ACACIA RESEARCH CORPORATION
1996 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
ARTICLE I. THE PLAN. . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Purpose. . . . . . . . . . . . . . . . . . 1
Section 1.2 Administration and Authorization; Power
and Procedure. . . . . . . . . . . . . . . 1
Section 1.3 Participation. . . . . . . . . . . . . . . 3
Section 1.4 Shares Available for Awards. . . . . . . . 3
Section 1.5 Grant of Awards. . . . . . . . . . . . . . 4
Section 1.6 Award Period . . . . . . . . . . . . . . . 4
Section 1.7 Exercise and Vesting of Awards . . . . . . 4
Section 1.8 No Transferability . . . . . . . . . . . . 4
ARTICLE II. KEY EMPLOYEE OPTIONS. . . . . . . . . . . . . . 5
Section 2.1 Grants . . . . . . . . . . . . . . . . . . 5
Section 2.2 Option Price . . . . . . . . . . . . . . . 5
Section 2.3 Limitations on Grant and Terms of
Incentive Stock Options. . . . . . . . . . 7
Section 2.4 Limits on 10% Holders. . . . . . . . . . . 7
Section 2.5 Option Repricing/Cancellation and
Regrant. . . . . . . . . . . . . . . . . . 7
Section 2.6 Limit on Grants to any Individual. . . . . 8
ARTICLE III. NON-EMPLOYEE DIRECTOR OPTIONS. . . . . . . . . . 8
Section 3.1 Participation. . . . . . . . . . . . . . . 8
Section 3.2 Annual Option Grants . . . . . . . . . . . 8
Section 3.3 Option Price . . . . . . . . . . . . . . . 8
Section 3.4 Option Period. . . . . . . . . . . . . . . 9
Section 3.5 Exercise of Options. . . . . . . . . . . . 9
Section 3.6 Termination of Directorship. . . . . . . . 9
Section 3.7 Adjustments. . . . . . . . . . . . . . . . 9
Section 3.8 Acceleration Upon a Change in Control
Event. . . . . . . . . . . . . . . . . . . 10
Section 3.9 Limitation on Amendments . . . . . . . . . 10
ARTICLE IV. OTHER PROVISIONS. . . . . . . . . . . . . . . . 10
Section 4.1 Rights of Eligible Employees,
Participants and Beneficiaries . . . . . . 10
Section 4.2 Adjustments; Acceleration. . . . . . . . . 11
Section 4.3 Effect of Termination of Employment. . . . 12
Section 4.4 Compliance with Laws . . . . . . . . . . . 12
Section 4.5 Tax Withholding. . . . . . . . . . . . . . 12
Section 4.6 Plan Amendment, Termination and
Suspension; Changes in Awards. . . . . . . 13
Section 4.7 Privileges of Stock Ownership. . . . . . . 14
Section 4.8 Effective Date of Plan . . . . . . . . . . 14
Section 4.9 Term of the Plan . . . . . . . . . . . . . 14
Section 4.10 Governing Law/Construction/Severability. . 14
Section 4.11 Captions . . . . . . . . . . . . . . . . . 15
Section 4.12 Effect of Change of Subsidiary Status. . . 15
Section 4.13 Non-Exclusivity of Plan. . . . . . . . . . 15
ARTICLE V. DEFINITIONS . . . . . . . . . . . . . . . . . . 15
Section 5.1 Definitions. . . . . . . . . . . . . . . . 15
ACACIA RESEARCH CORPORATION
1996 STOCK OPTION PLAN
ARTICLE I. THE PLAN
SECTION 1.1 PURPOSE.
The purpose of this Plan is to promote the success of the
Company by providing an additional means through the grant of
Awards (a) to attract, motivate and retain key employees,
including officers (whether or not directors), of the Company
with rewards and incentives for high levels of individual
performance and improved financial performance of the Company
under the "Key Employee Program" in Article II, and (b) to
attract, motivate and retain experienced and knowledgeable
independent directors through the benefits provided under the
"Non-Employee Director Program" in Article III. "Corporation"
means Acacia Research Corporation and "Company" means the
Corporation and its Subsidiaries, collectively. These terms and
other capitalized terms if not defined elsewhere in the text of
this Plan, are defined in Article V.
SECTION 1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND
PROCEDURE.
(a) Committee. This Plan shall be administered by and
all Awards to Eligible Employees shall be authorized by the
Committee. Any action of the Committee with respect to the
administration of this Plan shall be taken pursuant to a
majority vote or by written consent of its members.
(b) Plan Awards; Interpretation; Powers of Committee.
