STOCK-BASED INCENTIVE PLANS

The 2007 Acacia Technologies Stock Incentive Plan (“2007 Plan”) and the 2013 Acacia Research Corporation Stock Incentive Plan (“2013 Plan”) (collectively, the “Plans”) were approved by the stockholders of Acacia in May 2007 and May 2013, respectively. All Plans allow grants of stock options, stock awards and performance shares with respect to Acacia common stock to eligible individuals, which generally includes directors, officers, employees and consultants. Except as noted below, the terms and provisions of the Plans are identical in all material respects.

Acacia’s compensation committee administers the discretionary option grant and stock issuance programs. The compensation committee determines which eligible individuals are to receive option grants or stock issuances under those programs, the time or times when the grants or issuances are to be made, the number of shares subject to each grant or issuance, the status of any granted option as either an incentive stock option or a non-statutory stock option under the federal tax laws, the vesting schedule to be in effect for the option grant or stock issuance and the maximum term for which any granted option is to remain outstanding. The exercise price of options is generally equal to the fair market value of Acacia’s common stock on the date of grant. Options generally begin to be exercisable six months to one year after grant and generally expire ten years after grant. Stock options generally vest over two to three years and restricted shares generally vest in full after two to three years (generally representing the requisite service period). The Plans terminate no later than the tenth anniversary of the approval of the incentive plans by Acacia’s stockholders.

The Plans provide for the following separate programs:

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Discretionary Option Grant Program. Under the discretionary option grant program, Acacia’s compensation committee may grant (1) non-statutory options to purchase shares of common stock to eligible individuals in the employ or service of Acacia or its subsidiaries (including employees, non-employee board members and consultants) at an exercise price not less than 85% of the fair market value of those shares on the grant date, and (2) incentive stock options to purchase shares of common stock to eligible employees at an exercise price not less than 100% of the fair market value of those shares on the grant date (not less than 110% of fair market value if such employee actually or constructively owns more than 10% of Acacia’s voting stock or the voting stock of any of its subsidiaries).

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Stock Issuance Program. Under the stock issuance program, eligible individuals may be issued shares of common stock directly, upon the attainment of performance milestones or the completion of a specified period of service or as a bonus for past services. Under this program, the purchase price for the shares shall not be less than 100% of the fair market value of the shares on the date of issuance, and payment may be in the form of cash or past services rendered. The eligible individuals shall have full stockholder rights with respect to any shares of Common Stock issued to them under the Stock Issuance Program, whether or not their interest in those shares is vested. Accordingly, the eligible individuals shall have the right to vote such shares and to receive any regular cash dividends paid on such shares.

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Automatic Option Grant Program (2013Plan only). Each non-employee director will receive restricted stock units for the number of shares determined by dividing the annual retainer by the closing price of Acacia’s common stock on the grant date, provided that such individual has served as a non-employee director for at least 6 months. In addition, each new non-employee director will receive restricted stock units for the number of shares determined by dividing the annual board of directors retainer by the closing price of Acacia’s common stock on the commencement date. Restricted stock units vest in a series of twelve quarterly installments over the three year period following the grant date, subject to immediate acceleration upon a change in control. Acacia will deliver shares corresponding to the vested restricted stock units within thirty (30) days after the first to occur of the following events: (i) the fifth (5th) anniversary of the grant date; or (ii) termination of the non-employee director’s service as a member of the Company’s Board of Directors. The non-employee directors do not have any rights, benefits or entitlements with respect to any shares unless and until the shares have been delivered.

The initial share reserve under the 2007 Plan was 560,000 shares. The number of shares of common stock available for issuance under the 2007 Plan automatically increased on January 1, 2008 and 2009, by an amount equal to two percent (2%) of the total number of shares of common stock outstanding on the last trading day of December in the prior calendar year. After January 1, 2009, no new additional shares will be added to the 2007 Plan without stockholder approval (except for shares subject to outstanding awards that are forfeited or otherwise returned to the 2007 Plan). At December 31, 2015, there were no shares available for grant under the 2007 Plan.

The number of shares of Common Stock initially reserved for issuance under the 2013 Plan was 4,750,000 shares. No new additional shares will be added to the 2013 Plan without security holder approval (except for shares subject to outstanding awards that are forfeited or otherwise returned to the 2013 Plan). The stock issuable under the 2013 Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market. At December 31, 2015, there were 2,778,000 shares available for grant under the 2013 Plan.

Upon the exercise of stock options, the granting of restricted stock, or the delivery of shares pursuant to vested restricted stock units, it is Acacia’s policy to issue new shares of common stock. Acacia’s board of directors may amend or modify the Plans at any time, subject to any required stockholder approval.

The following table summarizes stock option activity for the Plans for the year ended December 31, 2015:



			Weighted-Average
	Options		Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value

Outstanding at December 31, 2014	150,000		$	7.59
Exercised	(135,000	)	$	6.95
Outstanding at December 31, 2015	15,000		$	13.38	1 year	$	—
Vested	15,000		$	13.38	1 year	$	—
Exercisable at December 31, 2015	15,000		$	13.38	1 year	$	—

The aggregate intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $751,000, $518,000, and $2,024,000, respectively. No options vested during the years ended December 31, 2015, 2014 and 2013.

The following table summarizes nonvested restricted share activity for the year ended December 31, 2015:



	Nonvested Restricted Shares		Weighted Average Grant Date Fair Value

Nonvested restricted stock at December 31, 2014	1,018,000		$	18.71
Granted	894,000		$	12.83
Vested	(615,000	)	$	18.69
Canceled	(468,000	)	$	15.13
Nonvested restricted stock at December 31, 2015	829,000		$	14.41

The weighted-average grant date fair value of nonvested restricted stock granted during the years ended December 31, 2015, 2014 and 2013 was $12.83, $14.41, and $24.31, respectively. The aggregate fair value of restricted stock that vested during the years ended December 31, 2015, 2014 and 2013 was $11,494,000, $21,490,000, $22,317,000, respectively. As of December 31, 2015, the total unrecognized compensation expense related to nonvested restricted stock awards was $9,264,000, which is expected to be recognized over a weighted-average period of approximately 1.6 years.

The following table summarizes restricted stock unit activity for the year ended December 31, 2015:



	Restricted Stock Units		Weighted Average Grant Date Fair Value

Nonvested restricted stock units outstanding at December 31, 2014	33,000		$	17.10
Granted	28,000		$	16.72
Vested	(26,000	)	$	18.48
Nonvested restricted stock units outstanding at December 31, 2015	35,000		$	15.78
Vested restricted stock units outstanding at December 31, 2015	75,000		$	23.32

The weighted-average grant date fair value of restricted stock units granted during the years ended December 31, 2015 and 2014 was $16.72 and $14.33, respectively. There were no restricted units granted during the year ended December 31, 2013. The aggregate fair value of restricted stock units that vested during the years ended December 31, 2015, 2014 and 2013 was $480,000, $460,000 and $469,000, respectively. As of December 31, 2015, the total unrecognized compensation expense related to restricted stock unit awards was $482,000, which is expected to be recognized over a weighted-average period of approximately 1.7 years.

As of December 31, 2015, there are 2,903,000 shares of common stock reserved for issuance under the Plans.