Item 1.01. Entry into a Material Definitive Agreement.
Senior Secured Note Exchange
On June 30, 2020, Acacia Research Corporation, a Delaware corporation (the
"Company"), entered into an Exchange Agreement (the "Exchange Agreement") with
Merton Acquisition HoldCo LLC, a Delaware limited liability company and
wholly-owned subsidiary of the Company ("Merton") and Starboard Value LP
(the "Designee"), on behalf of itself and on behalf of certain funds and
accounts under its management, including the holders of the Company's $115
million outstanding aggregate principal amount of senior secured notes (the "Old
Notes"), originally issued pursuant to the Company's previously reported
Securities Purchase Agreement, dated November 18, 2019 (the "Purchase
Agreement"), with the Designee and the Buyers (as defined in the Purchase
Agreement), as supplemented by the Supplemental Agreement, dated June 4, 2020,
with the Designee. Pursuant to the Exchange Agreement, the holders of the Old
Notes exchanged (the "Exchange") the entire outstanding principal amount for new
senior notes (the "New Notes") issued by Merton having an aggregate outstanding
original principal amount of $115 million. Such exchange was exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Section 3(a)(9) thereof.
The New Notes bear interest at a rate of 6.00% per annum and will mature
December 31, 2020. The New Notes are fully guaranteed by the Company and are
secured by an all-assets pledge of the Company and Merton and non-recourse
equity pledges of each of the Company's material subsidiaries. Pursuant to the
Exchange Agreement, the New Notes (i) are deemed to be "Notes" for purposes of
the Purchase Agreement, (ii) are deemed to be "June 2020 Approved Investment
Notes" for purposes of the Exchange Agreement, and therefore the Company has
agreed to redeem $80 million principal amount of the New Notes by September 30,
2020 and (iii) are deemed to be "Notes" for the purposes of the previously
issued Series B Warrants of the Company (the "Series B Warrants"), and therefore
may be tendered pursuant to a Note Cancellation under the Series B Warrants on
the terms set forth in the Series B Warrants and the New Notes. Delivery of
notes in the form of the New Notes will satisfy the delivery of Exchange Notes
pursuant to Section 16(i) of the Certificate of Designations of the Company's
Series A Convertible Preferred Stock, par value $0.001 per share. The New Notes
will not be deemed to be "Notes" for the purposes of the Registration Rights
Agreement, dated as of November 18, 2019, by and between the Company, the
Designee and the Buyers.
The foregoing description of the Exchange Agreement, the Exchange and the New
Notes are summaries of the material terms of such agreement, event and notes, do
not purport to be complete and are qualified in their entirety by reference to
the Exchange Agreement, form of Senior Secured Note, Stock Pledge Agreement,
Guaranty and Release of Security Interests in Patents, which are filed as
Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to this Current Report on Form 8-K and
are incorporated by reference herein.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The disclosure in Item 1.01 is incorporated by reference into this Item 2.03.
Item 3.03. Material Modification to Rights of Security Holders.
The disclosure in Item 1.01 is incorporated by reference into this Item 3.03.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description of Exhibit
10.1 Exchange Agreement, dated June 30, 2020, among Acacia Research
Corporation, Merton Acquisition HoldCo LLC and Starboard Value
LP.
10.2 Form of Senior Secured Note.
10.3 Stock Pledge Agreement, dated June 30, 2020, entered into by
Acacia Research Group LLC, Advanced Skeletal Innovations LLC and
Saint Lawrence Communications LLC in favor of Starboard Value
Intermediate Fund LP, as collateral agent.
10.4 Guaranty, dated June 30, 2020, entered into by the Guarantors (as
defined therein) in favor of the Holders (as defined therein).
10.5 Release of Security Interests in Patents, dated June 30, 2020,
between the Releasees (as defined therein) and Starboard Value
Intermediate Fund LP, as collateral agent.
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