<PAGE>
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 to Section240.14a-11(c) or
Section240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
April 23, 1999
Dear Shareholder:
On behalf of your Board of Directors and Management, you are cordially
invited to attend the Annual Meeting of Shareholders to be held on Thursday, May
20, 1999, 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
to serve until the next Annual Meeting of Shareholders and "FOR" ratification of
the selection of PricewaterhouseCoopers LLP as the Company's independent
accountants.
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,
[SIGNATURE]
Paul R. Ryan
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
ACACIA RESEARCH CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1999
------------------------
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Acacia
Research Corporation, a California corporation (the "Company"), will be held on
Thursday, May 20, 1999 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 directors to serve for the ensuing year and until their
successors are duly elected and qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending December 31, 1999;
and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on April 5, 1999 are
entitled to receive notice of and to vote at the Annual Meeting.
All shareholders 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
shareholder attending the Annual Meeting may vote in person even if he or she
previously returned a proxy.
By Order of the Board of Directors,
[SIGNATURE]
Kathryn King-Van Wie
SECRETARY
Pasadena, California
April 23, 1999
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.
<PAGE>
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 California corporation ("Acacia" or the
"Company"), for use at Acacia's annual meeting of shareholders (the "Annual
Meeting") to be held on Thursday, May 20, 1999 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
Shareholders. 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 26, 1999 to all
shareholders entitled to vote at the Annual Meeting.
QUESTIONS AND ANSWERS
<TABLE>
<C> <S>
1. Q: WHAT MAY I VOTE ON?
A: (1) The election of nominees to serve on the Board of Directors; and
(2) The approval of the appointment of PricewaterhouseCoopers LLP as independent
accountants for 1999.
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 and FOR the
ratification of PricewaterhouseCoopers LLP as independent accountants for 1999.
3. Q: WHO IS ENTITLED TO VOTE?
A: Shareholders as of the close of business on April 5, 1999 (the "Record Date") are
entitled to vote at the Annual Meeting.
4. Q: HOW DO I VOTE? CAN I REVOKE MY PROXY LATER?
A: Sign and date each proxy card you receive and return it in the prepaid envelope.
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.
5. Q: WHO WILL COUNT THE VOTE?
A: The Secretary of the Company will count the votes and act as the inspector of
election.
6. 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.
</TABLE>
1
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<TABLE>
<C> <S>
7. 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 Co. or, if your shares are
held in "street name," by contacting the broker or bank who holds your shares.
8. Q: HOW MANY SHARES CAN VOTE?
A: As of the Record Date, 10,310,815 shares of Common Stock, the only voting
securities of the Company, were issued and outstanding. Every shareholder is
entitled to one vote for each share of Common Stock held.
9. Q: WHAT IS A "QUORUM"?
A: A "quorum" is a majority of the outstanding shares entitled to vote. They may be
present in person 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.
10. 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 become directors of the Company. To
ratify 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.
11. Q: MAY I CUMULATE MY VOTES FOR A NOMINEE FOR DIRECTOR?
A: Yes, you may give one nominee the number of votes equal to the number of
directors to be elected multiplied by the number of votes to which your shares
are entitled or distribute your votes calculated on the same principle among the
nominees. No person may cumulate votes unless the nominees have been nominated
prior to voting and a shareholder has given notice at the meeting prior to voting
of his or her intent to cumulate votes. If a shareholder gives such notice, then
all shareholders may cumulate votes for nominees and the proxyholders will have
discretionary authority to cumulate votes.
13. 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 shares present, an abstention is equivalent to a "no" vote.
14. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: Although we do 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 presented at the Annual Meeting, your signed proxy card gives authority to the
proxyholders, Paul R. Ryan and Kathryn King-Van Wie, to vote on such matters at
their discretion.
</TABLE>
2
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<TABLE>
<C> <S>
15. Q: WHO ARE THE LARGEST PRINCIPAL SHAREHOLDERS?
A: For information regarding holders of more than 5% of the outstanding Common
Stock, see "Security Ownership of Certain Beneficial Owners and Management."
