EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
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THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of January 28, 2005, by and among ACACIA RESEARCH CORPORATION, a
Delaware corporation (the "COMPANY"), ACACIA GLOBAL ACQUISITION CORPORATION, a
Delaware corporation, and a wholly owned subsidiary of Company (the
"Purchaser"), and GLOBAL PATENT HOLDINGS, LLC, a Delaware limited liability
company (the "SELLER").
WHEREAS, the Purchaser and the Seller have entered into a Membership
Interest Purchase Agreement dated as of even date herewith (the "PURCHASE
AGREEMENT") pursuant to which the Purchaser is acquiring all of the outstanding
membership interests of those subsidiaries of the Seller listed on SCHEDULE 1
hereto, each a limited liability company and a wholly owned subsidiary of the
Seller.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and other good and valuable consideration the sufficiency of
which is hereby acknowledged, the parties hereto further agree as follows:
1. DEFINITIONS. Each capitalized term used herein and not otherwise
defined shall have the meaning given to such term in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"ADJUSTED EVENT DATE" has the meaning set forth in Section
2(b).
"ADVICE" has the meaning set forth in Section 5(c).
"COMMON STOCK" means Acacia Research-Acacia Technologies
Common Stock, par value $0.001 per share, or any securities exchanged or
substituted for such common stock.
"EFFECTIVENESS PERIOD" has the meaning set forth in Section
2(a).
"EVENT" has the meaning set forth in Section 2(b).
"EVENT DATE" has the meaning set forth in Section 2(b).
"FILING DATE" means, with respect to the Registration
Statement required to be filed hereunder, a date that is the later of (i) within
three (3) business days following the Closing; or (ii) within three (3) business
days following the receipt by the Company of all information reasonably
requested (the "REQUESTED INFORMATION") prior to the Closing Date by the Company
for inclusion in the Registration Statement and necessary for the completion of
the Registration Statement.
"HOLDER" or "HOLDERS" means the Seller and the shareholders
(the "Selling Shareholders") in whose name the Purchase Shares are issued at
Closing pursuant to Section 1.2(a)(ii) of the Purchase Agreement.
"INDEMNIFIED PARTY" has the meaning set forth in Section 7(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section
7(c).
"LOSSES" has the meaning set forth in Section 5(a).
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REGISTRABLE SECURITIES" means any and all of the Purchase
Shares issuable pursuant to the Purchase Agreement, together with any shares of
Common Stock issued or issuable upon any stock split, dividend or other
distribution, recapitalization or any similar event with respect to the
foregoing, or any securities into which any such securities are converted,
exchanged or substituted in any recapitalization or other capital reorganization
of the Company.
"REGISTRATION STATEMENT" means the registration statement
registering the Registrable Securities pursuant to the Securities Act which are
required to be filed hereunder, including (in each case) amendments and
supplements to the registration statement, including pre- and post-effective
amendments, all exhibits thereto , and all material incorporated by reference or
deemed to be incorporated by reference in the registration statement.
"RULE 415" means Rule 415 promulgated by the Securities and
Exchange Commission (the "COMMISSION") pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.
"RULE 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "SECURITIES ACT").
2. REGISTRATION.
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission the Registration Statement covering the resale of
all of the Registrable Securities for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement required hereunder shall
be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which event Registration shall
be on another appropriate form available for the sale of the Registrable
Securities by the Holders in accordance herewith). Subject to the terms of this
Agreement, the Company shall use its reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, and to use its reasonable best
efforts to keep the Registration Statement continuously effective under the
Securities Act from the date on which the Commission declares it effective until
the date on which all Registrable Securities covered by the Registration
Statement have been sold or may be sold without volume restrictions pursuant to
Rule 144(k) as determined by counsel to the Company pursuant to a written
opinion letter to such effect, addressed and reasonably acceptable to the
Company's transfer agent and the Holders subject to such restrictions (the
"EFFECTIVENESS PERIOD").
