ACTG Acacia Research Technologies

Item 1.01 Entry Into a Material Definitive Agreement.

Securities Purchase Agreement

On November 18, 2019, Acacia Research Corporation, a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Starboard Value LP (the “Designee” or “Starboard Value”) and the Buyers (as defined in the Purchase Agreement), pursuant to which the Company (i) issued and sold 350,000 shares of Series A Convertible Preferred Stock, par value $0.001 per share (the “Preferred Shares”) at a purchase price of $35,000,000 (the “Initial Purchase Price”), or $100 per Preferred Share, and (ii) issued warrants (the “Series A Warrants”) to purchase up to 5,000,000 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at an exercise price equal to $3.65 per share (subject to certain price-based anti-dilution adjustments). Payment of the Initial Purchase Price by the Buyers was transferred into an escrow account (the “Escrow Account”), to be released to the Company upon, among other things, (i) the consummation of a suitable investment or acquisition by the Company (an “Investment”), such Investment to be identified and approved by each of the Company and the Designee prior to consummation (an “Approved Investment”), or (ii) with respect to an amount designated to be converted, the election by a Buyer to convert its Preferred Shares into Common Stock. The Preferred Shares are convertible into shares of Common Stock at a conversion price of $3.65 (subject to certain price-based anti-dilution adjustments).

Pursuant to the Purchase Agreement, in the event that an Approved Investment has been identified, the Designee may elect to purchase and allocate among one or more of its affiliates senior secured notes (the “Notes”), in one or more additional closings (each, an “Additional Closing”), in an aggregate principal amount not to exceed the lesser of (i) the amount of the applicable Approved Investment and (ii) $365,000,000.

The Purchase Agreement contains customary representations and warranties from the Company, on the one hand, and the Buyers, on the other, including representations and warranties by the Company regarding its capitalization, compliance with applicable laws, undisclosed liabilities, affiliate transactions, taxes and litigation. The Company has also agreed to certain covenants regarding its compliance with laws.

In addition, promptly following the receipt of Stockholder Approval (as defined below), one or more of the Designee’s affiliates will purchase warrants to purchase up to 100,000,000 shares of Common stock (the “Series B Warrants” and together with the Preferred Shares, the Series A Warrants and the Notes, the “Securities”) at an exercise price (subject to certain price-based anti-dilution adjustments) of either (i) $5.25 per share, if exercising by cash payment, or (ii) $3.65 per share, if exercising by cancellation of a portion of the Notes.

Subject to certain limitations, the Company has also agreed to indemnify each Buyer for (i) any misrepresentation or breach of any representation or warranty made by the Company in the Securities Purchase Agreement and (ii) any breach of any covenant or agreement of the Securities Purchase Agreement.

The Company and the Buyers entered into the Purchase Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933 (as amended, “1933 Act”), and Rule 506(b) of Regulation D as promulgated by the Securities and Exchange Commission (the “SEC”) under the 1933 Act.

From and after the consummation of an Additional Closing, the Preferred Shares may be exchanged for Notes and Series B Warrants without any additional consideration.

The Company has agreed to file with the SEC a definitive proxy statement by no later January 17, 2020, for a special meeting of stockholders (the “Stockholder Meeting”), to solicit the affirmative vote of the Company’s stockholders for the approval of resolutions providing for: (i) the Company’s issuance of all of the Securities under the Purchase Agreement without giving effect to any limitations under the rules of the Nasdaq Stock Market LLC, and (ii) an amendment to the Company’s certificate of incorporation to increase the number of authorized shares of Common Stock to not less than 300,000,000 shares (such approvals, collectively, the “Stockholder Approval”). Pursuant to the Purchase Agreement, the Stockholder Meeting must be held no later than February 16, 2020 (the “Stockholder Approval Deadline”).

Subject to (i) the Company’s obtaining Stockholder Approval, (ii) the consummation of one or more Approved Investments and (iii) at least $100,000,000 of principal amount of Notes having been issued to Buyers, the Company will have the option to complete one or more rights offerings to its stockholders (a “Stockholder Offering”) of senior secured notes with terms substantially identical to the Notes, in an aggregate principal amount of up to $100,000,000, and warrants to purchase up to 27,397,261 shares of Common Stock with terms substantially identical to the Series B Warrants.