16. Q: HOW WILL THE COMPANY SOLICIT PROXIES?
A: Corporate Investor Communications, Inc. was hired by the Company to assist in the
distribution of proxy materials and solicitation of votes for $3,500, plus
estimated out-of-pocket expenses of $750. We also reimburse brokerage houses and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to shareholders. Proxies
may also be solicited in person, by telephone, or by facsimile by directors,
officers, and employees of the Company without additional compensation.
</TABLE>
PROPOSAL NO. 1: ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The Bylaws of the Company presently provide that there shall be five
directors and that such directors are to be elected at the annual meeting of
shareholders. Unless otherwise instructed, the proxyholders will vote the
proxies received by them for the five nominees named below. If any 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 any nominee designated by the
present Board of Directors to fill the vacancy. It is not presently expected
that any of the nominees named below 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 listed below as possible. In such event,
the specific nominees to be voted for will be determined by the proxyholders.
The term of office of each person elected as a director will continue until the
next annual meeting of shareholders or until a successor has been elected and
duly qualified.
NOMINEES
Biographical summaries and ages as of the date hereof of individuals
nominated by the Board of Directors for election as directors are provided
below. See "Security Ownership of Certain Beneficial Owners and Management" for
data with respect to the number of shares of Common Stock beneficially
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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.
<TABLE>
<CAPTION>
DIRECTOR
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE
- -------------------------------------------------------------------------------------------------- --- -----------
<S> <C> <C>
R. BRUCE STEWART, CHAIRMAN AND CHIEF FINANCIAL OFFICER 62 1993
Mr. Stewart has served as Chairman of the Board of Directors since January 1993 and as Chief
Financial Officer since January 1997. Mr. Stewart founded the Company and has guided the
development of the Company's strategies and operations. From the Company's incorporation in
January 1993 to January 1997, Mr. Stewart served as the President, Chief Executive Officer and
Treasurer of the Company.
PAUL R. RYAN, DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER 53 1995
Mr. Ryan has served as a Director since August 1995 and as President and Chief Executive Officer
since January 1997. From May 1996 to January 1997, Mr. Ryan served as Executive Vice President
and Chief Investment Officer of the Company and from August 1995 to May 1996, as Vice President,
Capital Management, of the Company. Mr. Ryan is, along with the Company, a general partner of
each of the private investment partnerships formed by the Company. From April 1993 to August
1995, he was self-employed as a private investor. Mr. Ryan was a general partner of the American
Health Care Fund, L.P. until April 1993. He received his B.S. degree from Cornell University and
attended the New York University Graduate School of Business.
THOMAS B. AKIN, DIRECTOR 47 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. From 1981 to 1996, Mr. Akin 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 serves on the Board
of Directors of eFax.com and Infotec Inc.
FRED A. DE BOOM, DIRECTOR 63 1995
Mr. de Boom has served as a Director since February 1995. Mr. de Boom 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 California.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE
- -------------------------------------------------------------------------------------------------- --- -----------
<S> <C> <C>
EDWARD W. FRYKMAN, DIRECTOR 62 1996
Mr. Frykman has served as a Director since April 1996. Mr. Frykman has been an account executive
with Crowell, Weedon & Co. since 1992. From 1990 to 1992, 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 from September 1987 to March 1990 and was the Manager of
the Los Angeles Regional Retail Office of Shearson Lehman Hutton from October 1972 to September
1987.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE FIVE
NOMINEES LISTED ABOVE. PROXIES RECEIVED WILL BE VOTED FOR EACH OF THE NOMINEES
UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THE PROXY.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of nineteen meetings
during the fiscal year ended December 31, 1998. 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. See "Director Compensation"
for information on the compensation of non-employee directors. 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 R. Bruce Stewart, Fred A. de Boom
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 Audit Committee
held one meeting during 1998. 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 four meetings during 1998.
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 non-discretionary grant of options
to purchase 20,000 shares of Common Stock upon joining the Board of Directors
and subsequent non-discretionary annual grants of options to purchase 2,000
shares of Common Stock, 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 $750 for each meeting of the Board of Directors
and for any Board committee meeting not immediately preceding or following a
Board of Directors meeting attended in person and $250 for each telephonic
meeting, unless such telephonic meeting exceeds one hour whereby the
non-employee directors each receive $750. 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.
