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
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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.
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(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
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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
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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.
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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
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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.
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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
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Title Chief Financial Officer
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CHRISTOPHER D. HODGES
/s/ CHRISTOPHER D. HODGES
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(Address)
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(City, State, Zip Code)
ANN P. HODGES
/s/ ANN P. HODGES
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(Address)
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(City, State, Zip Code)
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Notational Record of Exercise:
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Date Number of Shares Amount Received
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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
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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
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---------------------------
Insert Taxpayer I.D. No.
of Christopher Hodges)
ANN P. HODGES
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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:
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Its:
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