SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant toss. 240.14a-11(c) orss. 240.14a-12
Acacia Research Corporation
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
ACACIA
RESEARCH
CORPORATION
April 16, 2001
Dear Stockholder:
On behalf of your Board of Directors and Management, you are cordially
invited to attend the Annual Meeting of Stockholders to be held on Tuesday, May
22, 2001, at 9:00 a.m., at the Ritz Carlton Huntington Hotel, located at 1401
South Oak Knoll Avenue in Pasadena, California.
The enclosed Notice and Proxy Statement contain details concerning the
business to come before the meeting. You will note that the Board of Directors
of the Company recommends a vote "FOR" the election of the nominated directors
and "FOR" the ratification of the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants.
Whether or not you attend the Annual Meeting, please vote as soon as
possible by returning the enclosed proxy card. Your vote is important, and
voting by written proxy will assure your representation at the Annual Meeting.
You may revoke your proxy in accordance with the procedures described in the
Proxy Statement at any time prior to the time it is voted.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE ANNUAL
MEETING EVEN IF YOU CANNOT ATTEND IN PERSON. PLEASE SIGN, DATE AND RETURN YOUR
PROXY CARD IN THE ENCLOSED ENVELOPE.
Thank you for your continued support.
Cordially,
/s/ Paul R. Ryan
------------------------------------
Paul R. Ryan
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ACACIA RESEARCH CORPORATION
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 2001
- --------------------------------------------------------------------------------
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Acacia Research Corporation, a Delaware corporation (the "COMPANY"), will be
held on Tuesday, May 22, 2001 at 9:00 a.m. at the Ritz Carlton Huntington Hotel
located at 1401 South Oak Knoll Avenue, Pasadena, California, for the following
purposes:
1. To elect two directors;
2. To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for the fiscal year
ending December 31, 2001; and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 3, 2001
are entitled to receive notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person even if he or she
previously returned a proxy.
By Order of the Board of Directors,
/s/ Robert A. Berman
-----------------------------
Robert A. Berman
SECRETARY
Pasadena, California
April 16, 2001
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
ACACIA RESEARCH CORPORATION
55 SOUTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
(626) 396-8300
- --------------------------------------------------------------------------------
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Acacia Research Corporation, a Delaware corporation ("ACACIA" or the "COMPANY"),
for use at Acacia's annual meeting of stockholders (the "ANNUAL MEETING") to be
held on Tuesday, May 22, 2001 at 9:00 a.m., and at any adjournments thereof. The
purposes of the Annual Meeting are set forth in this Proxy Statement and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Ritz Carlton Huntington Hotel located at 1401 South Oak Knoll
Avenue, Pasadena, California. These proxy solicitation materials were mailed on
or about April 16, 2001 to all stockholders entitled to vote at the Annual
Meeting.
QUESTIONS AND ANSWERS
1. Q: WHAT MAY I VOTE ON?
A: (1) The election of two nominees to serve on the Board of
Directors;
(2) The approval of the appointment of PricewaterhouseCoopers LLP
as independent accountants for the fiscal year ending December
31, 2001.
2. Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: The Board of Directors recommends a vote FOR each of the
nominees for director, and FOR the ratification of
PricewaterhouseCoopers LLP as independent accountants for the
fiscal year ending December 31, 2001.
3. Q: WHO IS ENTITLED TO VOTE?
A: Stockholders as of the close of business on April 3, 2001 (the
"Record Date") are entitled to vote at the Annual Meeting.
4. Q: HOW DO I VOTE?
A: Sign and date each proxy card you receive and return it in the
prepaid envelope prior to the Annual Meeting.
5. Q: CAN I REVOKE MY PROXY?
A: You have the right to revoke your proxy at any time before the
Annual Meeting by: (1) notifying the Secretary of the Company
in writing; (2) voting in person; or (3) returning a
later-dated proxy card.
6. Q: WHO WILL COUNT THE VOTE?
A: U.S. Stock Transfer Corporation will count the votes and act
as the inspector of election.
7. Q: WHAT SHARES ARE INCLUDED ON THE PROXY CARD(S)?
A: The shares on your proxy card(s) represent ALL of your shares.
If you do not return your proxy card(s), your shares will not
be voted.
8. Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: If your shares are registered differently and are in more than
one account, you will receive more than one proxy card. Sign
and return all proxy cards to ensure that all your shares are
voted. We encourage you to have all accounts registered in the
same name and address (whenever possible). You can accomplish
this by contacting our transfer agent, U.S. Stock Transfer
Corporation, or if your shares are held in "street name," by
contacting the broker or bank holding your shares.