5
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MANAGEMENT
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive officers of
the Company as of the date hereof.
<TABLE>
<S> <C> <C>
R. Bruce Stewart 62 Chairman and Chief Financial Officer
Paul R. Ryan 53 Director, President and Chief Executive
Officer
Kathryn King-Van Wie 37 Chief Operating Officer and Secretary
</TABLE>
Biographical information on Messrs. Stewart and Ryan is set forth above
under the caption "Nominees."
KATHRYN KING-VAN WIE has served as Chief Operating Officer since January 1997
and Secretary since October 1995. She joined the Company in August 1995 as Vice
President, Operations. She has more than ten years of marketing and operations
experience. From 1992 to 1995, she served as a business consultant to several
small and mid-size companies. Prior to this, she held positions at Capitol
Records, Vinokur Advertising and CBS.
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 Common Stock by each person known by the Company
to be the beneficial owner of more than five percent 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, warrant, 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 Acacia
Research Corporation, 55 South Lake Avenue, Pasadena, California 91101.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME OWNERSHIP(1)(2) CLASS
- -------------------------------------------------- ------------------------ ---------------
<S> <C> <C>
R. Bruce Stewart.................................. 532,200(a) 5.02%
Paul R. Ryan...................................... 394,000(b) 3.72%
Thomas B. Akin (3)................................ 380,944(c) 3.60%
Fred A. de Boom................................... 38,000(d) *
Edward W. Frykman................................. 20,900(e) *
All Directors and Executive Officers as a Group
(six persons)................................... 1,551,328(f) 14.64%
</TABLE>
- ------------------------
* Represents less than one percent.
(1) All shares which a named shareholder 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 shareholder, but not for
determining the percentage of Common Stock owned by any other shareholder.
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(2) Includes the following options and/or warrants exercisable on or within 60
days of the Record Date: (a) options to purchase 150,000 shares; (b) options
to purchase 175,000 shares and warrants to purchase 203,000 shares; (c)
options to purchase 5,000 shares and warrants to purchase 260,872 shares;
(d) options to purchase 35,000 shares; (e) options to purchase 19,000
shares; and (f) options to purchase 574,000 shares and warrants to purchase
463,872 shares.
(3) Includes warrants to purchase 130,436 shares. Also includes 3,636 shares and
130,436 warrants to purchase 130,436 shares held by Talkot Crossover Fund,
L.P., of which Mr. Akin serves as general partner.
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 one
highly compensated executive officer whose cash compensation exceeded $100,000
in the last fiscal year (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION
- ------------------------------------ --------- ----------- ----------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Ryan, President and Chief 1998 87,115 2,500 0 0 128,944(1)
Executive Officer 1997 60,000 5,000 0 50,000 155,597(1)
1996 0 10,792 0 200,000(2) 14,208(1)
R. Bruce Stewart, Chief Financial 1998 128,333 2,500 11,276(3) 0 0
Officer 1997 130,000 5,000 15,473(3) 0 0
1996 100,833 5,000 14,448(3) 200,000(2) 0
</TABLE>
- --------------------------
(1) Represents his 25% share of the management and performance fees received as
general partner of Company-affiliated investment funds. See "Transactions
with Management--Transactions with Paul R. Ryan."
(2) Represents shares of stock underlying options granted under the 1996
Executive Stock Bonus Plan.
(3) Includes $9,879, $13,895, and $13,536 paid by the Company for certain
automobile expenses in 1998, 1997, and 1996, respectively.
The Company has not entered into employment contracts with any of its Named
Executive Officers nor does the Company have any agreement or arrangement with
any such Named Executive Officers relating to a change in control of the
Company.
