Exhibit 10.3

 
ACACIA RESEARCH CORPORATION
 
WARRANT TO PURCHASE COMMON STOCK
 
December ___, 2006
 
Void After December ___, 2011
 
THIS CERTIFIES THAT, for value received, [             ], or permitted
registered assigns (the “Holder”), is entitled to subscribe for and purchase at
the Exercise Price (defined below) from Acacia Research Corporation, a Delaware
corporation (the “Company”), up to [       ] shares of the Company’s Acacia
Research-CombiMatrix common stock, par value $0.001 per share (the “Common
Stock”).
 
1.    DEFINITIONS. As used herein, the following terms shall have the following
respective meanings:
 
(a)    “Exercise Period” shall mean the period commencing on the date hereof and
ending five (5) years from the date hereof, unless sooner terminated as provided
below.
 
(b)    “Exercise Price” shall mean $________ per share, subject to adjustment
pursuant to Section 5 below.
 
(c)    “Exercise Shares” shall mean the shares of Common Stock issuable upon
exercise of this Warrant.
 
(d)    “Trading Day” shall mean (a) any day on which the Common Stock is listed
or quoted and traded on its primary Trading Market, (b) if the Common Stock is
not then listed or quoted and traded on any Eligible Market, then a day on which
trading occurs on the OTC Bulletin Board (or any successor thereto), or (c) if
trading does not occur on the OTC Bulletin Board (or any successor thereto), any
Business Day.

2.    EXERCISE OF WARRANT.  The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth on the
signature page hereto (or at such other address as it may designate by notice in
writing to the Holder):
 
(a)    An executed Notice of Exercise in the form attached hereto;

(b)    Payment of the Exercise Price either (i) in cash or by check, (ii) by
cancellation of indebtedness, or (iii) pursuant to Section 2.1 below; and
 
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(c)    This Warrant.
 
The Holder shall not be required to deliver the original Warrant in order to
effect the exercise hereunder. Execution and delivery of the Notice of Exercise
shall have the same effect as cancellation of the original Warrant and issuance
of a new Warrant evidencing the right to purchase the remaining number of
Exercise Shares.

Certificates for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the Holder’s
prime broker with the  Depository Trust Company through its Deposit Withdrawal
Agent Commission system if the Company is a participant in such system, and
otherwise by physical delivery to the address specified by the Holder in the
Notice of Exercise within three business days from the delivery to the Company
of the Notice of Exercise, surrender of this Warrant and payment of the
aggregate Exercise Price as set forth above.  This Warrant shall be deemed to
have been exercised on the date the Exercise Price is received by the Company. 
The Exercise Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price.
 
In addition to any other rights available to the Holder, if the Company fails to
deliver to the Holder a certificate representing Exercise Shares by the third
Trading Day after the date on which delivery of such certificate is required by
this Warrant, and if after such third Trading Day the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares that the Holder
anticipated receiving from the Company (a “Buy-In”), then in the Holder’s sole
discretion, the Company shall within three Trading Days after the Holder’s
request, either (i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased less the Exercise Price (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate (and to issue such
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to the Holder a certificate or certificates representing such Common Stock and
pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common Stock, times (B)
the Closing Price on the date of the event giving rise to the Company’s
obligation to deliver such certificate.
 
The person in whose name any certificate or certificates for Exercise Shares are
to be issued upon exercise of this Warrant shall be deemed to have become the
holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.

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To the extent permitted by law, the Company’s obligations to issue and deliver
Exercise Shares in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any person or entity or any action to enforce
the same, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder or any other person or entity of any
obligation to the Company or any violation or alleged violation of law by the
Holder or any other person or entity, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with the issuance of Exercise Shares. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

This Warrant shall be non-callable.

2.1.    Net Exercise.  If during the Exercise Period, the fair market value of
one share of the Common Stock is greater than the Exercise Price (at the date of
calculation as set forth below), in lieu of exercising this Warrant by payment
of cash or by check, or by cancellation of indebtedness, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Notice of Exercise in
which event the Company shall issue to the Holder a number of shares of Common
Stock computed using the following formula:
 
X = Y (A-B)
A
 
Where X = the number of shares of Common Stock to be issued to the Holder
 

Y =
the number of shares of Common Stock purchasable under the Warrant or, if only a
portion of the Warrant is being exercised, the portion of the Warrant being
canceled (at the date of such calculation)

   

A =
the fair market value of one share of the Company’s Common Stock (at the date of
such calculation)