9. Q: HOW MANY SHARES CAN VOTE?
A: As of the Record Date, 17,702,124 shares of Common Stock, the
only outstanding voting securities of the Company, were issued
and outstanding. Each stockholder is entitled to one vote for
each share of Common Stock held.
10. Q: WHAT IS A "QUORUM?"
A: A "quorum" is a majority of the outstanding shares entitled to
vote. They may be present or represented by proxy. For the
purposes of determining a quorum, shares held by brokers or
nominees will be treated as present even if the broker or
nominee does not have discretionary power to vote on a
particular matter or if instructions were never received from
the beneficial owner. These shares are called "broker
non-votes." Abstentions will be counted as present for quorum
purposes.
11. Q: WHAT IS REQUIRED TO APPROVE EACH PROPOSAL?
A: For the election of directors, once a quorum has been
established, the nominees for director who receive the most
votes will be elected directors of the Company. To approve the
appointment of the independent accountants, a majority of the
shares represented at the Annual Meeting, either in person or
by proxy, must be voted in favor of the proposal.
If a broker indicates on its proxy that it does not have
discretionary authority to vote on a particular matter, the
affected shares will be treated as not present and entitled to
vote with respect to that matter, even though the same shares
may be considered present for quorum purposes and may be
entitled to vote on other matters.
12. Q: WHAT HAPPENS IF I ABSTAIN?
A: Proxies marked "abstain" will be counted as shares present for
the purpose of determining the presence of a quorum, but for
purposes of determining the outcome of a proposal, shares
represented by such proxies will not be treated as affirmative
votes. For proposals requiring an affirmative vote of a
majority of the outstanding shares entitled to vote or a
majority of the shares present, an abstention is equivalent to
a "no" vote.
13. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: Although the Company does not know of any business to be
considered at the Annual Meeting other than the proposals
described in this proxy statement, if any other business is
properly presented at the Annual Meeting, your signed proxy
card gives authority to the proxyholders, Paul R. Ryan and
Robert A. Berman, to vote on such matters at their discretion.
14. Q: WHO ARE THE LARGEST PRINCIPAL STOCKHOLDERS?
A: For information regarding holders of more than 5% of the
outstanding Common Stock, see "Security Ownership of Certain
Beneficial Owners and Management."
15. Q: WHO WILL BEAR THE COST OF THIS SOLICITATION?
A: The Company will bear the entire cost of the solicitation. The
Company will reimburse brokerage houses and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to
stockholders. Proxies may also be solicited in person, by
telephone, or by facsimile by directors, officers and
employees of the Company without additional compensation.
2
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The number of directors of the Company is fixed at six. Pursuant to the
Company's Certificate of Incorporation, the Board of Directors of the Company is
divided into three classes, with each class being as nearly equal in number of
directors as possible. The term of one class expires, and their successors are
elected for a term of three years, at each annual meeting of the Company's
stockholders.
At the Annual Meeting, Robert L. Harris II and Fred A. de Boom have
been nominated for re-election to a term of office expiring in 2004 and until
their successors are elected and qualified.
Unless otherwise instructed, the proxyholders will vote the proxies
received by them for the two nominees for election as directors. If either
nominee of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for such other nominees as may
be designated by the present Board of Directors to fill the vacancy. It is not
presently expected that either of the nominees named above will be unable or
will decline to serve as a director. If additional persons are nominated for
election as directors, the proxyholders intend to vote all proxies received by
them in a manner to assure the election of as many of the nominees named above
as possible. In such event, the specific nominees to be voted for will be
determined by the proxyholders.
The following table contains certain information about the nominees for
election as a director and each other person whose term of office as a director
will continue after the meeting. See "Security Ownership of Certain Beneficial
Owners and Management" for data with respect to the number of shares of the
Company's Common Stock beneficially owned by each of them, directly or
indirectly, as of the Record Date. There is no family relationship among any
directors or executive officers of the Company.
DIRECTOR
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE
- -------------------------------------------- --- -----
*ROBERT L. HARRIS II, DIRECTOR AND PRESIDENT 42 2000
Mr. Harris has served as a director since April 2000 and as
President since July 2000. Prior to joining the Company, Mr.
Harris was the President and Director of Entertainment
Properties Trust since 1997. Mr. Harris founded Entertainment
Properties Trust, which is a publicly-traded company that
purchases real estate from major entertainment companies. Mr.
Harris previously led the International Division and served as
Senior Vice President of AMC Entertainment from 1993 to 1997
and as President of Carlton Browne and Company, Inc., a
holding company and trust with assets in real estate,
insurance and financial services, from 1984 to 1992. He also
serves on the Board of Directors of the George L. Graziadio
School of Business and Management at Pepperdine University.
