Any substantial unauthorized use of the Affiliates patent and other proprietary rights, could materially and adversely affect the business and operational results of the Affiliates. NEW PRODUCTS AND TECHNOLOGICAL CHANGES AFFECTING THE AFFILIATES: The markets for each Affiliate's products are also marked by extensive competition, rapidly changing technology, frequent product improvements, and evolving industry standards. The success of each Affiliate will depend on its ability to develop and market new products or enhance existing ones to meet the evolving needs of the market for such products. There can be no assurance that the Affiliates' existing or future products will be successful or profitable. In addition, there can be no assurance that products or technologies developed by others will not render the Affiliates' products noncompetitive or obsolete. NEED FOR ADDITIONAL CAPITAL; SUBSEQUENT FINANCINGS: To date, the Company has relied upon the sale of equity securities to generate the funds needed to finance the implementation of its plan of operations. The Company has in the past also relied on gains from the sale of investment securities, including those of Whitewing, CombiMatrix, Soundview Technologies, and MerkWerks, as well as equity interests in Greenwich Information Technologies as additional 12 sources of revenue. The Company may be required to obtain additional financing through bank borrowings, debt or equity financings or otherwise. MINORITY POSITIONS IN CERTAIN AFFILIATES: WHITEWING. The Company currently owns 532,459 shares of the common stock of Whitewing, representing 18.4% of the outstanding shares and has voting control over 789,709 shares of common stock of Whitewing, representing 27.3% of the outstanding shares. R. Bruce Stewart, the Company's Chief Financial Officer, is Chairman of the Board of Directors of Whitewing and Paul Ryan, the Company's President and Chief Executive Officer, is also a member of the Board of Directors of Whitewing, representing half of Whitewing's Board of Directors. This minority position and board representation results in the Company having influence at Whitewing, but not the ability to control the decision-making at Whitewing. GREENWICH INFORMATION TECHNOLOGIES. The Company currently maintains a membership interest of 30.02% in Greenwich Information Technologies. Although a senior member of Greenwich Information Technologies, the Company does not hold a majority of the board of three senior members. Similarly, the Company has no control over the day to day operations of Greenwich Information Technologies, which are directed by the chief executive officer, H. Lee Browne, a major shareholder of the Company. This minority position results in the inability of the Company to control or direct the decision-making of Greenwich Information Technologies in any meaningful way. MANAGEMENT AND PERFORMANCE FEES: The level of management and performance fee revenue received by the Company will depend upon the amount of money invested in the funds managed by the Company, which in turn will depend to a large extent upon the performance of the funds managed by the Company. There can be no assurance that the Company will prove successful in raising any additional capital for the investment funds managed by the Company. INVESTMENT IN THE PARTNERSHIP: As of June 30, 1997, the Company's had $504,389 invested in the two domestic private partnership funds it manages, and may invest additional amounts to acquire or increase its interests in these or other funds. To the extent that the Company's funds are so committed, they will be subject to all of the risks to be encountered by all investors in such funds as a result of the investment strategy adopted for the funds by the Company as a general partner, including the risks associated with short sales, hedging, option trading, trading on margin and other leverage transactions. The investment strategy adopted by the domestic funds managed by the Company, and any other funds it subsequently invests, could result in substantial losses, and these losses could have a material adverse impact on the operational results of the Company. Conversely, if any partnership funds in which Company funds are invested prove to be profitable, the partners thereof, including the Company, will be credited with partnership net income. The Company will thereby incur income tax liability, even if it receives little or no cash distributions from such funds. Since the stated intention of the funds managed by the Company is to reinvest substantially all income and gain allocable to the partners thereof, the Company does not anticipate receiving distributions of cash from the funds to the partners, including the Company, that could be used to pay any income tax on partnership profits. It is the present intention of the Company to limit its investment in certain designated assets, including investments in domestic partnership funds, to an amount not exceeding forty-five percent in the aggregate, of the Company's total assets, to avoid characterization of the Company as an investment company that would be subject to regulation under the Investment Company Act of 1940. 13 SELLING SECURITYHOLDERS The following table sets forth certain information regarding beneficial ownership of shares of the Company's Common Stock by the Selling Securityholders as of [June 30, 1997] and the number of shares which may be offered for the account of the Selling Securityholders or their transferees or distributees from time to time. As of the date of this Prospectus, all of the shares beneficially owned by the Selling Securityholders are issuable to the Selling Securityholders upon exercise of Options. Each Option represents the right of the holder to purchase one share of the Company's Common Stock, representing an aggregate of 120,600 shares. The exercise price per share is $4.25. The Options expire November 7, 1998. Because the Selling Securityholders may sell all or any part of their shares pursuant to this Prospectus, no estimate can be given as to the number of shares that will be held by the Selling Securityholders upon termination of this offering.