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(b) If (i) a Registration Statement is not filed on or prior
to the Filing Date, or (ii) the Commission fails to declare such Registration
Statement effective within (A) thirty (30) days following the Closing; or (B)
one hundred (100) days following the Closing under circumstances where the
Commission has notified the Company that the Registration Statement is under
"review" by the Commission with respect to compliance with the Securities Act
(any such failure or breach being referred to as an "EVENT," and for the
purposes of clause (A) or clause (B), the date on which such Event occurs being
referred to as an "EVENT DATE"), then commencing on such Event Date until each
Event is cured by filing (with respect to (i) above) or by a declaration of
effectiveness of such Registration Statement or the expiration of the
Effectiveness Period (with respect to (ii) above), as applicable, the Company
shall pay to Seller the sum of Three Thousand Dollars ($3,000.00) per day, in
cash, as liquidated damages (the "LIQUIDATED DAMAGES") and not as a penalty, for
up to sixty (60) days from the date of such Event (the "LIQUIDATED DAMAGES
PERIOD"), and Seller shall distribute such sum among the Selling Shareholders as
the Seller and the Selling Shareholders may separately agree, it being
understood by all parties hereto that, with respect to the distribution among
the Selling Shareholders, the Company's sole obligation under this Section (b)
is to pay the Liquidated Damages amount directly to Seller, and not to
distribution among the Selling Shareholders. Payment for any such Liquidated
Damages shall be made no later than the first Trading Day of each calendar month
immediately following any date such Liquidated Damages are incurred. If the
Company fails to pay such Liquidated Damages to Seller pursuant to this Section
(b) in full within ten (10) days after the date on which such payment is due,
the Company will pay interest thereon at the rate of ten percent (10%) per annum
to Seller, accruing daily from the dates on which such Liquidated Damages are
due until such amounts, including all interest thereon, are paid in full;
PROVIDED, HOWEVER, that if the Company does not receive from Seller and each of
the Holders the Requested Information (the "REQUEST DATE"), then the applicable
Event Date shall be extended by the number of days beginning on the Request Date
and ending on the day the Company has received all such Requested Information
(the "ADJUSTED EVENT DATE"). Not withstanding anything contained in this
Agreement to the contrary, if the Registration Statement has not been filed
(with respect to (i) above) or declared effective (with respect to (ii) above)
by the last day of the Liquidated Damages Period, then the Company shall
continue to pay the Liquidated Damages to Seller as set forth above until the
Event is cured by such filing or effectiveness, as applicable, in addition to
any other rights to which the Seller and Holders may be entitled under either
this Agreement or applicable law.
(c) PLAN OF DISTRIBUTION. Each Selling Shareholder shall be
named as a selling security holder in the Registration Statement and related
Prospectus in such a manner as to permit such Selling Shareholder to deliver
such Prospectus to purchasers of Registrable Securities in accordance with
applicable law under ordinary circumstances. The "PLAN OF DISTRIBUTION" section
of the Registration Statement and Prospectus shall be substantially in the form
of EXHIBIT "A" hereto (to the extent such inclusion is permitted under
applicable Commission regulations and is consistent with comments received from
the Commission during any Commission review of the Registration Statement).
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(d) BLACKOUT PERIODS. With respect to any registration
statement filed or to be filed pursuant to this Section 2, if the Company shall
determine, in its good faith judgment, that to maintain the effectiveness of
such registration statement (or, if no registration statement has yet been filed
or become effective, to file such a registration statement or cause it to become
effective) would (i) require the public disclosure of material non-public
information concerning any transaction or negotiations involving the Company or
any of its affiliates that would materially interfere with such transaction or
negotiations or (ii) otherwise require premature disclosure of information, in
either case that would be materially disadvantageous (a "DISADVANTAGEOUS
CONDITION"), the Company may, for the shortest period possible, notify the
Selling Shareholders and the Seller that such registration statement is
unavailable for use; provided, that the Company shall not exercise such rights
for a period of more than 45 days from the date of delivery of such notice to
the Seller and the Selling Shareholders, and in any event when aggregated with
any other Disadvantageous Suspension or Regulatory Suspension not more than an
aggregate of 90 days in any 365-day period. If the Company exercises such right,
it will provide written notice thereof to the Seller and the Selling
Shareholders and the Seller, and upon the receipt of any such notice, the
Selling Shareholders shall forthwith discontinue use of the prospectus contained
in such registration statement as provided in this Section 2(d)
("DISADVANTAGEOUS SUSPENSION"), subject to the payment of Liquidated Damages
pursuant to Section (b); provided, that, if at the time of the receipt of such
notice any of the Seller and Selling Shareholder shall have sold Registrable
Securities (or have signed a firm commitment underwriting agreement with respect
to the purchase of such securities) and the Disadvantageous Condition is not of
a nature that would require a post-effective amendment to the Registration
Statement, then the Company shall use its reasonable best efforts to take such
action as will permit such securities to be timely delivered. If any
Disadvantageous Condition shall cease to exist, the Company shall promptly
notify the Selling Shareholders and the Seller to such effect. Liquidated
Damages shall accrue commencing on and including the date of delivery to the
Seller and the Selling Shareholders of the notice of a Disadvantageous
Suspension and shall continue until the date of delivery of the notice of
cessation referenced in the preceding sentence, and payment for any such
Liquidated Damages shall be made no later than the first Trading Day of each
calendar month immediately following any date such Liquidated Damages are
accrued.