*FRED A. DE BOOM, DIRECTOR 65 1995
Mr. de Boom has served as a Director since February 1995 and
has been a principal in Sonfad Associates since June 1993.
Sonfad Associates is a Los Angeles-based investment banking
firm that is involved in mergers and acquisitions, private
debt and equity placements, strategic and financial business
planning, leveraged buy-outs and ESOP funding, bank debt
refinance, asset based and lease financing, and equity for
debt restructuring. Previously, he had been employed as a Vice
President of Tokai Bank for five years and as a Vice President
of Union Bank for eight years. Mr. de Boom received his B.A.
degree from Michigan State University and his M.B.A. degree
from the University of Southern California.
3
DIRECTOR
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE
- -------------------------------------------- --- -----
THOMAS B. AKIN, DIRECTOR 48 1998
Mr. Akin has served as a Director since May 1998. Mr. Akin has
been the Managing General Partner of four private investment
funds (Talkot Partners I, Talkot Partners II, LLC, Talkot
Crossover Fund, L.P., and Talkot Capital) since 1996. Mr. Akin
previously served in a variety of capacities for Merrill Lynch
and Co., including Managing Director of Western Regional Sales
from 1986 to 1994. Mr. Akin holds a B.A. from the University
of California at Santa Cruz and attended the University of
California at Los Angeles Graduate School of Business. He also
serves on the Board of Directors of Infotec Inc.
EDWARD W. FRYKMAN, DIRECTOR 64 1996
Mr. Frykman has served as a Director since April 1996. Mr.
Frykman has been an Account Executive with Crowell, Weedon &
Co. since 1992. Previously, Mr. Frykman served as Senior
Vice President of L.H. Friend & Co. Both Crowell, Weedon &
Co. and L.H. Friend & Co. are investment brokerage firms
located in Southern California. In addition, Mr. Frykman was
a Senior Account Executive with Shearson Lehman Hutton where
he served as the Manager of the Los Angeles Regional Retail
Office.
GERALD D. KNUDSON, DIRECTOR 57 2000
Gerald D. Knudson has served as a Director since July 2000.
Since February 2000, he has served as Chairman and Chief
Executive Officer and as a Director of CombiMatrix
Corporation, a majority-owned subsidiary of the Company
engaged in the development of a proprietary universal biochip
with applications in the genomics, proteomics and
combinatorial chemistry markets. From January 1997 to May
1999, Mr. Knudson served as Executive Vice President of
Sterling Diagnostic Imaging, Inc., a supplier of conventional
and digital systems for the capture, communication, display
and storage of medical diagnostic images. From October 1994 to
January 1997, Mr. Knudson was the President of the Medical
Imaging Systems Division of Polaroid Corporation, a company
engaged in the medical imaging business. Mr. Knudson received
a B.A. in Biology from Augustana College.
PAUL R. RYAN, CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER 55 1995
Mr. Ryan has served as a Director since August 1995, as Chief
Executive Officer since January 1997 and as Chairman since
April 2000. He also served as President of the Company from
January 1997 until July 2000. Prior to being named Chief
Executive Officer, he was Executive Vice President and Chief
Investment Officer of the Company from 1996 through 1997 and
Vice President, Capital Management, of the Company from 1995
through 1996. He was formerly co-founder and general partner
of the American Health Care Fund, L.P., held positions with
Young & Rubicam, Ogilvy & Mather, and Merrill Lynch and was a
private venture capital investor. Mr. Ryan holds a B.S. from
Cornell University and attended the New York University
Graduate School of Business.
*Nominee for election as a director.
VOTE REQUIRED
To elect directors, the nominees for director who receive the most
votes will become directors of the Company. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE STOCKHOLDERS VOTE "FOR" THE TWO NOMINEES LISTED ABOVE. PROXIES RECEIVED
WILL BE VOTED FOR EACH OF THE NOMINEES UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN
THE PROXY.
4
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of 19 meetings during the fiscal
year ended December 31, 2000. During that period, no incumbent director attended
fewer than 75% of the sum of the total number of meetings of the Board of
Directors and the total number of meetings of all committees of the Board of
Directors on which that director served. The Board of Directors has an Audit
Committee and a Compensation Committee, but does not have a nominating committee
or any committee performing a similar function.
The Audit Committee currently consists of Fred A. de Boom, Thomas B.
Akin and Edward W. Frykman. The Audit Committee recommends engagement of the
Company's independent accountants and is primarily responsible for approving the
services performed by the Company's independent accountants and for reviewing
and evaluating the Company's accounting principles, financial reporting
practices, and its system of internal accounting controls. The Company's Audit
Committee held one meeting during the fiscal year ended December 31, 2000. The
Audit Committee is also responsible for maintaining a line of communication
between the Board of Directors and the Company's independent accountants.