NUMBER OF SHARES NUMBER OF SHARES BENEFICIALLY WHICH MAY BE SOLD NUMBER OF SHARES PERCENT BENEFICIALLY OWNED PRIOR TO IN THIS BENEFICIALLY OWNED OWNED AFTER THE SELLING SECURITYHOLDERS OFFERING(1) OFFERING(1) AFTER THE OFFERING OFFERING - ---------------------------------- ----------------- ------------------ --------------------- --------------------- Ann P. Hodges and Christopher D. Hodges.......................... 120,600 120,600 0 0% ------- ------- --- ---
- ------------------------ (1) Assumes all Options have been exercised. PLAN OF DISTRIBUTION The shares offered hereby may be sold by the Selling Securityholders or by their respective pledgees, donees, transferees or other successors in interest. Such sales may be made at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. The shares may be sold by one or more of the following: (a) one or more block trades in which a broker or dealer so engaged will attempt to sell all or a portion of the shares held by the Selling Securityholders as agent but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchase by a broker or dealer as principal and resale by such broker or dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus; (c) ordinary brokerage transactions and transactions in which the broker solicits purchasers; and (d) privately negotiated transactions between the Selling Securityholders and purchasers without a broker-dealer. The Selling Securityholders may effect such transactions by selling shares to or through broker-dealers, and such broker-dealers will receive compensation in negotiated amounts in the form of discounts, concessions, commissions or fees from the Selling Securityholders and/or the purchasers of the shares for whom such broker-dealers may act as agent or to whom they sell as principal, or both (which compensation to a particular broker-dealer might be in excess of customary commissions). Such brokers or dealers or other participating brokers or dealers and the Selling Securityholders may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, in connection with such sales. Except for customary selling commissions in ordinary brokerage transactions, any such underwriter or agent will be identified, and any compensation paid to such persons will be described, in a Prospectus Supplement. In addition, any securities covered by this Prospectus that qualify for sale pursuant to Rule 144 might be sold under Rule 144 rather than pursuant to this Prospectus. LEGAL MATTERS The validity of the shares of Common Stock intended to be sold pursuant to this Prospectus will be passed upon for the Company by O'Melveny & Myers LLP. EXPERTS The financial statements incorporated in this Prospectus by reference to the Annual Report on Form 10-K/A for the year ended December 31, 1996 have been so included in reliance on the report of Finocchiaro & Co., independent accountants, given on the authority of said firm as experts in auditing and accounting. 14 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ----- Available Information.......................... 2 Incorporation of Certain Documents by Reference.................................... 2 Prospectus Summary............................. 4 Recent Developments............................ 6 Forward Looking Statements..................... 6 Risk Factors................................... 6 Selling Securityholders........................ 14 Plan of Distribution........................... 14 Legal Matters.................................. 14 Experts........................................ 14
ACACIA RESEARCH CORPORATION 120,600 SHARES OF COMMON STOCK --------------------- PROSPECTUS --------------------- , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses in connection with the registration and sale of the Selling Securityholder Securities are as follows: SEC registration fee............................................... $ 279 Printing and engraving............................................. 5,000 Accounting fees and expenses....................................... 5,000 Legal fees and expenses............................................ 15,000 Blue Sky filing fees and expenses.................................. 3,000 Miscellaneous expenses............................................. 5,000 --------- Total............................................................ $ 33,279
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Restated Articles of Incorporation and Bylaws of the Company, each as amended to date, require the Company to indemnify its officers and directors to the fullest extent permitted by Section 317 of the California General Corporation Law and applicable law. Section 317 of the California General Corporation Law makes provision for the indemnification of officers, directors and other corporate agents in terms sufficiently broad to indemnify such persons, under certain circumstances, for liabilities (including reimbursement of expenses incurred) arising under the Securities Act of 1933, as amended. ITEM 16. EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ----------- ------------------------------------------------------------------------------------ 4.1 Form of Option Agreement among the Company, Ann P. Hodges and Christopher D. Hodges 4.2 Form of Specimen Certificate of Company's Common Stock(1) 5.1 Opinion of O'Melveny & Myers LLP regarding legality of securities being registered 23.1 Consent of Finocchiaro & Co. 23.2 Consent of O'Melveny & Myers LLP (contained in Exhibit 5.1) 24.1 Power of Attorney (contained on signature page hereof)