Subject to the express provisions of this Plan, the
Committee shall have the authority:
(i) to determine from among those eligible
persons the particular Eligible Employees who will
receive any Awards;
(ii) to grant Awards to Eligible Employees,
determine the price at which securities will be offered
or awarded and the amount of securities to be offered
or awarded to any of such persons, and determine the
other specific terms and conditions of such Awards
consistent with the express limits of this Plan, and
establish the installments (if any) in which such
Awards shall become exercisable, or determine that no
delayed exercisability is required, and establish the
events of termination of such Awards;
(iii)to approve the forms of Award Agreements
(which need not be identical either as to type of award
or among Participants);
(iv) to construe and interpret this Plan and any
agreements defining the rights and obligations of the
Company and Eligible Employee Participants under this
Plan, further define the terms used in this Plan, and
prescribe, amend and rescind rules and regulations
relating to the administration of this Plan;
(v) to cancel, modify or waive the Corporation's
rights with respect to, or modify, discontinue,
suspend, or terminate any or all outstanding Awards
held by Eligible Employees, subject to any required
consent under Section 4.6;
(vi) to accelerate or extend the exercisability or
extend the term of any or all such outstanding Awards
within the maximum ten-year term of Awards under
Section 1.6; and
(vii)to make all other determinations and take
such other action as contemplated by this Plan or as
may be necessary or advisable for the administration of
this Plan and the effectuation of its purposes.
Notwithstanding the foregoing, the provisions of Article III
relating to Non-Employee Director Awards shall be non-
discretionary, automatic and, to the maximum extent possible,
self-effectuating, and the discretion of the Committee shall not
extend to such Awards in any manner that would be impermissible
under Rule 16b-3(c)(2).
(c) Binding Determinations. Any action taken by, or
inaction of, the Corporation, any Subsidiary, the Board or
the Committee relating or pursuant to this Plan shall be
within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. No member
of the Board or Committee, or officer of the Corporation or
any Subsidiary, shall be liable for any such action or
inaction of the entity or body, of another person or, except
in circumstances involving bad faith, of himself or herself.
Subject only to compliance with the express provisions
hereof, the Board and Committee may act in their absolute
discretion in matters within their authority related to this
Plan.
(d) Reliance on Experts. In making any determination
or in taking or not taking any action under or with respect
to this Plan, the Committee or the Board, as the case may
be, may obtain and may rely upon the advice of experts,
including professional advisors to the Corporation. No
director, officer or agent of the Company shall be liable
for any such action or determination taken or made or
omitted in good faith.
(e) Delegation. The Committee may delegate
ministerial, non-discretionary functions to individuals who
are officers or employees of the Company.
SECTION 1.3 PARTICIPATION.
Awards may be granted by the Committee only to those persons
that the Committee determines to be Eligible Employees. An
Eligible Employee who has been granted an Award may, if otherwise
eligible, be granted additional Awards if the Committee shall so
determine. Non-Employee Directors shall not be eligible to
receive any Awards except for Nonqualified Stock Options granted
automatically without further action of the Committee under the
provisions of Article III.
SECTION 1.4 SHARES AVAILABLE FOR AWARDS.
Subject to the provisions of Section 4.2, the capital stock
that may be delivered under this Plan shall be shares of the
Corporation's authorized but unissued Common Stock. The shares
may be delivered for any lawful consideration.
(a) Number of Shares. The maximum aggregate number of
shares of Common Stock that may be delivered pursuant to all
Awards granted under this Plan (including under Articles II
and III) shall not exceed 500,000 shares and the maximum
number of shares of Common Stock that may be delivered under
the provisions of Article III shall not exceed 60,000
shares. The maximum number of shares of Common Stock that
may be delivered pursuant to Options qualified as Incentive
Stock Options granted under this Plan is 300,000. Each of
the three foregoing numerical limits shall be subject to
adjustments as contemplated by Section 4.2.
(b) Calculation of Available Shares and Replenishment.
Shares subject to outstanding Awards shall be reserved for
issuance. If any Award shall expire or be cancelled or
terminated without having been exercised in full, the
unpurchased shares subject thereto shall again be available
for the purposes of the Plan, subject to any applicable
limitations under Rule 16b-3. In addition, any Common Stock
which is used by an Eligible Employee Participant as full or
partial payment to the Company for the purchase of Common
Stock acquired upon exercise of an Option and any shares
delivered by an Eligible Employee Participant or withheld by
the Company in satisfaction of the tax withholding
obligations of such Participant, shall be available for
further awards to Eligible Employees under this Plan;
provided, however, that, to the extent required to maintain
the Plan's status as a qualifying plan under Rule 16b-3,
such shares shall be available for subsequent awards only to
Eligible Employees who are not Section 16 Persons; provided
further that (except as otherwise permitted by the Code) no
such shares shall be available for future grants of
incentive stock options under this Plan.
SECTION 1.5 GRANT OF AWARDS.
Subject to the express provisions of this Plan, the
Committee shall grant and determine the terms and conditions of
all Awards to Eligible Employees, the number of shares of Common
Stock subject to each Award and the price to be paid for the
shares subject to each Award. Each Award shall be evidenced by
an Award Agreement signed by the Corporation and, if required by
the Committee, by the Participant.
SECTION 1.6 AWARD PERIOD.
All Awards to Eligible Employees and all executory rights or
obligations under the related Award Agreements shall expire on
such date (if any) as shall be determined by the Committee, but
not later than 10 years after the Award Date, and shall be
subject to earlier termination as provided herein or in the Award
Agreements. The Committee from time to time may authorize by
amendment to or waiver of the Award Agreements or otherwise, as
to any number of Awards or all Awards to Eligible Employees, any
extension or acceleration of benefits thereunder.