The Compensation Committee, which currently consists of Thomas B. Akin,
Fred A. de Boom and Edward W. Frykman, is primarily responsible for making
recommendations to the Board of Directors regarding the Company's executive
compensation policy and incentive compensation for employees and consultants to
the Company. In addition, the Compensation Committee administers the 1996 Stock
Option Plan. The Compensation Committee held 17 meetings during the fiscal year
ended December 31, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer
or employee of the Company or any of its subsidiaries.
DIRECTOR COMPENSATION
Directors who are also employees of the Company receive no separate
compensation from the Company for their service as members of the Board of
Directors. Non-employee directors receive a nondiscretionary grant of options to
purchase 20,000 shares of the Company's Common Stock upon initially joining the
Board of Directors and subsequent non-discretionary annual grants of options to
purchase 12,000 shares of the Company's Common Stock while serving as Board
members, all such grants at an exercise price equal to the market price on the
date of grant. In addition, non-employee directors receive compensation in the
amount of $1,000 for each meeting of the Board of Directors attended in person,
$1,000 for each meeting attended by telephone if the meeting is longer than one
hour in length, and $500 for each meeting attended by telephone if the meeting
is one hour or less in length. Non-employee directors receive the same
compensation for each Board committee meeting attended that does not immediately
proceed or follow a Board of Directors meeting. Directors are also reimbursed
for expenses incurred in connection with attendance at meetings of the Board of
Directors and Board committees and the performance of Board duties.
MANAGEMENT
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive
officers of the Company as of the date hereof.
Paul R. Ryan 55 Chairman and Chief Executive Officer
Robert L. Harris II 42 President
Biographical information on Messrs. Ryan and Harris is set forth above under the
director biographies.
5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, information
relating to the beneficial ownership of the Company's Common Stock by each
person known by the Company to be the beneficial owner of more than five percent
(5%) of the outstanding shares of Common Stock, by each director and nominee for
director, by each of the executive officers named in the Summary Compensation
Table, and by all directors and executive officers as a group. The number of
shares beneficially owned by each director or executive officer is determined
under rules of the Securities and Exchange Commission (the "COMMISSION"), and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as to
which the individual has the sole or shared voting power or investment power and
also any shares which the individual has the right to acquire within 60 days of
the Record Date through the exercise of any stock option or other right. Unless
otherwise noted, the Company believes that each person has sole investment and
voting power (or shares such powers with his or her spouse) with respect to the
shares set forth in the following table. The address for each person is the
Company's principal offices, Acacia Research Corporation, 55 South Lake Avenue,
Pasadena, California 91101.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
OWNERSHIP(1)(2) CLASS
--------------- ---------------
Paul R. Ryan............................... 541,944(a) 3.06%
Thomas B. Akin(3).......................... 221,008(b) 1.30%
Fred A. de Boom............................ 34,000(c) *
Edward W. Frykman.......................... 46,500(d) *
Robert L. Harris II........................ 101,667(e) *
Gerald Knudson(4).......................... 25,750(f) *
Peter Frank(5)............................. 37,500(g) *
Kathryn King-Van Wie(6).................... 265,000 1.47%
All Directors and Executive Officers
as a Group (eight persons)................ 1,273,369(h) 7.19%
- --------------
* Represents less than one percent.
(1) All shares that a named stockholder has the right to acquire within 60
days, including through the exercise of stock options and warrants as
described below are deemed outstanding for the purpose of computing the
percentage of Common Stock owned by such named stockholder, but not the
percentage of Common Stock owned by any other stockholder.
(2) Includes the following options exercisable on or within 60 days of the
Record Date: (a) options to purchase 171,667 shares; (b) options to
purchase 37,500 shares; (c) options to purchase 14,000 shares; (d)
options to purchase 46,500 shares; (e) options to purchase 101,667
shares; (f) options to purchase 21,750 shares; (g) options to purchase
37,500 shares; and (h) options to purchase 430,584 shares.
(3) Includes 105,672 shares held by Talkot Crossover Fund, L.E, of which
Mr. Akin serves as managing general partner.
(4) Mr. Knudson was appointed to the Board of Directors in July 2000.
(5) Mr. Frank resigned his position of Chief Financial Officer in July
2000.
(6) Ms. King-Van Wie resigned her position as Chief Operating Officer in
March 2000. Her share number is based upon the most recent information
available to the Company.