STOCK OPTION GRANTS AND EXERCISES
In 1998, no stock options were granted to the Named Executive Officers. The
following table sets forth information regarding the stock options exercised by
to the Named Executive Officers during the
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fiscal year ended December 31, 1998 and the value of in-the-money options held
by the Named Executive Officers as of December 31, 1998:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT 1998
SHARES OPTIONS AT 1998 YEAR-END(#) YEAR-END(1)($)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED(2)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Ryan.......... 0 0 125,000 125,000 168,906 168,906
R. Bruce Stewart...... 300,000 2,156,250 180,000 100,000 436,875 149,375
</TABLE>
- ------------------------
(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 National Market on December 31, 1998 of $4.59375 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.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the last fiscal year, there were certain transactions that occurred
between the Company and its officers and directors, 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.
TRANSACTIONS WITH PAUL R. RYAN. In January 1995, prior to the time Paul
R. Ryan became an officer or director of the Company, the Company and Mr.
Ryan entered into an agreement pursuant to which the Company and Mr. Ryan
agreed to act as the general partners of certain private investment funds
and co-managers to other investment funds. Under this agreement, the Company
is entitled to receive 75% and Mr. Ryan is entitled to receive 25% of the
performance and management fees earned in respect of the investment advisory
services provided to co-managed investment funds, less certain expenses
shared with other parties. Pursuant to this agreement, Mr. Ryan earned
approximately $128,944 during 1998. Also in January 1995, Mr. Ryan acquired
warrants to purchase 100,000 shares of Common Stock at an exercise price of
$2 per share for an investment of $10,000. At the time the warrants were
issued, the Company was privately-held and had no actively-traded market for
its shares of Common Stock.
TRANSACTIONS WITH ROBERT B. STEWART. In August 1997, the Company hired
Robert B. Stewart as Director of Marketing and, in November 1998, promoted
him to Vice President of Acacia Capital Management. Rob Stewart is the son
of R. Bruce Stewart, Chief Financial Officer and the Chairman of the
Company. Rob Stewart was awarded an option to purchase 60,000 shares of the
Company's Common Stock, vesting over four years, at an exercise price of
$7.75, the price of which was equal to the fair market value of the shares
on the date of grant. In 1998, Rob Stewart earned a base salary of $70,769
and a bonus of $2,500.
TRANSACTION WITH H. LEE BROWNE. In April 1998, the Company acquired a
25% interest in Internet Software LLC, a Delaware limited liability company,
for $2.5 million in cash. In November 1998, Internet Software LLC was
renamed Signature-mail.com llc. Signature-mail.com llc has created a
proprietary software product that enables users to personalize their e-mail
and computer documents by including an image of their handwritten
signatures, greetings and drawings, and by easily changing the image's size
and color. Following the Company's investment, Mr. Browne holds a
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33.4% interest in Signature-mail.com llc. Mr. Browne is employed as the
chief executive officer of Signature-mail.com llc.
Mr. Browne is also the president and chief executive officer of Soundview
Technologies Incorporated, a majority-owned subsidiary of the Company. Mr.
Browne is also the chief executive officer and majority owner of Greenwich
Information Technologies LLC, an entity in which the Company has a substantial
minority ownership interest.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors administers the
Company's executive compensation program. 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 incentive stock 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 officer 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 periodically reviews the individual base salaries
of the executive officers, and adjusts salaries based on individual job
performance and changes in that 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 shareholders. In addition, the Compensation Committee believes
that the grant of an equity interest serves to link management interests with
shareholder interest and to motivate executive officers to make long-term
decisions that are in the best interests of the Company and the shareholders as
well as provides an incentive to maximize shareholder value. Stock options have
value for an employee only if the price of Common Stock increases above the
exercise price on the grant date and the employee remains in the Company's
employ for the period required for the stock options 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 President and Chief Executive Officer, received
an annual base salary of $87,115 in 1998. Mr. Ryan also received a bonus of
$2,500, which was no more than the bonus amount paid to each executive officer
of the Company in 1998. When Mr. Ryan was appointed Vice President, Capital
Management in August 1995 and later Executive Vice President and Chief
Investment Officer in May 1996, he received no salary for these additional
duties. The cash amounts paid to Mr. Ryan in the form of base salary and bonus
were 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 as well as (a) Mr. Ryan's compensation as a general partner in
the investment funds, which is pursuant to an agreement entered into prior to
his being named an officer of the Company that entitles him to receive 25% of
the performance and management fees for investment advisory services rendered
the funds; and
9
<PAGE>
(b) Mr. Ryan's additional duties and responsibilities as President and Chief
Executive Officer. The Board of Directors approved the Compensation Committee's
recommendation.