3. REGISTRATION PROCEDURES. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than five (5) Trading Days prior to the filing of
the Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall furnish to Seller copies of all such
documents proposed to be filed (including documents incorporated or deemed
incorporated by reference to the extent requested by Seller). The Company shall
not file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which Seller shall reasonably object in good faith,
provided that the Company is notified of such objection in writing no later than
three (3) Trading Days after the Seller has been so furnished copies of such
documents; provided further, that if such objection by Seller is based solely on
information provided to the Company by any Holder or Holders, then any
applicable Event Date shall be extended by the number of days which lapse
between the date the Company is notified by Seller of such objection and the
date which the revised or corrected information is delivered to the Company.
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(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities during the Effectiveness Period; (ii) cause the related Prospectus to
be amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and, as
promptly as reasonably possible, upon request, provide the Seller true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement, as so amended, or in such Prospectus, as so
supplemented.
(c) Notify Seller as promptly as reasonably possible and
confirm such notice in writing promptly following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of the Registration Statement and
whenever the Commission comments in writing on the Registration Statement (the
Company shall upon request provide true and complete copies thereof and all
written responses thereto to Seller); and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority during the Effectiveness Period for amendments or supplements to the
Registration Statement or Prospectus; (iii) of the issuance by the Commission or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event or passage of time that makes (A) the financial statements included in the
Registration Statement ineligible for inclusion therein or (B) any statement
made in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and, in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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(d) Use reasonable best efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the effectiveness
of the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any Registrable Security for sale in any
jurisdiction, at the earliest practicable moment, in each case at the earliest
practicable moment. The Company agrees to use its reasonable best efforts to
amend the Registration Statement within fifteen (15) days after such cessation
of effectiveness in a manner reasonably expected to obtain the withdrawal of any
order suspending the effectiveness thereof.
(e) Furnish to each Seller, without charge, at least one
conformed copy of the Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference to the extent requested by
Seller, and all exhibits to the extent requested by Seller (including those
previously furnished or incorporated by reference) promptly after the filing of
such documents with the Commission.
(f) Promptly deliver to each Holder, without charge, as many
copies of the Prospectus or Prospectuses (including each form of prospectus) and
each amendment or supplement thereto as such persons may reasonably request.
Subject to the terms of this Agreement, the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto,
except after the Company's giving of any notice pursuant to Section 3(c).
(g) Prior to any resale of Registrable Securities by a Holder,
(i) to register or qualify such Registrable Securities for the resale by the
Holder under the securities laws of the United States, applicable states thereof
or cooperate with the selling Holders in connection with the registration or
qualification (or exemption from the Registration or qualification) of such
Registrable Securities for the resale by the Holder under the securities or Blue
Sky laws of such jurisdictions within the United States as any Holder reasonably
requests in writing, (ii) to cause such Registrable Securities to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company, (iii) to keep
such Registration Statement or qualification (or exemption therefrom) effective
during the Effectiveness Period and (iv) to do any and all other acts or things
reasonably necessary to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.
(h) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to the
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such Holders may request.
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(i) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies Seller ("SUSPENSION NOTICE") of the
occurrence of any event described in clauses (ii) through (v) of Section 3(c)
above and to suspend the use of any Prospectus until the requisite changes to
such Prospectus have been made, then Seller shall inform Holders to suspend use
of such Prospectus. The Company will use its best efforts to ensure that the use
of the Registration Statement and Prospectus may be resumed by each of the
Holders as promptly as is practicable and that the Regulatory Suspension (as
hereinafter defined) remains in effect for the shortest period possible;
PROVIDED, that the period of such Regulatory Suspension shall not exceed a
period of 45 days from the date of delivery of notice thereof by the Company to
the Selling Shareholders, and in any event when aggregated with any other
Regulatory Suspension or Disadvantageous Suspension shall not exceed more than
an aggregate of 90 days in any 365-day period. Subject to giving effect to the
preceding sentence and after giving written notice thereof to the Selling
Shareholders and the Seller, the Company shall be entitled to exercise its right
under this Section 3(i) to suspend the availability of a Registration Statement
and Prospectus ("REGULATORY SUSPENSION"), subject to the payment of Liquidated
Damages pursuant to Section 2(b). Liquidated Damages shall accrue commencing on
and including the date of delivery of such notice and shall continue until the
date of termination of such Regulatory Suspension, and payment for any such
Liquidated Damages shall be made no later than the first Trading Day of each
calendar month immediately following any date such Liquidated Damages are
accrued.
(j) Comply with all applicable rules and regulations of the
Commission.
(k) Cause all Registrable Securities covered by such
Registration Statement, or supplement or amendment thereto, to be listed on each
securities exchange or markets on which the Common Stock, or securities
exchanged or substituted for such Common Stock, are then listed or quoted, and
cooperate with each seller (and any underwriter) participating in the
disposition of such Registrable Securities, in connection with any filings
required to be made with any such exchange or markets.