6
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows information concerning compensation earned
for services to the Company in all capacities during the last three fiscal years
for the Company's Chief Executive Officer for the last fiscal year and the three
most highly compensated executive officers whose annual cash compensation
exceeded $100,000 in the last fiscal year (the "NAMED EXECUTIVE OFFICERS"):
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
SALARY BONUS COMPENSATION OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) COMPENSATION
- --------------------------- ------ --------- ------ ------------ ------------ ------------
Paul R. Ryan, Chairman and 2000 224,173 0 0 412,500 0
Chief Executive Officer 1999 104,423 0 0 102,917 40,769(1)
1998 87,115 2,500 0 0 128,944(1)
Robert L. Harris II, President(2) 2000 91,385 0 0 440,000 0
1999 0 0 0 0 0
Peter Frank, Chief Financial 2000 96,976 0 0 55,000 72,917(4)
Officer(3) 1999 23,077 0 0 150,000 0
Kathryn King-Van Wie, Chief Operating 2000 47,596 0 0 0 0
Officer(5) 1999 109,615 0 0 49,584 0
1998 83,429 2,500 0 0 0
- --------------
(1) Represents a 25% share of the management and performance fees received
as general partner of Company affiliated investment funds pursuant to
an agreement entered into in January 1995 prior to the time Mr. Ryan
became an officer of the Company. The Company terminated its management
of the funds in the fourth quarter of 1999.
(2) Mr. Harris was appointed to his position of President in July 2000. Mr.
Harris also serves as a member of the Board of Directors.
(3) Mr. Frank was appointed as Chief Financial Officer in October 1999 and
resigned his position in July 2000.
(4) Represents severance paid to Mr. Frank in 2000.
(5) Ms. King-Van Wie resigned her position as Chief Operating Officer in
March 2000.
The Company has not entered into employment contracts with any of its
Named Executive Officers nor does the Company have any agreement or arrangement
with any such Named Executive Officers relating to a change in control of the
Company.
7
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth information regarding stock options
granted to the Named Executive Officers listed below:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATE
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR FOR OPTION TERM(1)
GRANTED IN FISCAL BASE PRICE EXPIRATION -------------------------
NAME (#) YEAR ($/SH) DATE 5%($) 10%($)
- ---- ----------- ----------- ----------- ----------- ----------- -----------
Paul R. Ryan.................. 112,500 5.50% 33.1875 1/5/10 2,348,033 5,950,384
300,000 14.57% 24.2375 7/9/10 4,572,840 11,588,490
Robert L. Harris II........... 20,000 0.97% 31.4375 4/9/05 173,712 383,858
20,000 0.97% 19.0625 5/16/10 239,766 607,614
400,000 19.43% 30.2500 7/13/10 7,609,640 19,284,280
Peter Frank(2)................ 55,000 2.67% 22.8750 7/20/10 791,230 2,005,130
Kathryn King-Van Wie(3)....... 0 N/A N/A N/A N/A N/A
- -------------
(1) The amounts under the columns labeled "5%" and "10%" are included
pursuant to certain rules promulgated by the Commission and are not
intended to forecast future appreciation, if any, in the price of the
Company's Common Stock. The amounts are calculated by using the closing
market price of a share of Common Stock on the grant date as reported
by the Nasdaq National Market and assuming annual compounded stock
appreciation rates of 5% and 10% over the full term of the option. The
option grants vest over a three-year period. The reported amounts are
based on the assumption that the named persons hold the options granted
for their full term. The actual value of the options will vary in
accordance with the market price of the Company's Common Stock.
(2) Mr. Frank resigned his position as Chief Financial Officer in July
2000.
(3) Ms. King-Van Wie resigned her position as Chief Operating Officer in
March 2000.
The following table sets forth information regarding the stock options
exercised by to the Named Executive Officers during the fiscal year ended
December 31, 2000 and the value of in-the-money options held by the Named
Executive Officers as of December 31, 2000:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 2000 YEAR-END(#) 2000 YEAR-END (1)($)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED(2)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ----------- ----------- -----------
Paul R. Ryan................ 0 0 315,417 450,000 4,402,899 394,335
Robert L. Harris............ 0 0 20,000 420,000 0 0
Peter Frank(3).............. 10,000 164,375 37,500 0 41,250 0
Kathryn King-Van Wie(4)..... 265,000 8,022,406 0 0 0 0
- -------------
(1) Represents the difference between the exercise price of the options and
the average of the high and low prices of the Company's Common Stock on
the Nasdaq Stock Market on December 29, 2000 of $18.06 per share.
(2) Value realized represents the difference between the exercise price of
the options and the value of the underlying securities on the date of
exercise.
(3) Mr. Frank resigned his position as Chief Financial Officer in July
2000.
(4) Ms. King-Van Wie resigned her position as Chief Operating Officer in
March 2000.