SECTION 1.7 EXERCISE AND VESTING OF AWARDS.
(a) Provisions for Exercise. Unless the Committee
otherwise provides, no Eligible Employee's Award shall be
exercisable until at least 6 months after the initial Award
Date and, once exercisable, an Award shall remain
exercisable until the expiration or earlier cancellation or
termination of the Award.
(b) Procedure. Any exercisable Award shall be deemed
to be exercised when the Secretary of the Corporation
receives written notice of such exercise from the
Participant, together with any required payment made in
accordance with Section 2.2(a) or 3.3, as the case may be,
and Section 4.5.
(c) Fractional Shares/Minimum Issue. Fractional share
interests shall be disregarded, but may be accumulated. The
Committee may, however, in the case of Eligible Employees
determine in the Award Agreement or thereafter that cash,
other securities, or other property will be paid or
transferred in lieu of any factional share interests. No
fewer than 100 shares may be required on exercise of an
Award at one time unless the number purchased is the total
number at the time available for purchase under the Award.
SECTION 1.8 NO TRANSFERABILITY.
Awards may be exercised only by, and amounts payable or
shares issuable pursuant to an Award shall be paid only to (or
registered only in the name of), the Participant or, if the
Participant has died, the Participant's Beneficiary. Other than
by will or the laws of descent and distribution or, with respect
to Nonqualified Stock Options, pursuant to a QDRO, no right or
benefit under this Plan or any Award shall be transferrable by
the Participant or shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge and any such attempted action shall be
void. The Corporation shall disregard any attempt at transfer,
assignment or other alienation prohibited by the preceding
sentences and shall pay or deliver such cash or shares of Common
Stock in accordance with the provisions of this Plan. The
designation of a Beneficiary hereunder shall not constitute a
transfer for these purposes.
ARTICLE II. KEY EMPLOYEE OPTIONS
SECTION 2.1 GRANTS.
One or more Options may be granted under this Article to any
Eligible Employee. Each Option granted may be either an Option
intended to be an Incentive Stock Option, or not so intended, as
determined by the Committee, and such intent shall be indicated
in the applicable Award Agreement. Notwithstanding the preceding
sentence, Options granted to Other Eligible Persons shall only be
Nonqualified Stock Options.
SECTION 2.2 OPTION PRICE.
(a) Pricing Limits. The purchase price per share of
the Common Stock covered by each Option granted under this
Article shall be determined by the Committee at the time of
the Award, but in the case of Incentive Stock Options shall
not be less than 100% (110% in the case of an Eligible
Employee Participant described in Section 2.4) of the Fair
Market Value of the Common Stock on the date of grant.
(b) Payment Provisions. No shares shall be delivered
pursuant to the exercise of an Option granted under this
Article until payment of the full purchase price of such
shares is received by the Corporation at its principal
office located at 12 S. Raymond Avenue, Suite B, Pasadena,
California 91105, or at such other place as the Committee
may specify from time to time. Payment methods may include
any of the following, pursuant to such conditions and rules
or procedures as may be established by the Committee from
time to time or as may be set forth in the Award Agreement:
(i) In cash;
(ii) In shares of Common Stock already owned by
the Participant;
(iii)Partly in cash and partly in shares of Common
Stock already owned by the Participant; or
(iv) By delivery of a notice instructing the
Corporation to deliver the shares being purchased to a
broker, subject to the broker's delivery of cash to the
Corporation equal to the purchase price; or
(v) To the extent an applicable Award Agreement
so provides, payment may be made in whole or in part by
a promissory note executed by the recipient of an Award
in favor of the Corporation, upon terms and conditions
determined by the Committee, and secured by the Common
Stock issuable upon exercise of the Options granted by
such Award in compliance with applicable law
(including, without limitation, state corporate law and
federal margin requirements).
Any shares used for payment pursuant to clause (ii) or (iii)
above shall have been held by the Eligible Employee Participant
for at least six months prior to such exercise date. Common
Stock accepted as a payment shall be valued at the Fair Market
Value of the Common Stock on the date of exercise.
(c) Reload Options. The Committee may provide in an
Award Agreement that, effective as of the date of exercise
by a Participant of all or part of an Option (the "Base
Option") by delivering shares of Common Stock already owned
by the Participant to the extent permitted by subsection
(b)(ii) or (iii) above, the Eligible Employee Participant
shall be granted an additional Option (a "Reload Option") to
purchase at the Fair Market Value on the date of such
exercise and new grant, a number of shares of Common Stock
equal to the number of whole shares (subject to reduction in
the case of an outstanding Incentive Stock Option to the
extent necessary to comply with the $100,000 limit set forth
in Section 2.3(a)) used by the Participant to pay or toward
the payment of the exercise price of the Base Option,
provided the Participant at the time of such exercise is an
Eligible Employee. The Reload Option may be exercised
between the date six months after its grant and the original
date of expiration of the Base Option or such later time as
the Committee may permit. The Reload Option shall be
evidenced in the Award Agreement for the Base Option or by
any other writing containing such terms and conditions as
the Committee shall approve, which conditions may provide
that upon the exercise of any Reload Option, an additional
Reload Option may be granted with respect to the number of
whole shares used to exercise the prior outstanding Reload
Option. In no event, however, shall the aggregate number of
additional shares authorized by Reload Option(s) exceed 50%
of the maximum number of shares initially deliverable
(subject to adjustments pursuant to Section 4.2(a)) on
exercise of the Base Option.