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, 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 Frykman
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Stock of the Company for the last ten fiscal quarters with the cumulative
total return of (i) the Composite Index for The Nasdaq Stock Market (U.S.
Companies) (the "Nasdaq Index") and (ii) the Index for Nasdaq Financial Stocks
(the "Industry Index"). This graph assumes the investment of $100 on June 30,
1995 in the Company's Common Stock, the Nasdaq Index and the Industry Index and
assumes dividends are reinvested. Measurement points are at the last trading day
of the fiscal quarters represented below.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ACACIA RESEARCH CORPORATION NASDAQ STOCK MARKET (US) NASDAQ FINANCIAL STOCKS
<S> <C> <C> <C>
6/30/95 100.00 100.00 100.00
9/29/95 125.00 112.04 113.95
12/29/95 100.00 113.41 122.24
3/29/96 145.89 118.71 127.18
6/28/96 133.33 128.40 130.19
9/30/96 170.83 132.97 141.22
12/31/96 125.00 139.51 156.73
3/31/97 120.83 132.00 163.51
6/30/97 114.58 156.20 190.40
9/30/97 200.00 182.62 222.19
12/31/97 133.33 171.27 240.55
3/31/98 65.63 200.04 253.54
6/30/98 132.29 205.83 247.04
9/30/98 98.99 186.34 205.25
12/31/98 77.08 240.33 231.48
</TABLE>
10
<PAGE>
PROPOSAL NO. 2: RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
(ITEM 2 ON PROXY CARD)
The firm of PricewaterhouseCoopers LLP (formerly known as Price Waterhouse
LLP), the Company's independent accountants for the year ended December 31,
1998, 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, 1999, subject to ratification by the shareholders.
On April 28, 1997, the Company changed its independent accountants from
Finocchiaro & Co. to PricewaterhouseCoopers LLP. This change was made because of
the developing complexity of the Company's financial statements and the
Company's status as a reporting company under the Securities Exchange Act of
1934 (the "Exchange Act"). Neither of the reports of Finocchiaro & Co. for the
years ended December 31, 1995 or December 31, 1996 contained an adverse opinion
or a disclaimer of opinion, or was qualified or modified as to uncertainty,
audit scope, or accounting principles. The decision to change independent
accountants was approved by the Audit Committee of the Board of Directors, by
delegated authority of the Board of Directors of the Company.
Since January 1, 1995, there were no disagreements with Finocchiaro & Co. on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, and none of the events set forth in
paragraphs (a)(1)(v)(A) through (D) of Item 304 of Regulation S-K occurred.
Since January 1, 1995, neither the Company nor anyone acting on its behalf (i)
has received from PricewaterhouseCoopers LLP either a written report or oral
advice relating to the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements, which was an important
factor considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue; or (ii) has consulted
PricewaterhouseCoopers LLP regarding any matter that was either the subject of a
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions to the Item) or a reportable event (as described in Item
304(a)(1)(v) of Regulation S-K).
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 shareholders 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 SHAREHOLDERS VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
FOR THE YEAR ENDING DECEMBER 31, 1999. PROXIES RECEIVED WILL BE SO VOTED UNLESS
SHAREHOLDERS 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
11
<PAGE>
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, 1998
by its directors, officers and holders of more than 10% of the Company's Common
Stock complied with the requirements of Section 16(a) with the exception of: (i)
Mr. de Boom and Mr. Frykman, who did not timely file Form 5 to report one
transaction each and (ii) Mr. Stewart, who did not timely file Form 4 to report
one transaction.