8
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the last fiscal year, there were certain transactions that
occurred between the Company and a member of the immediate family of the
Company's former Chairman, which are reported below. With respect to each
transaction, the Company has determined that the terms of each arrangement were
no less fair to the Company than those which could have been obtained from
unaffiliated persons.
In August 1997, the Company hired Robert B. Stewart as Director of
Marketing and promoted him to Senior Vice President in 1999. He is responsible
for investor relations and capital formation for affiliate companies. Rob
Stewart is the son of R. Bruce Stewart, the former Chairman of the Board of
Directors who resigned in April 2000. In 2000, Mr. Stewart earned a base salary
of $137,404 and was awarded option to purchase 120,000 shares of the Company's
Common Stock, vesting over ten years, at an average aggregate exercise price of
$27.43 per share. Mr. Stewart was previously awarded in 1999 an option to
purchase 10,000 shares, vesting over two years, at an exercise price of $23.75
per share, and in 1998 an option to purchase 120,000 shares, vesting over four
years, at an exercise price of $3.875 per share.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The Compensation Committee is
responsible for approving the compensation package of each executive officer and
recommending it to the Board of Directors as well as administering the 1996
Stock Option Plan. In making decisions regarding executive compensation, the
Compensation Committee considers the input of the Company's management and other
directors.
The Company's executive compensation program consists of a mixture of
base salary, cash bonuses, and stock option awards. In determining the total
amount and mixture of the compensation package for each executive officer, the
Compensation Committee and the Board of Directors subjectively consider the
overall value to the Company of each executive in light of numerous factors such
as competitive position, individual performance, including past and expected
contribution to the Company's goals of each executive officer, and the Company's
long-term needs and goals, including attracting and retaining key management
personnel.
The Compensation Committee will periodically review the individual base
salaries of the executive officers, and adjust salaries based on individual job
performance and changes in the officer's duties and responsibilities. In making
salary decisions, the Compensation Committee exercises its discretion and
judgment based on these factors. No specific formula is applied to determine the
weight of each factor.
Long-term incentive compensation is realized through granting of stock
options to most employees, including eligible executive officers. The Company
has no other long-term incentive plans. Stock options are granted by the Company
to aid in the retention of employees and to align the interests of employees
with those of the stockholders. In addition, the Compensation Committee believes
that the grant of an equity interest serves to link management interests with
stockholder interests and to motivate executive officers to make long-term
decisions that are in the best interests of the Company and the stockholders as
well as provides an incentive to maximize stockholder value. Stock options have
value for an employee only if the price of the Company's Common Stock increases
above the exercise price, and the employee remains in the Company's employ for
the period required for the stock to be exercisable, thus providing an incentive
to remain in the Company's employ.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Paul R. Ryan, the Company's Chairman and Chief Executive Officer,
received an annual base salary of $224,173 and no bonus in 2000. The cash amount
paid to Mr. Ryan in the form of base salary was recommended to the Board of
Directors by the Compensation Committee. In exercising its discretion and
judgment in reaching its recommendation, the Compensation Committee took into
consideration the various factors and criteria described above. The Board of
Directors approved the Compensation Committee's recommendation.
9
IMPACT OF SECTION 162(m) OF THE INTERNAL REVENUE CODE
The Company does not believe Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), which disallows a tax deduction for
certain compensation in excess of $1 million, will generally have an effect on
the Company. The Compensation Committee reviews the potential effect of Section
162(m) periodically and will consider various alternatives for preserving the
deductibility of compensation payments. However, the Compensation Committee will
not necessarily limit compensation to that which is deductible.
Respectfully Submitted by the Compensation
Committee of the Board of Directors,
Thomas B. Akin
Fred A. de Boom
Edward W. Frykman
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is comprised of three
independent directors, as defined by Nasdaq National Market rules, and operates
under a written charter adopted by the Board of Directors, a copy of which is
attached as Appendix A. The members of the Audit Committee are Fred A. de Boom
(Chairman), Thomas B. Akin and Edward W. Frykman.
The responsibilities of the Audit Committee include recommending to the
Board of Directors an accounting firm to be engaged as the Company's independent
accountants. Management is responsible for the Company's internal controls and
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and for
issuing a report thereon. The Audit Committee's responsibility is to oversee
these processes and the activities of the Company's internal audit department.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent accountants. The Audit Committee discussed with
the independent accountants matters required to be discussed by Statement on
Auditing Standards No. 61, "Communication with Audit Committees."
The Company's independent accountants also provided to the Audit
Committee the written disclosures and the letter required by Independent
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," and the Audit Committee discussed with the independent accountants,
PricewaterhouseCoopers LLP, the firm's independence.