SECTION 2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE
STOCK OPTIONS.
(a) $100,000 Limit. To the extent that the aggregate
"fair market value" (as defined below) of stock with respect
to which incentive stock options first become exercisable by
a Participant in any calendar year exceeds $100,000, taking
into account both Common Stock subject to Incentive Stock
Options under this Plan and stock subject to incentive stock
options under all other plans of the Company, such options
shall be treated as Nonqualified Stock Options. For this
purpose, the "fair market value" of the stock subject to
options shall be determined as of the date the options were
awarded. In reducing the number of options treated as
incentive stock options to meet the $100,000 limit, the most
recently granted options shall be reduced first. To the
extent a reduction of simultaneously granted options is
necessary to meet the $100,000 limit, the Committee may, in
the manner and to the extent permitted by law, designate
which shares of Common Stock are to be treated as shares
acquired pursuant to the exercise of an Incentive Stock
Option.
(b) Option Period. Each Option and all rights
thereunder shall expire no later than 10 years after the
Award Date.
(b) Other Code Limits. There shall be imposed in any
Award Agreement relating to Incentive Stock Options such
terms and conditions as from time to time are required in
order that the Option be an "incentive stock option" as that
term is defined in Section 422 of the Code.
SECTION 2.4 LIMITS ON 10% HOLDERS.
No Incentive Stock Option may be granted to any person who,
at the time the Option is granted, owns (or is deemed to own
under Section 424(d) of the Code) shares of outstanding Common
Stock representing more than 10% of the total combined voting
power of all classes of stock of the Corporation, unless the
exercise price of such Option is at least 110% of the Fair Market
Value of the stock subject to the Option on the date of grant and
such Option by its terms is not exercisable after the expiration
of five years from the date such Option is granted.
SECTION 2.5 OPTION REPRICING/CANCELLATION AND REGRANT.
Subject to Section 1.4 and Section 4.6 and the general
limitations on Awards contained elsewhere in this Plan, the
Committee from time to time may authorize, generally or in
specific cases only, any adjustment in the exercise or purchase
price, the number of shares subject to, or the term of, an Award
granted under this Article by cancellation of an outstanding
Award and a subsequent regranting of an Award, by amendment, by
substitution of an outstanding Award, by waiver or by other
legally valid means. Such amendment or other action may result
among other changes in an exercise or purchase price which is
higher or lower than the exercise or purchase price of the
original or prior Award, provide for a greater or lesser number
of shares subject to the Award, or provide for a longer or
shorter vesting or exercise period.
SECTION 2.6 LIMIT ON GRANTS TO ANY INDIVIDUAL.
The maximum number of shares of Common Stock that are
issuable under Options that during any calendar year are granted
to any Eligible Employee Participant shall not exceed 100,000,
subject to adjustments contemplated by Section 4.2.
ARTICLE III. NON-EMPLOYEE DIRECTOR OPTIONS
SECTION 3.1 PARTICIPATION.
Awards under this Article III shall be made only to Non-
Employee Directors.
SECTION 3.2 ANNUAL OPTION GRANTS.
(a) Time of Initial Award. Subject to approval by the
shareholders of the Corporation, persons who are Non-
Employee Directors at the time of the Plan's adoption on
April 16, 1996, and persons who are elected or appointed to
the Board after April 16, 1996, on the date of such
election, shall each be granted without further action a
NonQualified Stock Option to purchase 10,000 shares of
Common Stock.
(b) Subsequent Annual Awards. On the first business
day in each calendar year following the approval of this
Plan by the shareholders of the Corporation and during the
term of this Plan, there shall be granted automatically
(without any action by the Committee or the Board) a
Nonqualified Stock Option (the Award Date of which shall be
such date) to each Non-Employee Director then in office to
purchase 1,000 shares of Common Stock on each such date.
SECTION 3.3 OPTION PRICE.
The purchase price per share of the Common Stock covered by
each Option granted pursuant to Section 3.2 hereof shall be 100
percent of the Fair Market Value of the Common Stock on the Award
Date. The Award Date of Options granted under Section 3.2(a)
shall, for purposes of determining the Option price, be April 16,
1996 with respect to Options granted to Non-Employee Directors as
of that date, or the date such Option is granted upon election or
appointment of the applicable director to the Board with respect
to all other Options granted under Section 3.2(a). The purchase
price of any shares purchased shall be paid in full at the time
of each purchase either (i) in cash or by check of or on behalf
of the Non-Employee Director, including (to the extent permitted
by applicable law and consistent with Rule 16b-3(c)(2)) the
process set forth in Section 2.2(b)(iv), (ii) in shares of Common
Stock valued at their Fair Market Value on the date of exercise
of the Option or (iii) partly in such shares and partly in cash;
provided that if payments are made pursuant to clauses (ii) and
(iii) above any shares used for such payment shall have been held
by the Non-Employee Director Participant for at least six months
prior to such exercise date.