(l) The Company may require each Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the person
thereof that has voting and dispositive control over the Purchase Shares. During
any periods that the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely because any
Holder fails to furnish such information within five (5) Trading Days of the
Company's request, any Liquidated Damages that are accruing at such time shall
be tolled and any Event that may otherwise occur solely because of such delay
shall be suspended, until such information is delivered to the Company.
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(m) Use its commercially reasonable efforts to take all
actions requested by a Holder or the managing underwriter engaged by the Holder
in order to facilitate the disposition of such Registrable Securities.
4. REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement shall be borne by the Company
whether or not a Registration Statement is declared effective or any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with any
securities exchange or market on which the Common Stock is then listed for
trading, and (B) relating to compliance and qualification with applicable state
securities or Blue Sky laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, and (v) fees and expenses of all other persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. Notwithstanding the preceding sentence, other
than as set forth in Section 5(c) hereof, the Holders shall be solely
responsible for all fees and expenses of any counsel retained by any of them,
and will bear all underwriting discounts and all selling commissions from the
sale of the Registrable Securities by the Holders.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
Seller, each Holder, the officers, directors, agents and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorneys' fees) and expenses (collectively, "LOSSES"), (i) arising out of or
based upon any untrue or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectus or in any amendment or supplement
thereto, or (ii) arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, or (iii)
any violation by the Company of the Securities Act, the Exchange Act or any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law, except to the extent, but
only to the extent, that such Losses are caused by (Y) such untrue statements or
omissions or alleged untrue statements or omissions based upon information
regarding any Holder furnished in writing to the Company by such Holder
expressly for use therein, or (Z) in the case of an occurrence of an event of
the type specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the date the Holder has received notice
from the Company in writing that such Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 7(c).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
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(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based upon (x) such Holder's failure
to deliver the Prospectus provided by the Company in accordance with this
Agreement, or (y) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading (i) to the extent, but only to the extent,
that such untrue statement or omission is contained in any information regarding
any Holder so furnished in writing by such Holder to the Company expressly for
inclusion in the Registration Statement or such Prospectus or (ii) in the case
of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the
use by such Holder of an outdated or defective Prospectus after the date the
Holder has received notice from, or has been delivered notice to Holder's
address last given to, the Company in writing that such Prospectus is outdated
or defective and prior to the receipt by or such delivery to such Holder of the
Advice contemplated in Section 7(c). In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel mutually satisfactory to the parties and the
payment of all fees and expenses incurred in connection with defense thereof,
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
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reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding(including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case of subclause (3), if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and the reasonable
fees and expenses of one separate counsel for all Indemnified Parties shall be
at the expense of the Indemnifying Party). The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
Subject to the terms of this Agreement, all
reasonable fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party; provided, that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that
portion of such fees and expenses applicable to such actions for which such
Indemnified Party is not entitled to indemnification hereunder, determined based
upon the relative faults of the parties (determined as set forth in Section 5(d)
hereof).
(d) CONTRIBUTION. If the indemnification provided for in this
Section 5 is unavailable (by reason of, without limitation, public policy or
otherwise) to an Indemnified Party under Section 6(a) or 6(b) in respect of any
Losses or is insufficient to hold such Indemnified Party harmless, then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
severally but not jointly, contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party or Parties,
on the one hand, and such Indemnified Party, on the other hand, in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party or Parties, on the one hand, and Indemnified Party, on the
other hand, shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in this Agreement,
any reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
10
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 5(d) were determined by
pro rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject or giving rise to the Proceeding, except in the
case of fraud by such Holder.
The indemnity and contribution agreements contained
in this Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
(e) The provisions of this Section 5 shall survive so long as
Registrable Securities remain outstanding, notwithstanding any permitted
transfer of the Registrable Securities by any Holder or any termination of this
Agreement.
6. COMPANY REPRESENTATIONS. The Company represents and warrants to the
Seller as follows:
(a) AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of the Company hereunder has been taken or will be taken prior
to the Closing.
(b) STATUS OF PURCHASE SHARES. The Purchase Shares, when
issued pursuant to the terms of the Purchase Agreement, will be duly authorized,
validly issued and outstanding, fully paid and nonassessable, free and clear of
any mortgage, pledge, security interest, charge, lien or encumbrance of any
kind, and will not be in violation of any preemptive or similar rights of any
person. The Company is not bound by any agreement or understanding restricting
its right to issue or transfer the Purchase Shares.