   

B =
Exercise Price (as adjusted to the date of such calculation)

 
For purposes of the above calculation, the “fair market value” of one share of
Common Stock shall mean (i) the average of the closing sales prices for the
shares of Common Stock on the Nasdaq Global Market or other trading market where
such security is listed or traded as reported by Bloomberg Financial Markets (or
a comparable reporting service of national reputation selected by the Company
and reasonably acceptable to the Holder if Bloomberg Financial Markets is not
then reporting sales prices of such security) (collectively, “Bloomberg”) for
the 10 consecutive trading days immediately preceding such date, or (ii) if the
Nasdaq Global Market is not the principal trading market for the shares of
Common Stock, the average of the reported sales prices reported by Bloomberg on
the principal trading market for the Common Stock during the same period, or, if
there is no sales price for such period, the last sales price reported by
Bloomberg for such period, or (iii) if neither of the foregoing applies, the
last sales price of such security in the over-the-counter market on the pink
sheets or bulletin board for such security as reported by Bloomberg, or if no
sales price is so reported for such security, the last bid price of such
security as reported by Bloomberg or (iv) if fair market value cannot be
calculated as of such date on any of the foregoing bases, the fair market value
shall be as determined by the Board of Directors of the Company in the exercise
of its good faith judgment. 
 
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2.2.    Issuance of New Warrants.  Upon any partial exercise of this Warrant,
the Company, at its expense, will forthwith and, in any event within five
business days, issue and deliver to the Holder a new warrant or warrants of like
tenor, registered in the name of the Holder, exercisable, in the aggregate, for
the balance of the number of shares of Common Stock remaining available for
purchase under the Warrant.
 
2.3.    Payment of Taxes and Expenses.  The Company shall pay any recording,
filing, stamp or similar tax which may be payable in respect of any transfer
involved in the issuance of, and the preparation and delivery of certificates
(if applicable) representing, (i) any Exercise Shares purchased upon exercise of
this Warrant and/or (ii) new or replacement warrants in the Holder’s name or the
name of any transferee of all or any portion of this Warrant.
 
3.       COVENANTS OF THE COMPANY.
 
3.1.    Covenants as to Exercise Shares.  The Company covenants and agrees that
all Exercise Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance in accordance with the terms
hereof, be validly issued and outstanding, fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issuance thereof. 
The Company further covenants and agrees that the Company will at all times
during the Exercise Period, have authorized and reserved, free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant.  If at any time during the
Exercise Period the number of authorized but unissued shares of Common Stock
shall not be sufficient to permit exercise of this Warrant, the Company will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
 
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3.2.    No Impairment.  Except and to the extent as waived or consented to by
the Holder, the Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder against impairment.
 
3.3.    Notices of Record Date and Certain Other Events.  In the event of any
taking by the Company of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the Company shall mail to the Holder,
at least 20 days prior to the date on which any such record is to be taken for
the purpose of such dividend or distribution, a notice specifying such date.  In
the event of any voluntary dissolution, liquidation or winding up of the
Company, the Company shall mail to the Holder, at least 20 days prior to the
date of the occurrence of any such event, a notice specifying such date. In the
event the Company authorizes or approves, enters into any agreement
contemplating, or solicits stockholder approval for any Fundamental Transaction,
as defined in Section 7 herein, the Company shall mail to the Holder, at least
twenty days prior to the date of the occurrence of such event, a notice
specifying such date.
 
4.     [INTENTIONALLY OMITTED]
 
5.     ADJUSTMENT OF EXERCISE PRICE AND SHARES.
 
(a)    In the event of changes in the outstanding Common Stock of the Company by
reason of stock dividends, split-ups, recapitalizations, reclassifications,
combinations or exchanges of shares, separations, reorganizations, liquidations,
consolidation, acquisition of the Company (whether through merger or acquisition
of substantially all the assets or stock of the Company), or the like, the
number, class and type of shares available under the Warrant in the aggregate
and the Exercise Price shall be correspondingly adjusted to give the Holder of
the Warrant, on exercise for the same aggregate Exercise Price, the total
number, class, and type of shares or other property as the Holder would have
owned had the Warrant been exercised prior to the event and had the Holder
continued to hold such shares until the event requiring adjustment.  The form of
this Warrant need not be changed because of any adjustment in the number of
Exercise Shares subject to this Warrant.
 