Based upon the Audit Committee's discussions with management and the
independent accountants and the Audit Committee's review of the representations
of management, and the report of the independent accountants to the Audit
Committee, the Audit Committee recommended that the Board of Directors include
the audited consolidated financial statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000, as filed with the Securities and
Exchange Commission.
This report is submitted by the Audit Committee of the Board of
Directors.
AUDIT AND RELATED FEES
AUDIT FEES. The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services for the audit of the Company's annual consolidated
financial statements for fiscal 2000 and the review of the consolidated
financial statements included in the Company's Forms 10-Q for fiscal 2000 were
$167,197.
10
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There
were no fees billed by PricewaterhouseCoopers LLP to the Company for financial
information systems design and implementation fees for fiscal 2000.
ALL OTHER FEES. The aggregate fees billed to the Company for all other
services rendered by PricewaterhouseCoopers LLP for fiscal 2000 were $123,154.
The Audit Committee has determined that the provision of services
rendered above for all other fees is compatible with maintaining
PricewaterhouseCoopers LLP's independence.
11
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Common Stock of the Company for the last five fiscal years with the
cumulative total return of (i) the Composite Index for the Nasdaq Stock Market
(U.S. Companies) (the "NASDAQ INDEX") and (ii) the Nasdaq Biotech Index. This
graph assumes the investment of $100 on December 31, 1995 in the Company's
Common Stock, the Nasdaq Index and the Nasdaq Biotech Index and assumes any
dividends are reinvested. Measurement points are at the last trading day of the
fiscal years represented below.
[ACACIA RESEARCH CORPORATION STOCK PERFORMANCE GRAPH HERE]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Acacia Research Corporation 100 125 133 146 998 594
Nasdaq Index 100 123 149 208 387 235
Nasdaq Biotech Index 100 100 100 144 290 356
12
PROPOSAL NO. 2: RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, the Company's independent
accountants for the year ended December 31, 2000, was recommended by the Audit
Committee, whose selection was approved by the Board of Directors, to act in
such capacity for the fiscal year ending December 31, 2001, subject to
ratification by the stockholders.
PricewaterhouseCoopers LLP has served as the principal independent
accountants for the Company since April 1997. There are no affiliations between
the Company and PricewaterhouseCoopers LLP, its partners, associates or
employees, other than as pertain to the engagement of PricewaterhouseCoopers LLP
as independent accountants for the Company.
If the stockholders of the Company do not ratify the selection of
PricewaterhouseCoopers LLP, or if such firm should decline to act or otherwise
become incapable of acting, or if the employment should be discontinued, the
Board of Directors, on the recommendation of the Audit Committee, will appoint
substitute independent accountants. A representative of PricewaterhouseCoopers
LLP will be present at the Annual Meeting, will be given the opportunity to make
a statement if he or she so desires, and will be available to respond to
appropriate questions.
VOTE. The favorable vote of a majority of votes cast regarding the
proposal is required to ratify the selection of PricewaterhouseCoopers LLP. THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO RATIFY
THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001. PROXIES RECEIVED WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THE PROXY.
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock to
file with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock of the Company. The Company believes that, based on
the written representations of its directors and officers, and the copies of
reports filed with the Commission during the fiscal year ended December 31,
2000, its directors, officers and holders of more than 10% of the Company's
Common Stock complied with the requirements of Section 16(a).
ANNUAL REPORT TO STOCKHOLDERS
Enclosed with this Proxy Statement is the Annual Report of the Company
for the fiscal year ended December 31, 2000. The Annual Report is enclosed for
the convenience of stockholders only and should not be viewed as part of the
proxy solicitation material. If any person who was a beneficial owner of Common
Stock of the Company on the Record Date for the 2001 Annual Meeting desires
additional copies of the Company's Annual Report, the same will be furnished
without charge upon receipt of a written request. The request should identify
the person making the request as a stockholder of the Company as of the Record
Date and should be directed to Robert A. Berman, Acacia Research Corporation, 55
South Lake Avenue, Pasadena, California 91101.
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2002 Annual
Meeting must be received by the Company by December 12, 2001 to be considered
for inclusion in the Company's proxy statement relating to that meeting.
Stockholders desiring to present a proposal at the 2001 Annual Meeting but who
do not desire to have the proposal included in the proxy materials distributed
by the Company must deliver written notice of such proposal to the Company on or
after January 23, 2002 and on or before February 22, 2002 or the persons
appointed as proxies in connection with the 2002 Annual Meeting will have
discretionary authority to vote on any such proposal.
13
OTHER BUSINESS
The Company knows of no other matters to be submitted to the
stockholders at the Annual Meeting. If any other matters properly come before
the stockholders at the Annual Meeting, it is the intention of the persons named
on the enclosed proxy card to vote the shares they represent as the Board of
Directors may recommend.