(c) SEC FILINGS. Neither Company's Report on Form 10-K for the
year ended December 31, 2003 nor any other document filed by the Company with
the Securities and Exchange Commission ("SEC") since March 3, 2004
(collectively, the "SEC FILINGS"), contained a misstatement of a material fact
or failed to state a material fact required to be stated therein or necessary to
make the statements made therein not misleading as of the date such filing was
made. The consolidated financial statements of the Company and its subsidiaries
included in the SEC Filings comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared or, for Company filings
after the date hereof, will be prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited interim financial statements,
as permitted by Form 10-Q of the SEC) and fairly present or, for Company filings
after the date hereof, will fairly present (subject, in the case of the
unaudited interim financial statements, to normal, year-end audit adjustments,
which are not material in amount) the consolidated financial position of the
Company and its subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flow for the periods then ended.
11
(d) PRIVATE OFFERING; NO INTEGRATED OFFERING. Assuming the
accuracy of the Seller's representations and warranties in Section 8 hereto, the
offer and sale of the Purchase Shares to the Seller and issuance of the Purchase
Shares to the Holders pursuant to the Purchase Agreement is exempt from the
registration and prospectus delivery requirements of the Securities Act. Neither
the Company nor any person acting on its behalf has offered or will offer Common
Stock or the Purchase Shares or any part thereof or any similar securities for
issuance or sale to, or has solicited or will solicit any offer to acquire any
of the same from, any person so as to bring the issuance and sale by the Company
of the Purchase Shares within the provisions of the registration and prospectus
delivery requirements of the Securities Act. The Company has not offered, sold,
contracted to sell, pledged or disposed of, and will not at any time offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
any securities under circumstances where such offer, sale, pledge, contract or
disposition would cause the exemption under the Securities Act pursuant to which
the Purchase Shares are issuable without registration to the Seller and Holders
to cease to be applicable to the offer and sale of the Purchase Shares or cause
them to be integrated with any prior offering of securities of the Company for
purposes of the Securities Act (in circumstances which would require
registration of the Purchase Shares) or any applicable shareholder approval
provisions under any securities exchange or market upon which the Common Stock
is listed or quoted.
(e) INVESTMENT COMPANY ACT. The Company is not, and during the
term of this Agreement will not be, an "investment company," or a company
"controlled by" an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) COMPLIANCE. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
12
(c) DISCONTINUED DISPOSITION. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of a Suspension Notice and subject to the provisions and limitation
of Section 3(i), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the "ADVICE") by the Company that
the use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce the
provisions of this paragraph; provided, that the Company and any such stop
orders comply with the provisions and limitations set forth in Section 3(i).
(d) PIGGY BACK REGISTRATION.
(i) REGISTRATION PROCEDURES. If at any time during
the Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall determine to
prepare and file with the Commission a Registration Statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalent forms relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with the stock
option or other employee benefit plans, then the Company shall send to each
Holder a written notice of such proposed filing at least 25 days before the
anticipated filing. The notice referred to in the preceding sentence shall (i)
describe the proposed registration and offering and (ii) offer each Holder the
opportunity to register, offer or sell such amount of Registrable Securities as
any such Holder may request (a "PIGGYBACK REGISTRATION"). If within fifteen days
after the date of such notice, any such Holder shall so request in writing, the
Company shall include in such Piggyback Registration (and any related
qualification under state blue sky laws and other compliance filings, and any
underwriting involved therein) all Registrable Securities such Holder requests
to be registered; PROVIDED, that, the Company shall not be required to register
any Registrable Securities pursuant to this Section 7(d) that at such time may
be resold pursuant to Rule 144(k) promulgated under the Securities Act or that
are registered under a then effective Registration Statement which is not
subject to a discontinuance of disposition pursuant to Section 7(c). Holder will
be permitted to withdraw any or all of its Registrable Securities from a
Piggyback Registration at any time prior to the effective date of such Piggyback
Registration. If a Holder decides not to include all of its Registrable
Securities in any Registration Statement thereafter filed by the Company, such
Holder shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent Registration Statement or Registration Statements
as may be filed by the Company with respect to offerings of its securities, all
upon the terms and conditions set forth therein.
(ii) FIRST PRIORITY PIGGYBACK REGISTRATION. The
Company will cause the managing underwriter or underwriters, if any, of a
proposed registration of securities of the Company through underwriters to
permit any Holder, if holding Registrable Securities requested to be included in
such registration, to include in the registration for such offering all such
requested Registrable Securities on the same terms and conditions as any
securities of the Company included therein; provided, that the Holder shall give
13
customary representations and warranties and the Holder's indemnification
obligations shall be limited as set forth in Section 5(b) hereof. The Company
shall cooperate with the Holder in order to limit any representations and
warranties to, or agreements with, the Company or the underwriters to be made by
Holder only to those representations, warranties or agreements regarding
Holder's Registrable Securities and intended method of distribution, and as
required by law. If such managing underwriter or underwriters advises Holder in
writing to the effect that the total amount of securities that Holder, the
Company and any other person propose to include in such offering is such as to
materially and adversely affect the success of such offering, such Registrable
Securities of such Holder shall be subject to customary underwriter cutbacks
applicable to all holders of securities subject to registration in such
offering.