Until the Buyers no longer hold any Preferred Shares or Notes, the Company will not, other than the issuance and sale of securities in a Stockholder Offering, issue any of its or its subsidiaries’ equity or equity equivalent securities unless the Company will have first provided the Buyers with a right to participate in such offering, subject to certain limitations and exceptions.

The Company expects to use the proceeds from the sale of the Securities to fund strategic acquisitions and investments opportunities approved by the Company and the Designee.

The foregoing transactions contemplated by the Purchase Agreement are referred to herein as the “Financing.”

Registration Rights Agreement

On November 18, 2019, the Company entered into a Registration Rights Agreement with the Designee and the Buyers (the “Registration Rights Agreement”), pursuant to which the Company agreed to provide certain registration rights with respect to the Securities and the shares of Common Stock issued upon the conversion or exercise of the Securities, as applicable (the “Registrable Securities”).

Under the Registration Rights Agreement, the Company will, among other things, prepare and file with the SEC (i) an initial registration statement on Form S-3, or if unavailable, a Form S-1, covering the resale of Registrable Securities then-outstanding, and (ii) subsequent registration statements covering the resale of any Registrable Securities to the extent not included in previous registration statements. In addition, upon written notice to the Company by the Designee (a “Demand Notice”), the Company will prepare and file with the SEC a registration statement covering the resale of any Preferred Shares, Notes and/or Series B Warrants set forth in such Demand Notice.

At any time beginning on November 18, 2020, upon the Designee’s request, the Company will use its reasonable best efforts to cause the Preferred Shares, Series B Warrants and/or the Notes to be, as requested by the Designee, listed for trading on The Nasdaq Global Select Market or any other eligible market as selected by the Company.

Governance Agreement

On November 18, 2019, the Company entered into a Governance Agreement (the “Governance Agreement”) with the Designee and certain affiliates of the Designee (collectively, “Starboard”), pursuant to which, among other things, the Company agreed to (i) increase the size of the Board of Directors of the Company (the “Board”) from six to seven members, (ii) appoint Jonathan Sagal as a director of the Company (the “Starboard Appointee”), (iii) grant Starboard the right to recommend two additional directors for appointment to the Board (the “Additional Appointees”), (iv) form a Strategic Committee of the Board (the “Strategic Committee”), which will be tasked with, among other things, sourcing and performing due diligence on potential acquisition targets and intellectual property or other investment opportunities, with the goal of finding one or more Approved Investments, (v) appoint Clifford Press, Alfred V. Tobia, Jr. and Jonathan Sagal to the Strategic Committee, with Clifford Press serving as its Chairman, and (vi) appoint Jonathan Sagal to the Nominating and Corporate Governance Committee.

During the period beginning on November 18, 2019 and ending on the earlier of (i) fifteen (15) days prior to the deadline for the submission of stockholder nominations for the Company’s 2020 annual meeting of stockholders pursuant to the Company’s Second Amended and Restated Bylaws, or (ii) April 6, 2020 (such period, as may be extended by Starboard under certain circumstances, the “Governance Period”), the Board will remain at no more than seven directors, provided that the Board may be increased during the period to (a) accommodate the appointment of the Additional Appointees, (b) upon Starboard’s written consent, or (c) if the Company’s stockholders take actions to increase the size of the Board.

During the Governance Period, one or more Starboard partners or senior employees (the “Starboard Observers”) will have the right to attend and participate in meetings of the Strategic Committee and will receive copies of all documents distributed to the Strategic Committee. The Starboard Observers may attend and participate, but not vote, at all meetings of the Strategic Committee during the Governance Period. During the Governance Period, Starboard has agreed not to take certain actions with respect to the Company.

If there is a vacancy on the Board during the Governance Period as a result of any of the Starboard Appointee or the Additional Appointees no longer serving on the Board for any reason, then Starboard will be entitled to designate a replacement thereof (each, a “Replacement Director”); provided that at such time certain criteria set forth in the Governance Agreement are satisfied, including that Starboard beneficially own, in the aggregate, at least the lesser of 4.0% of the Company’s then-outstanding Common Stock (on an as-converted basis, if applicable) and 2,013,732 shares of issued and outstanding Common Stock (subject to adjustment for stock splits, reclassifications, combinations and similar adjustments).