SECTION 3.4 OPTION PERIOD.
Each option granted under this Article III and all rights or
obligations thereunder shall expire on the fifth anniversary of
the Award Date and shall be subject to earlier termination as
provided below.
SECTION 3.5 EXERCISE OF OPTIONS.
Each Option granted under this Article III shall become
exercisable in full 12 months after the Award Date, except (i)
such Options granted pursuant to Section 3.2(a), which such
Options shall vest at the rate of 2,500 shares of Common Stock
per year on each of the first four anniversaries of the date of
such grant, and (ii) as provided in Section 3.8.
SECTION 3.6 TERMINATION OF DIRECTORSHIP.
An Option granted pursuant to this Article shall, if
exercisable on the date of a Non-Employee Director Participant's
termination of service as a director, remain exercisable only for
six months after the date of such termination or until the
expiration of the stated term of such Option, whichever first
occurs. Any Option granted pursuant to Section 3.2 hereof held
by such Non-Employee Director Participant which is not
exercisable on the date of termination of service shall
terminate.
SECTION 3.7 ADJUSTMENTS.
Options granted under this Article III shall be subject to
adjustment as provided in Section 4.2, but only to the extent
that (a) such adjustment and the Committee's actions in respect
thereof satisfy applicable criteria under Rule 16b-3 and (b) such
adjustment is consistent with adjustments to Options held by
persons other than executive officers or directors of the
Corporation.
SECTION 3.8 ACCELERATION UPON A CHANGE IN CONTROL EVENT.
Upon the occurrence of a Change in Control Event, each
Option granted under Section 3.2 hereof shall become immediately
exercisable in full. To the extent that any Option granted under
this Article III (a) is not exercised prior to (i) a dissolution
of the Corporation or (ii) a merger or other corporate event in
which the Corporation does not survive and (b) no provision is
(or consistent with the provisions of Section 3.7 can be) made
for the assumption, conversion, substitution or exchange of the
Option, the Option shall terminate upon the occurrence of such
event.
SECTION 3.9 LIMITATION ON AMENDMENTS.
The provisions of this Article III shall not be amended more
than once every six months (other than as may be necessary to
conform to any applicable changes in the Code or ERISA or, in
each case, the rules thereunder), unless such amendment would be
consistent with the provisions of Rule 16b-3(c)(2)(ii) (or any
successor provision).
ARTICLE IV. OTHER PROVISIONS
SECTION 4.1 RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS
AND BENEFICIARIES.
(a) Employment Status. Status as an Eligible Employee
shall not be construed as a commitment that any Award will
be made under this Plan to an Eligible Employee or to
Eligible Employees generally.
(b) No Employment Contract. Nothing contained in this
Plan (or in any other documents related to this Plan or to
any Award) shall confer upon any Eligible Employee or other
Participant any right to continue in the employ or other
service of the Company or constitute any contract or
agreement of employment or other service, nor shall it
interfere in any way with the right of the Company to change
such person's compensation or other benefits or to terminate
the employment of such person, with or without cause, but
nothing contained in this Plan or any document related
hereto shall adversely affect any other contractual right of
such person without his or her consent thereto.
(c) Plan Not Funded. This Plan is not subject to
Title 1 of ERISA and is not funded. No Participant,
Beneficiary or other person shall have any right, title or
interest in any fund or in any specific asset (including
shares of Common Stock, except as expressly otherwise
provided) of the Company by reason of any Award hereunder.
Neither the provisions of this Plan (or of any related
documents), nor the creation or adoption of this Plan, nor
any action taken pursuant to the provisions of this Plan
shall create, or be construed to create, a trust of any kind
or a fiduciary relationship between the Company and any
Participant, Beneficiary or other person.
SECTION 4.2 ADJUSTMENTS; ACCELERATION.
(a) Adjustments. If there shall occur any
extraordinary dividend or other extraordinary distribution
in respect of the Common Stock (whether in the form of cash,
Common Stock, other securities, or other property), or any
recapitalization, stock split (including a stock split in
the form of a stock dividend), reverse stock split,
reorganization, merger, combination, consolidation, split-
up, spin-off, combination, repurchase, or exchange of Common
Stock or other securities of the Corporation, or there shall
occur any other like corporate transaction or event in
respect of the Common Stock, then the Committee shall, in
such manner and to such extent (if any) as it deems
appropriate and equitable (1) proportionately adjust any or
all of (a) the number and type of shares of Common Stock (or
other securities) which thereafter may be made the subject
of Awards (including the specific maximum numbers of shares
set forth elsewhere in this Plan), (b) the number, amount
and type of shares of Common Stock (or other securities or
property) subject to any or all outstanding Awards, and
(c) the exercise price of any or all outstanding Awards, or
(2) in the case of an extraordinary dividend or
distribution, merger, reorganization, consolidation,
combination, split up, exchange or spin off make provision
for a cash payment or a substitution or exchange of the
securities or property deliverable upon exercise to the
holder of any or all outstanding Awards based upon the
distribution or consideration payable to holders of Common
Stock upon or in respect of such event; provided, however,
in each case, that with respect to Awards of Incentive Stock
Options, no such adjustment shall be made which would cause
the Plan to violate Section 424(a) of the Code or any
successor provision thereto.