- ------------------------ (1) Previously filed as an exhibit to the Company's Registration Statement on Form SB-2, File No. SB2-33-87368-L.A., and incorporated by reference. ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales ar being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of II-1 securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (5) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (6) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (7) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 6 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pasadena, State of California, on August , 1997. ACACIA RESEARCH CORPORATION By /s/ PAUL R. RYAN -------------------------------------- Paul R. Ryan, PRESIDENT AND CHIEF EXECUTIVE OFFICER II-3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paul R. Ryan and Kathryn King-Van Wie, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or either of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------------------ ------------------------------------- ------------------ /s/ PAUL R. RYAN President, Chief Executive Officer ------------------------------------------- and Director (Principal Executive August 29, 1997 Paul R. Ryan Officer) /s/ R. BRUCE STEWART Chief Financial Officer and Chairman ------------------------------------------- of the Board (Principal Financial August 29, 1997 R. Bruce Stewart and Accounting Officer) /s/ BROOKE P. ANDERSON ------------------------------------------- Director August 29, 1997 Brooke P. Anderson /s/ FRED A. DE BOOM ------------------------------------------- Director August 29, 1997 Fred A. de Boom /s/ EDWARD W. FRYKMAN ------------------------------------------- Director August 29, 1997 Edward W. Frykman
EX-4.1 2 EXHIBIT 4.1_2151 EXHIBIT 4.1 NON-TRANSFERABLE, NONQUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT dated as of the 7th day of May, 1997, between Acacia Research Corporation, a California corporation (the "Company"), and Christopher D. Hodges and Ann P. Hodges (the "Hodges"). W I T N E S E T H WHEREAS, pursuant to the terms of the Settlement Agreement with the Hodges dated May 7, 1997 (the "Settlement Agreement"), the Company has granted to the Hodges effective as of the date hereof (the "Option Date") a stock option to purchase authorized but unissued or treasury shares of Common Stock of the Company (the "Common Stock"), upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the execution of the Settlement Agreement, the mutual promises and covenants made herein and therein and the mutual benefits derived, the parties agree as follows: 1. DEFINED TERMS. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Settlement Agreement. The term "Shares", as used herein, refers to shares of the Common Stock and of any stock or any other securities or property into which the Shares may hereafter be changed. 2. GRANT OF OPTION; EXERCISE PRICE; VESTING LIMITS. (a) This Agreement evidences the Company's grant to the Hodges of the right and option to purchase, subject to the terms and conditions set forth herein, all or any part of an aggregate of 120,600 shares of the Common Stock (the "Option") at a price per share of $4.25 (as from time to time adjusted hereunder, the "Exercise Price"), representing a price equal to 85% of the fair market value of the Common Stock on the date hereof. (b) The Option shall vest and may be exercised as follows: 6700 Shares (subject to adjustment pursuant to Section 7 of this Agreement) on the date of this Agreement, and 6700 Shares (subject to adjustment pursuant to Section 7 of this Agreement) on each of the successive seventeen monthly anniversaries of the date of this Agreement thereafter. (c) Once exercisable, the Option may be exercised, from time to time, in whole or in part, prior to the close of business on November 7, 1998, subject to earlier termination under Section 7 below, and subject to reduction or termination pursuant to Section 2(d) below (the earliest of such dates, the "Expiration A-1 Date"). The Exercise Price and the number of Shares purchasable upon exercise of the Option shall be subject to adjustment as provided in Section 7. (d) Options with respect to any Shares not exercised by the Hodges prior to the Expiration Date automatically expire on such Expiration Date. If, at any time prior to the Expiration Date, the Hodges have realized total profits of $475,000.00 from the exercise of Options as calculated in accordance with Paragraph II.A.(3) of the Settlement Agreement, then the Option (or such portion of the Option which, if exercised, would increase the Hodges' profit under such calculation to an amount in excess of $475,000.00) shall thereupon cease vesting, and any unexercised Options previously issued to the Hodges will automatically become null and void. (e) Except as provided in Section 2(d) above, the Hodges may at any time exercise all or any part of the Options that have vested, but they need not exercise all or any part of the Options at any time, and their right to exercise the Options will accumulate as the Options vest in accordance with this Agreement. (f) The Hodges will be entitled to registration rights with respect to the Shares in accordance with the terms set forth in the Settlement Agreement. 