April 16, 2001
By Order of the Board of Directors,
/s/ Robert A. Berman
----------------------
Robert A. Berman
SECRETARY
14
APPENDIX A--AUDIT COMMITTEE CHARTER
CHARTER OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS OF ACACIA RESEARCH CORPORATION
COMMITTEE The Board of Directors (the "Board") of Acacia Research
Corporation (the "Corporation") has established a standing
committee to be known as the Audit Committee (the
"Committee").
OBJECTIVES The purpose of the Committee is to oversee the Corporation's
auditing, accounting and control functions, including primary
responsibility for the financial reporting process of the
Corporation.
SCOPE OF ACTIVITIES To the full extent permitted by applicable law,
the Committee shall exercise the following powers and duties:
(a) Recommend to the Board the firm of independent
auditors to be selected to audit the Corporation
financial statements;
(b) Meet with the Corporation's independent auditors at
least annually and review the scope of the annual
audit (inclusions and exclusions), any open questions
as to the choice of acceptable accounting principles
to be applied and all other matters relating to the
auditors' relationship with the Corporation;
(c) Advise the Board as to the auditors' performance,
including the scope and adequacy of the auditors'
review;
(d) Recommend, where appropriate, the removal or
replacement of the independent auditors;
(e) Review the Corporation's annual financial statements,
including the footnotes, and discuss such statements
with the auditors prior to release of the
Corporation's annual report;
(f) Receive and consider the auditors' comments and
suggestions as to internal audit and control
procedures, adequacy of staff, and other matters;
(g) Receive and review periodic reports of the
Corporation's internal audit staff; meet with
internal audit staff to review and approve the
internal audit staff to review and approve the
internal audit programs; review the executive
management's responses to internal audit staff
reports; review the adequacy of the Corporation's
internal audit staff and report thereon to the Board;
(h) Approve non-audit services to be rendered to the
Corporation by the independent auditors, if any,
after considering the effect on audit independence;
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(i) Meet with the request and obtain reports and
information from such company officers, employees,
suppliers and others as the Audit Committee shall
determine to be necessary in carrying out their
duties as set forth above;
(j) Take, or recommend that the full board take,
appropriate action to oversee the independence of the
outside auditors;
(k) Receive and review periodic written statements from
the independent auditors delineating all
relationships between the auditors and the company;
and
(l) Engage in an active dialogue with the auditors with
respect to any disclosed relationships or services
that may impact the objectivity and independence of
the auditors.
COMPOSITION To the full extent permitted by applicable law, the
Committee's composition shall meet the following requirements:
(a) The Committee is to be composed of such number of
Corporation directors as may be appointed by the
Board, but in no event less than three (3).
(b) No Committee member shall be a full time employee of
the Corporation. All of the Directors on the
Committee shall be outside directors who are
independent of Corporation management and are in a
better position to provide the independent point of
view crucial to this Committee's effectiveness.
(c) One of the members so appointed will be designated by
the Board as the Chairperson of the Committee.
(d) One member of the Committee must have past employment
experience in finance or accounting, requisite
professional certification in accounting, or any
other comparable experience or background which
results in the individual's financial sophistication,
including being or having been a chief executive
officer, chief financial officer or other senior
officer with financial oversight responsibilities..
TERM The Board shall appoint the members of the Committee to serve
until their successors have been dully designated. Members of
the Committee may be removed by the Board for any reason and
at any time.
VACANCIES Vacancies on the Committee shall be filled by vote of the
Board during its first meeting following the occurrence of
such vacancy.
MEETINGS The Committee shall hold regular meetings on such days as it
shall determine. Other meetings of the Committee will be held
at the request of the Chairperson of the Committee or any two
other Committee members. Minutes shall be regularly kept of
the Committee proceedings, by a person appointed by the
Committee to do so.
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AGENDA Prior to each regularly scheduled meeting, the Committee will
receive a prepared agenda for the meeting. Other topics for
discussion may be introduced at the meeting at the request of
any Committee member.
ATTENDANCE Such corporate officers and other employees of the
Corporation, as the Committee may regularly or from
time-to-time designate, shall attend the meetings.
OUTSIDE ASSISTANCE Subject to the prior approval of the Board, the
Committee is authorized to engage or employ such outside
professional or other services as in its discretion may be
required to fulfill its responsibilities.
PROCEDURE The Committee may adopt rules for its meetings and activities.
In the absence of any such rules, Committee actions shall be
governed by the Corporation's Bylaws and applicable law. In
all cases, a quorum of the Committee shall be a majority of
the persons then serving as members of the Committee.
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