(e) AMENDMENTS AND WAIVERS, The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each Holder of the then outstanding Registrable Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of certain Holders
and that does not directly or indirectly affect the rights of other Holders may
be given by Holders of all of the Registrable Securities to which such waiver or
consent relates.
(f) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be made in
accordance with the provisions of the Purchase Agreement.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder and any permitted
transferee. Each Holder may transfer (including, without limitation, by
donation, devise or gift) or assign, by written agreement, any or all of such
Holder's registration rights granted hereunder to any direct or indirect
transferee or assignee of such Holder's Registrable Securities; PROVIDED, that
such assignee or transferee shall agree, in form and substance reasonably
satisfactory to the Company and the Holders, to be bound by the terms and
provisions of this Agreement; PROVIDED, that the Company may not assign its
obligations hereunder; FURTHER PROVIDED, that if the Company is a party to any
merger, consolidation, recapitalization, reorganization or otherwise pursuant to
which the Registrable Securities are converted into or exchanged for securities
or the right to receive securities of any other person ("CONVERSION
SECURITIES"), then the Company shall not effect any such action unless the
issuer of such Conversion Securities shall have previously assumed in writing,
to be delivered to all Holders, all obligations of the Company hereunder.
Following any such transfer or assignment, such transferring or assigning Holder
shall retain all rights under this Agreement with respect to the Registrable
Securities that continue to be held by such Holder.
14
(h) EXECUTION AND COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(i) GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
with the provisions of the Purchase Agreement.
(j) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.
(l) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(m) INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS.
The obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose.
(n) DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any Holder, upon any
breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or noncompliance, or any acquiescence therein, or of
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing.
15
8. INVESTMENT REPRESENTATIONS. Each Selling Shareholder understands
that the Purchase Shares are being offered and sold pursuant to a private
placement exemption from registration contained in the Securities Act based in
part upon such Selling Shareholder's representations contained in this
Agreement. Accordingly, each Selling Shareholder, severally and not jointly,
represents and warrants to the Company and Purchaser as of the date hereof as
follows:
(a) Such Selling Shareholder has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to Company so that such Selling Shareholder is capable of
evaluating the merits and risks of its investment in Company and has the
capacity to protect its own interests. Selling Shareholder understands that it
must bear the economic risk of this investment indefinitely unless the Purchase
Shares are registered pursuant to the Securities Act, or an exemption from
registration is available.
(b) Selling Shareholder is acquiring the Purchase Shares for
its own account for investment only, and not with a view towards their
distribution.
(c) Selling Shareholder represents that by reason of its, or
of its management's, business or financial experience, Selling Shareholder has
the capacity to protect its own interests in connection with the transactions
contemplated in the Purchase Agreement. Further, Selling Shareholder is aware of
no publication of any advertisement in connection with the transactions
contemplated in the Purchase Agreement.
(d) Selling Shareholder and each of its members, as
applicable, are accredited investors within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
(e) Selling Shareholder has had an opportunity to discuss
Company's business, management and financial affairs with directors, officers
and management of Company and has had the opportunity to review Company `s
operations and facilities. Selling Shareholder also has had the opportunity to
ask questions of and receive answers from Company and its management regarding
the terms and conditions of this investment.
(f) Selling Shareholder acknowledges and agrees that the
Purchase Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Selling Shareholder has been advised or is aware of the provisions of
Rule 144 promulgated under the Securities Act as in effect from time to time,
which permits limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring following the required holding period under Rule 144 and the number of
shares being sold during any three-month period not exceeding specified
limitations.
(g) The office or offices of Selling Shareholder in which its
investment decision was made is located at the address or addresses of Seller
set forth in Part 2.23(g) of the Disclosure Schedule. Selling Shareholder is a
United States person (as defined by Section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended).
16
(h) Selling Shareholder acknowledges and agrees that the
Purchase Shares are subject to restrictions on transfer as set forth in the
applicable securities laws.
9. CERTIFICATIONS. All certificates representing the purchase shares
shall have endorsed thereon legends in substantially the following forms (in
addition to any other legend which may be required by other agreements between
the parties hereto):
(a) (i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."
(ii) Any legend required by appropriate blue sky
officials.
(b) The Company shall be obligated to reissue promptly
certificates without the foregoing legend upon the request of any Holder
thereof, if the Holder shall have obtained an opinion of counsel reasonably
acceptable to the Company to the effect that the securities proposed to be
disposed of may lawfully be disposed of without registration, qualification or
legend.
(c) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instruction with respect
to such securities shall be removed upon receipt by the Company of an opinion of
counsel reasonably satisfactory to the Company or an order of the appropriate
blue sky authority authorizing such removal.