3. EXERCISABILITY OF OPTION. Upon payment in cash, bank cashier's check or by wire transfer of the Exercise Price, the Company shall cause to be delivered to the Hodges one or more certificates for the Shares so purchased. The certificate shall be deemed to have been issued as of the date of the surrender of the Option as to such number of Shares for which the Exercise Price has been paid. If less than all of the Option is exercised, the Hodges or the Company may request an exchange of this Agreement for a new option agreement in substantially the same form in respect of the remaining number of Shares subject to the Option. No fewer than 1000 Shares may be purchased at any one time, unless the number purchased is the total number at the time remaining for purchase under the Option. No adjustment shall be made for any cash dividends declared or paid on Shares issuable on the exercise of the Option. 4. METHOD OF EXERCISE OF OPTION. The Option may be exercised only by the delivery to the Company of a written executed notice substantially in the form of EXHIBIT I hereto stating the number of Shares as to which it is being exercised and accompanied by payment in full in cash, bank cashier's check or by wire transfer, of an amount equal to the Exercise Price per Share multiplied by the number of Shares to be purchased, plus an amount sufficient to pay all withholding or other taxes or charges associated with such exercise. 5. COMPLIANCE WITH LAWS. A-2 (a) SECURITIES LAWS. The issuance and delivery of the Shares are subject to compliance with all applicable federal and state securities laws, and to such approvals by any listing, regulatory or governmental authority as may be necessary in connection therewith. Any securities delivered under this Agreement shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may reasonably deem necessary or advisable to assure compliance with such legal requirements. Optionee acknowledges that it is acquiring the Option and if applicable any of the Shares for investment purposes and not with a view to or for sale in connection with the distribution thereof. Neither the Option nor the Shares have been registered under the 1933 Act or any state securities laws. Prior to their registration, the Shares will be considered "restricted securities" under Rule 144 under the 1933 Act and neither the Shares nor any interest therein may be sold or otherwise disposed of without such registration or an opinion of counsel to the Company that an exemption from applicable registration requirements is available. Any permitted transferee shall be subject to similar restrictions. (b) TAX WITHHOLDING. Upon exercise of the Option, the Hodges shall pay to the Company any taxes on income or gain or other charges which the Hodges may be required to pay or the Company may be required to withhold with respect to such event. (c) PAYMENT OF TAXES. The Company shall pay all documentary stamp taxes, if any, attributable to this Agreement or the issuance of any of the Shares or other securities upon the exercise of the Option, PROVIDED, HOWEVER, that the Company shall not be required to permit (or to pay any tax or taxes which may be payable in respect of) any transfer involved in the issue of any certificate for Shares in a name other than that of the Hodges. (d) RESERVATION OF SHARES. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Shares or its authorized and issued Shares held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Shares upon exercise of the Option, the full number of Shares deliverable upon exercise of the Option. 6. NON-TRANSFERABILITY OF OPTION. The Option and any other rights of the Hodges under this Agreement are exercisable only by the Hodges, are nontransferable and shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge (other than to the Company), except by operation of law or by will or the laws of descent and distribution. The Company may disregard any attempt at transfer, assignment or other alienation prohibited hereby. 7. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF SHARES A-3 PURCHASABLE. The Exercise Price and the number of Shares purchasable upon the exercise of the Option are subject to adjustment by action both of the Board of Directors of the Company from time to time as provided in this Section 7. (a) ADJUSTMENT EVENTS. If there shall occur any stock split, dividend payable in stock, reverse stock split, merger or other reorganization, or exchange of Shares or other securities of the Company, or there shall occur any other fundamental change or event in respect of the Shares or a sale of substantially all the assets of the Company as an entirety, then the Board of Directors shall (i) equitably and proportionately adjust (i) the number and type of Shares (or other securities or property) subject to the then outstanding Option, (ii) the exercise price of the Option, and (iii) the securities and/or property deliverable upon exercise of the Option; or (ii) in the case of a merger or other reorganization that the Company does not survive, or a sale of substantially all of the assets of the Company as an entirety, provide for the substitution or exchange of the Option (or the Shares deliverable on exercise of the Option) for a right to acquire the consideration payable to holders of other Shares of the Company upon or in respect of such event subject to the continuing limitations on vesting and exercise in Section 2. If, in the case of any such event, the stock or other securities or property receivable on common shares by shareholders of the Company includes shares of stock or other securities or property of or from an entity other than a successor legally bound hereby, such other entity shall execute and deliver for the benefit of the Hodges an agreement to be bound hereby, together with such additional provisions to protect the interests of the Hodges as