(b) Acceleration of Awards Upon Change in Control. As
to any Eligible Employee Participant, unless prior to a
Change in Control Event the Committee determines that, upon
its occurrence, there shall be no acceleration of benefits
under Awards or determines that only certain or limited
benefits under Awards shall be accelerated and the extent to
which they shall be accelerated, and/or establishes a
different time in respect of such Change in Control Event
for such acceleration, then upon the occurrence of a Change
in Control Event each Option shall become immediately
exercisable. The Committee may override the limitations on
acceleration in this Section 4.2(b) by express provision in
the Award Agreement and may accord any Eligible Employee
Participant a right to refuse such acceleration in such
circumstances as the Committee may approve. Any
acceleration of Awards shall comply with applicable
regulatory requirements, including without limitation
Section 422 of the Code. The authority and provisions of
this Section 4.2 are not intended to limit the Committee's
authority to provide for acceleration of exercisability of
Awards in other circumstances. Further, the Committee may
provide for the termination of any or all of an Eligible
Employee Participant's Awards to the extent they are not
exercised as of the date of any event or transaction in or
pursuant to which the Corporation does not survive.
SECTION 4.3 EFFECT OF TERMINATION OF EMPLOYMENT.
The Committee shall establish in respect of each Award
granted to an Eligible Employee the effect of a termination of
employment on the rights and benefits thereunder and in so doing
may make distinctions based upon the cause of termination.
SECTION 4.4 COMPLIANCE WITH LAWS.
This Plan, the granting and vesting of Awards under this
Plan and the issuance and delivery of shares of Common Stock
and/or the payment of money or the use or application of shares
under this Plan or under Awards granted hereunder are subject to
compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal
securities laws and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as
may, in the opinion of counsel for the Corporation, be necessary
or advisable in connection therewith. Any securities delivered
under this Plan shall be subject to such restrictions and the
person acquiring such securities shall, if requested by the
Corporation, provide such assurances and representations to the
Corporation as the Corporation may deem necessary or desirable to
assure compliance with all applicable legal requirements.
SECTION 4.5 TAX WITHHOLDING.
Upon any exercise, vesting, or payment of any Award or, if
they require upon the disposition of shares of Common Stock
acquired pursuant to the exercise of an Incentive Stock Option
prior to satisfaction of the holding period requirements of
Section 422 of the Code, the Company shall have the right at its
option to (i) require the Participant (or Beneficiary) to pay or
provide for payment of the amount of any taxes which the Company
may be required to withhold with respect to such transaction or
(ii) deduct from any amount payable in cash the amount of any
taxes which the Company may be required to withhold with respect
to such cash amount. In any case where a tax is required to be
withheld in connection with the delivery of shares of Common
Stock under this Plan, any Eligible Employee Participant may
elect, to the extent allowed by and pursuant to such rules and
subject to such conditions as the Committee may establish, to
have the Corporation reduce the number of shares to be delivered
by (or otherwise reacquire) that number of shares valued at their
then Fair Market Value to satisfy such withholding obligation.
SECTION 4.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION;
CHANGES IN AWARDS.
(a) Board Authorization. Except as provided in
Section 3.9, the Board may, at any time, terminate or, from
time to time, amend, modify or suspend this Plan, in whole
or in part. No Awards may be granted during any suspension
of this Plan or after termination of this Plan, but the
Committee shall retain jurisdiction as to Awards then
outstanding in accordance with the terms of this Plan.
(b) Shareholder Approval. If any amendment would
(i) materially increase the benefits accruing to
Participants under this Plan, (ii) materially increase the
aggregate number of securities that may be issued under this
Plan, or (iii) materially modify the requirements as to
eligibility for participation in this Plan, then to the
extent then required by Rule 16b-3 to secure benefits
thereunder or to avoid liability under Section 16 of the
Exchange Act (and Rules thereunder) or required under
Section 424 of the Code or any other applicable law, or
deemed necessary or advisable by the Board, such amendment
shall be subject to shareholder approval.
(c) Amendments to Awards. Without limiting any other
express authority of the Committee under, but subject to the
express limits of, this Plan, the Committee by agreement or
resolution may waive conditions of or limitations on Awards
to Eligible Employees that the Committee in the prior
exercise of its discretion has imposed, without the consent
of a Participant, and may make other changes to the terms
and conditions of Awards that do not affect in any manner
materially adverse to the Eligible Employee Participant, his
or her rights and benefits under an Award.