10. BOARD REPRESENTATION. As long as Anthony O. Brown ("Brown") and his
affiliates collectively own, either directly or beneficially, not less than
495,465 shares of Common Stock, subject to adjustment for any stock split,
dividend or other distribution, recapitalization or any similar event (the
"BROWN MINIMUM HOLDINGS"), upon written request by Brown, the Company shall use
its reasonable best efforts to cause Brown or his designee (which designee must
be reasonably acceptable to Acacia) to be elected to the Board of Directors of
the Company. Without limitation of the foregoing, the Company shall nominate
Brown or his designee to serve on the Board of Directors upon such request by
Brown, to be voted on in the next succeeding annual or special meeting for
election of directors following such request by Brown, and in successive annual
meetings thereafter so long as Brown continues to own the Brown Minimum
Holdings, until Brown is so elected, and shall treat Brown or his designee in
the same manner as other nominees selected by the Board of Directors of the
Company. The parties agree and acknowledge that pursuant to the Company's
Bylaws, the Board of Directors has the right to appoint an interim director to
fill any vacancy, but any election of a board member must be pursuant to the
17
vote of the Company's shareholders. The provisions of this Section 10 shall
survive any termination of this agreement and continue in accordance with the
terms hereof. Notwithstanding anything contained in the Agreement to the
contrary, the parties hereby acknowledge and agree that Brown shall be entitled
to enforce the rights and privileges under this Section 10 in his sole
discretion and, without limiting any remedies available at law or equity, Brown
shall be entitled to seek specific performance or injunctive relief to enforce
this Section 10.
[THIS SPACE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the parties have duly executed this Registration
Rights Agreement as of the day and year first above written.
COMPANY: ACACIA RESEARCH CORPORATION,
a Delaware corporation
By: /S/ Robert A Berman
-----------------------------------
Name: Robert A Berman
Title: Chief Operating Officer
PURCHASER: ACACIA GLOBAL ACQUISITION CORPORATION,
a Delaware corporation
By: /S/ Robert A Berman
-----------------------------------
Name: Robert A Berman
Title: Chief Operating Officer
SELLER: GLOBAL PATENT HOLDINGS, LLC
an Illinois limited liability company
By: /S/ Anthony O. Brown
-----------------------------------
Name: Anthony O. Brown
Title: Manager
SELLING SHAREHOLDERS: By: /S/ Richard Angell
----------------------------------
Richard Angell
By: /S/ Anthony O. Brown
----------------------------------
Anthony O. Brown
By: /S/ Scott Paseltiner
----------------------------------
Scott Paseltiner
By: /S/ Dooyong Lee
----------------------------------
Dooyong Lee
By: /S/ Scott Turbin
----------------------------------
Scott Turbin
Partner KDS LLC
By: /S/ Daniel Asher
----------------------------------
Daniel Asher
By: /S/ Robert Krasnow
----------------------------------
Robert Krasnow
By: /S/ James D. Esser
----------------------------------
James D. Esser
By: /S/ Marshall N. Toplansky
----------------------------------
Marshall N. Toplansky
By: /S/ James Cohen
----------------------------------
James Cohen
19
By: /S/ Richard R. Taylor
----------------------------------
Richard R. Taylor
By: /S/ Thomas M. Harney, Trustee
----------------------------------
Thomas M. Harney, Trustee
Thomas M. Harney,
Revocable Trust UTD 5/31/88
By: /S/ Michael Vender
----------------------------------
Michael Vender
By: /S/ Patrick J. McGarvey
----------------------------------
Patrick J. McGarvey
By: /S/ Jack Lavin
----------------------------------
Jack Lavin
By: /S/ Thomas Henrich
----------------------------------
Thomas Henrich
20
EXHIBIT "A"
PLAN OF DISTRIBUTION
We are registering the shares of AR-Acacia Technologies common stock on
behalf of the selling stockholders. A selling stockholder is a person named in
the section entitled "Selling Stockholders" and also includes any donee,
pledgee, transferee or other successor-in-interest selling shares received after
the date of this prospectus from a selling stockholder as a gift or other
non-sale related transfer.
We do not know of any plan of distribution for the resale of our
AR-Acacia Technologies common stock by the Selling Stockholders. We will not
receive any of the proceeds from the sale by the Selling Stockholders of any of
the resale shares.
We expect that the Selling Stockholders or transferees may sell the
resale shares from time to time in one or more transactions on Nasdaq or any
other exchange upon which the company may become listed, in privately negotiated
transactions, through put or call option transactions relating to the shares, or
a combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Stockholders may
sell the resale shares to or through broker-dealers, and such broker-dealers may
receive compensation from the Selling Stockholders or the purchasers of the
resale shares, or both.