the Board of Directors shall reasonably consider necessary by reason of the foregoing. In the event of a merger or other reorganization that the Company does not survive, or a sale of substantially all of the assets of the Company as an entirety, the Board of Directors may in its discretion determine that each Option shall become immediately exercisable, and Shares shall immediately vest free of restrictions. Any acceleration of Awards shall comply with applicable legal requirements. If any Option or other right to acquire Shares under this Agreement has been so accelerated, but the Hodges fail to exercise such Option prior to the consummation of such reorganization or sale, such Option or right shall thereupon terminate. The provisions of this Section 7 shall bind the Hodges to all adjustments or substitutions made by the Board of Directors in A-4 good faith in accordance with the terms hereof and shall apply to any successive recapitalization, reorganization or other referenced events. (b) NO SHAREHOLDER RIGHTS. Nothing contained in this Agreement shall be construed as conferring upon the Hodges (i) any right to vote or receive dividends or rights or to be deemed for any purpose the holder of Shares or of any other securities of the Company which may at any time be issuable on the exercise of the Option, (ii) any other rights of a shareholder of the Company, (iii) any right to vote upon any matter submitted to shareholders at any meeting thereof, (iv) any authority to give or withhold consent to any corporate action, or (v) to receive notice of meetings, until the Option shall have been duly exercised as provided herein. (c) EFFECTIVE DATE. Except as provided herein, adjustments under Section 7(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive the applicable rights contemplated thereby. Nevertheless, the Company may elect to defer the effectiveness of such adjustment (but in no event to a date later than the effective time of the event giving rise to such adjustment), in which case the Company shall, with respect to any Option exercised after such record date and before such adjustment shall have become effective (i) defer issuing the number of Shares or other securities or deliverable upon such exercise in excess of the number of Shares or other securities or property of the Company issuable thereupon prior to adjustment, and (ii) not later than five business days after such adjustment shall have become effective issue to such holder the additional Shares or other securities or property issuable on such exercise. (d) DE MINIMIS EXCEPTION. No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% of the Exercise Price per Share; PROVIDED, that any adjustments which by reason of this Section 7(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 7 shall be made to the nearer cent or to the nearer one-hundredth of a Share, as the case may be. The Company shall not be required to issue any fractional share, but any fractional share interest shall be paid in cash equal to the fair market value of the applicable percentage of a share in lieu thereof or, at the Company's election, paid in a fractional or whole Share. (e) FORM. Irrespective of any adjustments in the exercise price or the number or kind of shares that may be acquired upon the exercise of the Option, this Agreement may continue to express the same Exercise Price per share and number and kind of Shares as are originally set forth in this Agreement. A-5 8. NO RESTRICTIONS ON CORPORATE AUTHORITY; TERMINATION OF OPTION ON LIQUIDATION OF THE COMPANY. The provisions of this Agreement shall not be deemed to restrict in any way any rights of the shareholder(s) or the Board, acting in good faith, during the term of this Agreement to dissolve, reorganize or take any other action or make any other change (fundamental or otherwise) affecting the structure, existence, organization, operations or business of the Company or any of its subsidiaries. This Option and all rights hereunder shall terminate if the Option is not exercisable or exercised prior to a dissolution of the Company. All decisions, including adjustments, by the Board or the Board of Directors made in good faith under this Agreement shall be binding and conclusive on the Hodges. 9. NOTICES. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Company at its principal offices located at 12 South Raymond Avenue, Pasadena, California 91105 to the attention of the Chief Financial Officer and Corporate Secretary, and to the Hodges at the address given beneath their signatures hereto, or to such other address as either party may hereafter designate in writing delivered to the other party expressly for such purposes. 10. AMENDMENTS. This Agreement may be amended only by a writing signed by the Company and the Hodges. 11. SUCCESSORS; BENEFIT. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Hodges shall bind and inure to the benefit of their respective successors and permitted assigns hereunder. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the Hodges any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company, the Hodges and any such permitted assigns or successors. 12. TERMINATION. This Agreement shall terminate at the close of business on the Expiration Date. Notwithstanding the foregoing, this Agreement will terminate upon the exercise of the Option in accordance with these terms, in its entirety. 13. GOVERNING LAW. THIS AGREEMENT AND THE OPTION SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF CALIFORNIA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE, SUBJECT TO THE GENERAL CORPORATION LAW OF THE STATE OF INCORPORATION OF THE COMPANY AS TO MATTERS GOVERNED THEREBY AS A MATTER OF CORPORATION LAW. 14. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts A-6 shall together constitute but one and the same instrument. 15. HEADINGS. The headings used in this Agreement are inserted for convenience only and neither constitute a portion of this Agreement nor in any manner affect the construction of the provisions of this Agreement. 16. EFFECTIVE DATE. This Agreement and the Option evidenced hereby shall be granted as of the Effective Date and subject to the effectiveness of the Settlement Agreement. 17. NONQUALIFIED STOCK OPTION. The Option are not, and are not intended as, incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. A-7 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by a duly authorized officer and the Hodges have duly executed this Agreement. ACACIA RESEARCH CORPORATION, a California corporation By /s/ R. BRUCE STEWART -------------------------------- Title Chief Financial Officer ----------------------------- CHRISTOPHER D. HODGES /s/ CHRISTOPHER D. HODGES ---------------------------------- ---------------------------------- (Address) ---------------------------------- (City, State, Zip Code) ANN P. HODGES /s/ ANN P. HODGES ---------------------------------- ---------------------------------- (Address) ---------------------------------- (City, State, Zip Code) A-8 Notational Record of Exercise: - ----------------------------------------------------------------- - ----------------------------------------------------------------- Date Number of Shares Amount Received - ----------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- - ----------------------------------------------------------------- A-9 EXHIBIT I FORM OF EXERCISE OF OPTION ( TO BE EXECUTED UPON ANY EXERCISE OF OPTION ) The undersigned hereby irrevocably elects [check applicable box(es)] / / To exercise the rights, evidenced by the Non-Transferable, Nonqualified Stock Option Agreement dated as of ____________ ___, 1997 (the "Agreement"), to purchase _________ shares (the "Shares") and herewith tenders payment in full for such Shares as follows: [check applicable box] / / by certified or official bank check payable to the order of Acacia Research Corporation (the "Company") in the amount of $______________ / / by wire transfer to _______________________ in accordance with the terms of the Agreement and instructions from the Chief Financial Officer of the Company. The Hodges request that a certificate for such Shares be registered to the Hodges and delivered to: ___________________________________. If said number of Shares is less than all of the shares purchasable under the Agreement, the Hodges shall deliver the Agreement to the Company so that the Company can make notation of the partial exercise and the date hereof on the executed copies of the Agreement. The Shares may be sold or otherwise transferred only in compliance with the Securities Act of 1933 and any applicable state laws and that the Shares are legended to assure compliance with such laws. The Hodges severally represent that each of them A-1 will comply with the Agreement and all applicable securities laws as to any transactions in or with respect to the Shares. Dated: , 199 --------- --- -- CHRISTOPHER D. HODGES --------------------------- --------------------------- Insert Taxpayer I.D. No. of Christopher Hodges) ANN P. HODGES --------------------------- --------------------------- Insert Taxpayer I.D. No. of Ann P. Hodges) To be completed by the Company after the price and receipt of funds verified: ACCEPTED BY: ACACIA RESEARCH CORPORATION, a California corporation By: ---------------------------- Its: ---------------------------- A-2 EX-5.1 3 EXHIBIT 5.1_2151 EXHIBIT 5.1 August 29th 1 9 9 7 Acacia Research Corporation 12 South Raymond Avenue Pasadena, California 91105 Re: Registration on Form S-3 of Common Stock, no par value, of Acacia Research Corporation (the "Company") ------------------------------------------------------- Ladies and Gentlemen: At your request, we have examined the Registration Statement on Form S-3 to be filed with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended, of 120,600 shares of Common Stock, no par value, of the Company (the "Common Stock") to be sold by certain shareholders of the Company. We have examined the proceedings heretofore taken in connection with the authorization of the issuance of the Common Stock upon exercise of stock options. Based upon such examination and upon such matters of fact and law as we have deemed relevant, we are of the opinion that, upon exercise of the stock options, payment of the exercise price in accordance with the terms of the stock options and the countersigning of the certificates representing the Common Stock by the Transfer Agent and Registrar, the Common Stock will have been duly authorized by all necessary corporate action on the part of the Company and will be validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement. Respectfully submitted, O'MELVENY & MYERS LLP EX-23.1 4 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Acacia Research Corporation on Form S-3 of our report dated July 31, 1997 incorporated by reference into the Annual Report on Form 10K/A of Acacia Research Corporation for the fiscal year ended December 31, 1996 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ Finocchiaro & Co. Finocchiaro & Co. Pasadena, California August 14, 1997 -----END PRIVACY-ENHANCED MESSAGE-----