(b)    If at any time or from time to time the holders of Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,  
 
(i)    Common Stock or any shares of stock or other securities which are at any
time directly or indirectly convertible into or exchangeable for Common Stock,
or any rights or options to subscribe for, purchase or otherwise acquire any of
the foregoing by way of dividend or other distribution (other than a dividend or
distribution covered in Section 5(a) above),
 
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(ii)   any cash paid or payable otherwise than as a cash dividend or
 
(iii)   Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate rearrangement (other than shares of Common Stock
pursuant to Section 5(a) above), then and in each such case, the Holder hereof
will, upon the exercise of this Warrant, be entitled to receive, in addition to
the number of shares of Common Stock receivable thereupon, and without payment
of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in clauses (ii)
and (iii) above) which such Holder would hold on the date of such exercise had
such Holder been the holder of record of such Common Stock as of the date on
which holders of Common Stock received or became entitled to receive such shares
or all other additional stock and other securities and property.
 
(c)    Upon the occurrence of each adjustment pursuant to this Section 5, the
Company at its expense will, at the written request of the Holder, promptly
compute such adjustment in accordance with the terms of this Warrant and prepare
a certificate setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Exercise Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing
the transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company’s transfer agent.
 
6.    FRACTIONAL SHARES.  No fractional shares shall be issued upon the exercise
of this Warrant as a consequence of any adjustment pursuant hereto.  All
Exercise Shares (including fractions) issuable upon exercise of this Warrant may
be aggregated for purposes of determining whether the exercise would result in
the issuance of any fractional share.  If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.
 
7.    FUNDAMENTAL TRANSACTIONS.  If, at any time while this Warrant is
outstanding, (i) the Company effects any merger of the Company with or into
another entity, (ii) the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (iii) any tender offer or
exchange offer (whether by the Company or another individual or entity) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property or (iv) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for
 
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other securities, cash or property (other than as a result of a subdivision or
combination of shares of Common Stock covered by Section 5 above) (in any such
case, a “Fundamental Transaction”), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction, at the option of the Holder, (a) upon exercise
of this Warrant, the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
any additional consideration (the “Alternate Consideration”) receivable upon or
as a result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a Holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event.   For
purposes of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing provisions,
any successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 7 and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
 
8.    NO STOCKHOLDER RIGHTS.  This Warrant in and of itself shall not entitle
the Holder to any voting rights or other rights as a stockholder of the Company.
 
9.    TRANSFER OF WARRANT.  Subject to applicable laws, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder.
 
10.   LOST, STOLEN, MUTILATED OR DESTROYED WARRANT.  If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. 
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
 
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11.    NOTICES, ETC.  All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt.  All communications shall be sent to the
Company at the address listed on the signature page hereto and to Holder at the
applicable address set forth on the applicable signature page to the
Subscription Agreement or at such other address as the Company or Holder may
designate by 10 days advance written notice to the other parties hereto.
 
12.    ACCEPTANCE.  Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
 
13.    GOVERNING LAW.  This Warrant and all rights, obligations and liabilities
hereunder shall be governed by the laws of the State of New York.
 
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer as of December ___, 2006.
 

 
ACACIA RESEARCH CORPORATION
 
 
By:__________________________________
Name:
Title:

 
 
 
 
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NOTICE OF EXERCISE
 
TO:  ACACIA RESEARCH CORPORATION
 
(1)    o  The undersigned hereby elects to purchase            shares of the
Acacia Research-CombiMatrix Common Stock (the “Common Stock”) of ACACIA RESEARCH
CORPORATION  (the “Company”) pursuant to the terms of the attached Warrant, and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
 
 o  The undersigned hereby elects to purchase            shares of Common Stock
of the Company pursuant to the terms of the net exercise provisions set forth in
Section 2.1 of the attached Warrant, and shall tender payment of all applicable
transfer taxes, if any.
 
(2)    Please issue a certificate or certificates representing said shares of
Common Stock of the Company in the name of the undersigned or in such other name
as is specified below:
 
 

 
(Name)
 
 
(Address)

 

 
 
(Date)
 
_____________________________
(Signature)
 
 
 
_____________________________
(Signature)

 
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ASSIGNMENT FORM
 
(To assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to purchase shares.)
 
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to
 
 
Name:
 
 
Address:
 
 
Dated:        , 20___
_____________________________
(Please Print)
 
 
 
_____________________________
(Please Print)

 
       
Holder’s Signature: 
 
Holder’s Address:
 

 
 
 
NOTE:  The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
 
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