The selling stockholders may also enter into hedging transactions,
options or other transactions with broker-dealers or other financial
institutions that require the delivery to these broker-dealers or other
financial institutions of shares offered by this prospectus, which shares these
broker-dealer or other financial institution may resell pursuant to this
prospectus (as amended or supplemented to reflect such transaction). These
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from selling stockholders and/or the purchasers of shares for whom
these broker-dealers may act as agents or to whom they sell as principal, or
both. For example, the Selling Stockholders may:
o enter into transactions with a broker-dealer or affiliate of a
broker-dealer or other third party in connection with which
that other party will become a Selling Stockholder and engage
in short sales of securities under this prospectus, in which
case the other party may use securities received from the
Selling Stockholders to close out any short positions;
o sell short the securities under this prospectus and use the
securities held by it to close out any short position;
o enter into options, forwards or other transactions that
require the Selling Stockholders to deliver, in a transaction
exempt from registration under the Securities Act, the
securities to a broker-dealer or an affiliate of a
broker-dealer or other third party who may then become a
Selling Stockholder and publicly resell or otherwise transfer
the securities under this prospectus; or
Exhibit A, Page 1
o loan or pledge the securities to a broker-dealer or an
affiliate of a broker-dealer or other third party who may then
become a Selling Stockholder and sell the loaned securities
or, upon an event of default in the case of a pledge, become a
Selling Stockholder and sell the pledged securities, under
this prospectus.
The Selling Stockholders have advised us that they have not entered
into any agreements, arrangements or understandings with any underwriter,
broker-dealer or agent regarding the sale of their securities.
The selling stockholders and any broker-dealers that act in connection
with the sale of shares may be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any commissions received by these
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act.
Because selling stockholders may be "underwriters" within the meaning
of Section 2(11) of the Securities Act, the selling stockholders may be subject
to the prospectus delivery requirements of the Securities Act. Furthermore,
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of Rule 144. We have
informed the selling stockholders that the anti-manipulative provisions of
Regulation M promulgated under the Exchange Act may apply to their sales in the
market.
In addition, if we are notified by a selling stockholder that a donee,
pledgee or transferee or other successor in interest intends to sell more than
500 shares, a supplement to this prospectus will be filed.
At any time a particular offer of resale shares is made, to the extent
required, a supplemental prospectus will be distributed which will set forth the
number of resale shares offered and the terms of the offering including the name
or names of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the resale shares purchased from the selling stockholders, any
discounts, commission and other items constituting compensation from the selling
stockholders and any discounts, concessions or commissions allowed or paid to
dealers. We do not presently intend to use any forms of prospectus other than
print.
The Selling Stockholders and any other persons participating in the
sale or distribution of the resale shares will be subject to the federal
securities laws and must comply with certain terms of the requirements of the
Securities Act and the Exchange Act, including Rule 10b-5 and Regulation M under
the Exchange Act. These rules and regulations may limit the timing of purchases
and sales of shares of our AR-Acacia Technologies common stock by the Selling
Stockholders or other persons. Under these rules and regulations, generally,
except as otherwise permitted the thereby, Selling Stockholders and other
persons participating in the sale or distribution:
Exhibit A, Page 2
o may not engage in any stabilization activity in connection
with our AR-Acacia Technologies common stock,
o must furnish each broker which offers resale shares covered by
this prospectus with the number of copies of this prospectus
and any supplement which are required by the broker, and
o may not bid for or purchase any of our AR-Acacia Technologies
common stock or attempt to induce any person to purchase any
of our AR-Acacia Technologies common stock other than as
permitted under the Exchange Act.
We will make copies of this prospectus available to the Selling
Stockholders, and we have informed the Selling Stockholders of the need for
delivery of a copy of this prospectus to each purchaser of the resale shares
prior to or at the time of any sale of the resale shares offered hereby.
We may suspend the effectiveness or use of, or trading under, the
registration statement if we determine that the sale of any securities pursuant
to the registration statement would:
o materially impede, delay or interfere with any material
pending or proposed financing, acquisition, corporate
reorganization or other similar transaction involving the
company for which we have authorized negotiations; materially
adversely impair the consummation of any pending or proposed
material offering or sale of any class of securities by the
company, or
o require disclosure of material nonpublic information that, if
disclosed at such time, would be materially harmful to the
interests of the company and our stockholders.
We will pay all costs and expenses associated with registering and
qualifying the resale shares being offered hereunder with the SEC and any state
securities agencies. The selling stockholders will bear their own legal fees and
costs and all commissions, discounts and expenses of underwriters or brokers, if
any, attributable to the sales of the shares.
We and the selling stockholders have agreed to indemnify each other
against certain liabilities that could arise from the registration and sale of
the shares.
Exhibit A, Page 3