(d) Limitations on Amendments to Plan and Awards. No
amendment, suspension or termination of the Plan or change
of or affecting any outstanding Award shall, without written
consent of the Participant, affect in any manner materially
adverse to the Participant any rights or benefits of the
Participant or obligations of the Corporation under any then
outstanding Award granted under this Plan. Changes
contemplated by Section 4.2 shall not be deemed to
constitute changes or amendments for purposes of this
Section 4.6.
SECTION 4.7 PRIVILEGES OF STOCK OWNERSHIP.
A Participant shall not be entitled to any privilege of
stock ownership as to any shares of Common Stock not actually
delivered to and held of record by him or her, other than
benefits incident to the disposition of shares upon due exercise
of an Option consistent with the terms of this Plan. No
adjustment will be made for dividends or other rights as a
shareholder for which a record date is prior to the date of
delivery of shares on exercise of an Award.
SECTION 4.8 EFFECTIVE DATE OF PLAN.
This Plan is effective as of April 16, 1996, the date of
initial Board approval, subject to shareholder approval by
December 31, 1996.
SECTION 4.9 TERM OF THE PLAN.
No Award shall be granted more than ten years after the
initial effective date of the Plan (the "termination date").
Unless otherwise expressly provided in this Plan or in an
applicable Award Agreement, any Award theretofore granted may
extend beyond such termination date, and all authority of the
Committee with respect to Awards hereunder shall continue during
any suspension of this Plan and in respect of outstanding Awards
on such termination date.
SECTION 4.10 GOVERNING LAW/CONSTRUCTION/SEVERABILITY.
(a) Choice of Law. This Plan, the Awards, all
documents evidencing Awards and all other related documents
shall be governed by, and construed in accordance with the
laws of the state of incorporation of the Corporation.
(b) Severability. If any provision shall be held by a
court of competent jurisdiction to be invalid and
unenforceable, the remaining provisions of this Plan shall
continue in effect.
(c) Plan Construction. It is the intent of the
Corporation that this Plan and Awards hereunder satisfy and
be interpreted in a manner that in the case of Participants
who are or may be subject to Section 16(b) of the Exchange
Act satisfies the applicable requirements of Rule 16b-3
thereunder so that such persons will be entitled to the
benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the Exchange Act and will not be subjected to
avoidable liability thereunder and so that persons receiving
Awards under Article III remain "disinterested" under these
Rules. If any provision of this Plan or of any Award would
otherwise frustrate or conflict with the intent expressed
above, that provision to the extent possible shall be
interpreted and deemed amended so as to avoid such conflict,
but to the extent of any remaining irreconcilable conflict
with such intent as to such persons in the circumstances,
such provision shall be disregarded. It is the further
intent of the Company that Options with an exercise price
not less than Fair Market Value on the date of grant shall
qualify as performance-based compensation under Section
162(M) of the Code, and this Plan shall be interpreted
consistent with such intent.
(d) Limitations Prior to September 1, 1996.
Notwithstanding any other provision of this plan, during the
period prior to September 1, 1996 (or such other date as the
transition period under Rule 16b-3 may expire as to the
Company) (i) any Award granted to a Section 16 Person shall
have an exercise price equal to or greater than 50% of the
Fair Market Value of the shares of Common Stock on the date
of the Award and (ii) any Award the grant of which is
intended to be exempt from Rule 16b-3 shall not be
transferrable other than as permitted by former Rule 16b-
3(d)(ii).
SECTION 4.11 CAPTIONS.
Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material
or relevant to the construction or interpretation of the Plan or
any provision thereof.
SECTION 4.12 EFFECT OF CHANGE OF SUBSIDIARY STATUS.
If an entity ceases to be a Subsidiary, for purposes of this
Plan and any Award hereunder, a termination of employment of each
employee of such Subsidiary who does not continue as an employee
of another entity within the Company shall be deemed to have
occurred.
SECTION 4.13 NON-EXCLUSIVITY OF PLAN.
Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Committee to grant awards or
authorize any other compensation, with or without reference to
the Common Stock, under any other plan or authority.
ARTICLE V. DEFINITIONS.
SECTION 5.1 DEFINITIONS.
(a) "Award" shall mean an award of any Option
authorized by and granted under this Plan.
(b) "Award Agreement" shall mean any writing setting
forth the terms of an Award that has been authorized by the
Committee.
(c) "Award Date" shall mean the date upon which the
Committee took the action granting an Award or such later
date as the Committee designates as the Award Date at the
time of the Award, or in the case of Non-Employee Director
Awards under Article III, the date of automatic grant under
Article III.
(d) "Award Period" shall mean the period beginning on
an Award Date and ending on the expiration date of such
Award.
(e) "Beneficiary" shall mean the person, persons,
trust or trusts entitled by will or the laws of descent and
distribution to receive the benefits specified in the Award
Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's
executor or administrator if no other Beneficiary is
identified and able to act under the circumstances.
(f) "Board" shall mean the Board of Directors of the
Corporation.