The Purchase Agreement, Registration Rights Agreement and the Governance Agreement are filed as Exhibits 10.1 through 10.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. The form of Note, form of Series A Warrant and form of Series B Warrant are attached as Exhibits 4.1 through 4.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. The foregoing descriptions of the Purchase Agreement, Registration Rights Agreement, Governance Agreement, Notes, Series A Warrants and Series B Warrants do not purport to be complete and are qualified in their entirety by reference to such exhibits.

Mr. Sagal will serve as a member of the Nominating and Governance Committee and the Strategic Committee.

Mr. Sagal is a Managing Director at Starboard Value. Prior to joining Starboard Value in June 2011, Mr. Sagal was an investment analyst at Casablanca Capital, an investment firm focused on shareholder activism. Previously, he was an investment analyst at Mill Road Capital, where he focused on long-term public and private equity investments in microcap companies, and Prentice Capital Management (“Prentice”), where he focused on investments in consumer and retail companies. Prior to Prentice, he was an Investment Banking Analyst in the Mergers & Acquisitions group at Rothschild Inc. Mr. Sagal received an M.B.A. from Columbia Business School and graduated from Princeton University, where he received an A.B., summa cum laude, in Philosophy.

Mr. Sagal will receive the standard compensation for his respective services at the same level as other non-employee directors of the Company, as described in the Company’s definitive proxy statement for the Company’s 2019 annual meeting of stockholders, previously filed with the SEC on June 14, 2019. Mr. Sagal has entered into an indemnification agreement with the Company (the “Indemnification Agreement”), which requires the Company to indemnify him to the fullest extent permitted under Delaware law and to advance expenses incurred as a result of any proceeding against him as to which he could be indemnified. The foregoing description is qualified in its entirety by reference to the full text of the Indemnification Agreement, a form of which has been filed with the SEC as an exhibit to the Company’s Form 10-K for the year ended December 31, 2018.

Other than the Governance Agreement and the Financing, there is no arrangement or understanding between Mr. Sagal and any other persons or entities pursuant to which he was appointed as a director. There have been no transactions, or currently proposed transactions, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which Mr. Sagal, or any member of his respective immediate family, had or will have a direct or indirect material interest since the beginning of the Company’s last fiscal year.

A copy of the Certificate of Designations is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference. The foregoing description of the Certificate of Designations does not purport to be complete and is qualified in its entirety by reference to such exhibit.

Important Additional Information and Where to Find It

In connection with the Financing, the Company will file with the SEC a preliminary proxy statement and other documents relating to the Financing and the Stockholder Approvals required thereunder

and may file one or more amendments to such documents. When completed, a definitive proxy statement and a form of proxy will be filed with the SEC and mailed to the Company’s stockholders. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE FINANCING OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE FINANCING AND THE AUTHORIZATION AND ISSUANCE OF SECURITIES THEREUNDER. Investors and security holders may obtain a free copy of the proxy statement and other documents filed by the Company at the SEC’s Web site at http://www.sec.gov. The proxy statement and such other documents may also be obtained for free from the Company by directing such request to Acacia Research Corporation, 4 Park Plaza, Suite 550, Irvine, California 92614, Attention: Corporate Secretary, Telephone: (949) 480-8300.

The Company and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the proposed authorization and issuance of securities. Information concerning the interests of the Company’s participants in the solicitation, which may be different than those of the Company stockholders generally, is set forth in the Company’s definitive proxy statement for the Company’s 2019 annual meeting of stockholders, previously filed with the SEC on June 14, 2019, and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 15, 2019, as amended by Amendment No. 1 to Form 10-K on Form 10-K/A, filed with the SEC on April 30, 2019, as well as other documents filed with the SEC. Additional information regarding the interests of such participants will be included in the preliminary proxy statement, definitive proxy statement and other relevant documents regarding the Financing filed with the SEC when they become available. To the extent holdings of such participants in the Company’s securities are not reported, or have changed since the amounts described in the proxy statements, such changes have been or will be reflected on Initial Statements of Beneficial Ownership on Form 3 or Statements of Change in Ownership on Form 4 filed with the SEC.