ANNUAL REPORT TO SHAREHOLDERS
Enclosed with this Proxy Statement is the Annual Report of the Company for
the 1998 fiscal year. The Annual Report is enclosed for the convenience of
shareholders only and should not be viewed as part of the proxy solicitation
material. If any person who was a beneficial owner of Common Stock on the Record
Date for the 1999 Annual Meeting desires additional copies of the 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 shareholder of the
Company as of the Record Date and should be directed to Kathryn King-Van Wie,
Acacia Research Corporation, 55 South Lake Avenue, Pasadena, California 91101.
INCLUSION OF SHAREHOLDER PROPOSALS IN NEXT YEAR'S PROXY STATEMENT
Proposals of shareholders which are intended to be presented by such
shareholders at the Company's 2000 annual meeting must be received by the
Company no later than December 28, 1999 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
ADVANCE NOTICE PROCEDURES FOR NEXT YEAR'S ANNUAL MEETING
The Company hereby advises shareholders that, until further notice, March
10, 2000 is the date after which notice of a shareholder-sponsored proposal
submitted outside of the processes of Rule 14a-8 under the Exchange Act (i.e., a
proposal to be presented at the next annual meeting of shareholders but not
submitted for inclusion in the Company's proxy statement) will be considered
untimely under the Commission's proxy rules.
OTHER BUSINESS
The Company knows of no other matters to be submitted to the shareholders at
the Annual Meeting. If any other matters properly come before the shareholders
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.
Dated: April 23, 1999
By Order of the Board of Directors,
[SIGNATURE]
Kathryn King-Van Wie
SECRETARY
12
<PAGE>
ACACIA RESEARCH CORPORATION
ANNUAL MEETING OF SHAREHOLDERS MAY 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ACACIA RESEARCH CORPORATION
The undersigned hereby appoints Paul R. Ryan and Kathryn King-Van Wie, and
each of them, proxyholders, each with full power of substitution to vote for the
undersigned at the Annual Meeting of Shareholders of Acacia Research Corporation
to be held on May 20, 1999, and at any adjournments thereof, with respect to the
following matters, which were more fully described in the Proxy Statement dated
April 23, 1999 (the "Proxy Statement"), receipt of which is hereby acknowledged
by the undersigned.
THIS PROXY WILL BE VOTED AS DIRECTED. UNLESS OTHERWISE DIRECTED, THIS PROXY
WILL BE VOTED FOR THE ELECTON OF THE FIVE DIRECTOR NOMINEES IN PROPOSAL NO. 1
AND FOR PROPOSAL NO. 2.
(SEE REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
- ----------------------------------
COMMON /X/ Please mark your choices like this
The Board of Directors recommends that you vote FOR the nominees on Proposal No.
1 and FOR Proposal No. 2.
(1) The election of the nominees for director specified in the Proxy Statement
to the Board of Directors: R. Bruce Stewart, Paul R. Ryan, Thomas B. Akin,
Fred A. de Boom and Edward W. Frykman.
<TABLE>
<S> <C>
/ / FOR all nominees listed above (except as marked to the contrary below.) / / WITHHOLD AUTHORITY to vote for all nominees
listed below.
</TABLE>
(INSTRUCTION: To withhold authority to vote for any nominee, write that
nominee's name in the space below.)
- --------------------------------------------------------------------------------
(2) The ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants
of the Company for the fiscal year ending December 31, 1999. / /
FOR / / AGAINST / / ABSTAIN
(3) Such other matters as may properly come before the meeting or any
adjournment thereof. As to such matters, the undersigned hereby confers
discretionary authority and authorizes the proxyholders to vote the proxies
cumulatively in their discretion if cumulative voting is in effect at the
meeting.
Dated: __________________, 1999
_______________________________
(Please Print Name)
________________________________
(Signature of Holder of Common
Stock)
________________________________
(Additional Signature if Held
Jointly)
NOTE: Please sign exactly as
your name is printed. Each
joint tenant should sign.
Executors, administrators,
trustees and guarantors should
give full titles when signing.
Corporations and partnerships
should sign in full corporate
or partnership name by
authorized person. Please mark,
sign, date and return your
Proxy promptly in the enclosed
envelope, which requires no
postage if mailed in the United
States.