(g) A "Change in Control Event" shall mean and shall
be deemed to have occurred if and when: (i) within the
meaning of Section 13(d) of the Exchange Act, any person or
group becomes a beneficial owner, directly or indirectly, of
securities of the Corporation representing 20% or more of
the combined voting power in the election of directors of
the Corporation's then outstanding securities;
(ii) individuals who were members of the Board of the
Corporation immediately prior to a meeting of the
shareholders of the Corporation involving a contest for the
election of directors shall not constitute a majority of the
Board following such election; (iii) the shareholders of the
Corporation approve the dissolution or liquidation of the
Corporation; (iv) the shareholders of the Corporation
approve an agreement to merge or consolidate, or otherwise
reorganize, with or into one or more entities which are not
subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting
entity are, or are to be, owned by shareholders of the
Corporation immediately prior to such reorganization
(assuming for purposes of such determination that there is
no change in the record ownership of the Corporation's
securities from the record date for such approval until such
reorganization and that such record owners hold no
securities of the other parties to such reorganization,
excluding from consideration as a former shareholder any
shareholder who is, or as a result of the transaction in
question becomes, an "affiliate", as that term is used the
Exchange Act and the rules promulgated thereunder, of any
party to such merger, consolidation or reorganization); or
(v) the shareholders of the Corporation approve the sale of
substantially all of the Corporation's business and/or
assets to a person or entity which is not a Subsidiary.
(h) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(i) "Committee" shall mean a committee appointed by
the Board to administer this Plan, which committee shall be
comprised only of two or more directors or such greater
number of directors as may be required under applicable law,
none of whom is an Eligible Employee and each of whom,
during such time as one or more Participants may be subject
to Section 16 of the Exchange Act, shall be Disinterested
and "outside" within the meaning of Section 162(m) of the
Code.
(j) "Common Stock" shall mean the Common Stock, no par
value, of the Corporation and such other securities or
property as may become the subject of Awards, or become
subject to Awards, pursuant to an adjustment made under
Section 4.2 of this Plan.
(k) "Company" shall mean, collectively, the
Corporation and its Subsidiaries.
(l) "Corporation" shall mean Acacia Research
Corporation, a California corporation, and its successors.
(m) "Disinterested" shall mean disinterested within
the meaning of any applicable regulatory requirements,
including Rule 16b-3.
(n) "Eligible Employee" shall mean an officer, a key
executive, or an administrative, managerial, production,
marketing or sales employee of the Company, whether or not
such person is a director, or an Other Eligible Person.
(o) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(p) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(q) "Fair Market Value" shall mean (i) if the Common
Stock is listed and registered on a national securities
exchange such as the New York Stock Exchange or the American
Stock Exchange, the simple average of the highest and lowest
quoted selling prices of the Common Stock on such exchange
on the applicable date of determination, or, if no such
sales were made on such date on such exchange, then by such
method as of the last date prior thereto on which sales were
made, or (ii) if the Common Stock is not listed and
registered on any national securities exchange, the simple
average of the bid and ask prices per share of Common Stock
in the over-the-counter market at the end of the applicable
date of determination, or, if for any reason no such
quotations are available, then by such other method as the
Committee, in its sole discretion, shall determine to be
appropriate on such date of determination.
(r) "Incentive Stock Option" shall mean an Option
which is designated as an incentive stock option within the
meaning of Section 422 of the Code, the award of which
contains such provision as are necessary to comply with that
section.
(s) "Nonqualified Stock Option" shall mean an Option
that is designated as a Nonqualified Stock Option and shall
include any Option intended as an Incentive Stock Option
that fails to meet the applicable legal requirements
thereof. Any Option granted hereunder that is not
designated as an incentive stock option shall be deemed to
be designated a nonqualified stock option under this Plan
and not an incentive stock option under the Code. Options
granted under Article III shall be Nonqualified Stock
Options.
(t) "Non-Employee Director" shall mean a person who
is, as of the applicable date of determination for an award
under Article III, (i) a member of the Board of Directors of
the Corporation and not an officer or employee of the
Company or any affiliate, and (ii) eligible to serve on the
Committee.
(u) "Option" shall mean an option to purchase Common
Stock under this Plan.
(v) "Other Eligible Person" shall mean any other
individual (including significant agents and consultants)
who performs substantial services for the Company of a
nature similar to those performed by key employees, selected
to participate in this Plan by the Committee from time to
time; provided that in no event shall a Non-Employee
Director be selected as an Other Eligible Person.
(w) "Participant" shall mean a person who has been
granted or has received an Award under this Plan.
(x) "Plan" shall mean this 1996 Stock Option Plan.
(y) "QDRO" shall mean a qualified domestic relations
order as defined in Section 414(p) of the Code or Title I,
Section 206(d)(3) of ERISA (to the same extent as if this
Plan were subject thereto), or the applicable rules
thereunder or other decree accorded relief from transfer
restrictions under Rule 16b-3.
(z) "Rule 16b-3" shall mean Rule 16b-3 as promulgated
by the Securities and Exchange Commission pursuant to the
Exchange Act.
(aa) "Section 16 Person" shall mean a person subject to
Section 16(a) of the Exchange Act.
(bb) "Subsidiary" shall mean any corporation or other
entity a majority of whose outstanding voting stock or
voting power is beneficially owned directly or indirectly by
the Corporation.