<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DIGIMARC CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed per Exchange Act Rules 14a-6(i)(4) and 0-11.
[ ] 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.
<PAGE>
DIGIMARC CORPORATION
19801 SW 72ND AVENUE, SUITE 250
TUALATIN, OREGON 97062
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------------
To the Stockholders of Digimarc Corporation:
Notice is hereby given that the 2000 Annual Meeting of Stockholders
(Annual Meeting) of Digimarc Corporation, a Delaware corporation (Company) will
be held on Thursday, May 11, 2000 at the RiverPlace Hotel, 1510 SW Harbor Way,
Portland, Oregon 97201, at 2:00 p.m., local time. The purposes of the Annual
Meeting will be:
1. ELECTION OF DIRECTORS. To elect one director, to hold
office until the 2003 Annual Meeting of Stockholders or until his
successor is elected and qualified (Proposal No. 1);
2. AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION. To authorize the Board of Directors to amend Section 4.1
of the Company's Amended and Restated Certificate of Incorporation to
increase the number shares of Common Stock authorized for issuance by
the Company from 30,000,000 to 100,000,000 (Proposal No. 2); and
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS. To
ratify the appointment of KPMG LLP as the Company's independent
auditors for the year ending December 31, 2000 (Proposal No. 3); and
4. OTHER BUSINESS. To transact such other business as may
properly come before the Annual Meeting or any adjournment or
postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The Board of Directors has fixed the close
of business on March 17, 2000 as the record date for determining the
stockholders entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, WE
URGE YOU TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION
AND THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING. IF YOU SEND IN YOUR PROXY
CARD AND THEN DECIDE TO ATTEND THE ANNUAL MEETING TO VOTE YOUR SHARES IN PERSON,
YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURES
SET FORTH IN THE PROXY STATEMENT.
By Order of the Board of Directors,
Bruce Davis
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Tualatin, Oregon
April 5, 2000
<PAGE>
DIGIMARC CORPORATION
PROXY STATEMENT FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
This Proxy Statement is furnished to the stockholders of Digimarc
Corporation (Company), a Delaware corporation, on or about April 5, 2000, in
connection with the solicitation by the Company's Board of Directors (Board
of Directors) of proxies for use in voting at the Annual Meeting of
Stockholders of the Company (Annual Meeting) to be held on Thursday, May 11,
2000, at 2:00 p.m., local time, at the RiverPlace Hotel, 1510 SW Harbor Way,
Portland, Oregon 97201, and any adjournment or postponement thereof. The
shares represented by the proxies received, properly marked, dated, executed
and not revoked will be voted at the Annual Meeting.
The close of business on March 17, 2000 has been fixed as the record
date (Record Date) for determining the holders of shares of the Company's common
stock (Common Stock) entitled to notice of and to vote at the Annual Meeting. As
of the close of business on the Record Date, there were __,___,___ shares of
Common Stock outstanding and entitled to vote at the Annual Meeting.
Each outstanding share of Common Stock on the Record Date is entitled
to one vote on all matters. The required quorum for the Annual Meeting is a
majority of the shares outstanding on the Record Date. There must be a quorum
for the Annual Meeting to be held. Our transfer agent will tabulate votes cast
in person at the Annual Meeting.
REVOCABILITY OF PROXY
You may revoke your proxy and change your vote an any time prior to
voting at the Annual Meeting by:
- -- delivering to the Company (to the attention of E.K. Ranjit, the
Company's Secretary) a written notice of revocation or a duly executed
proxy bearing a later date, or
- -- attending the Annual Meeting and voting in person.
SOLICITATION
This solicitation of proxies is being made by and paid for by the
Company. Besides this solicitation by mail, our directors, officers and other
employees may solicit proxies. Such persons will not receive any additional
compensation for assisting in the solicitation. We will also request brokerage
firms, nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners. We will reimburse such persons and our transfer agent for
their reasonable out-of-pocket expenses in forwarding such material. We may also
retain the services of proxy solicitation, information agent and /or mailing
service to perform the broker nominee search and to distribute proxy materials
to banks, brokers, nominees and intermediaries, for which the Company would not
pay more than $5,000.
VOTING PROCEDURES
- -- Directors are elected by a plurality of the votes cast.
- -- The approval of the amendment of the Amended and Restated Certificate
of Incorporation will require the affirmative vote of a majority of the
shares of the outstanding Common Stock. The approval of the
ratification of the independent auditors of the Company for the fiscal
year ending December 31, 2000 will require the affirmative vote of a
majority of the shares of Common Stock present or represented and
entitled to vote at the Annual Meeting.
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- -- Abstentions are shares which abstain from voting on a particular
matter. Abstentions effectively count as votes against Proposal No. 2,
but have no effect on Proposal No. 3.
- -- Broker non-votes are shares held in "street name" by brokers or
nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular matter.
Broker non-votes effectively count as votes against Proposal No. 2, but
have no effect on Proposal No. 3.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
At the Annual Meeting, one director is to be elected to serve for a
term of three years and until his successor is elected and qualified, or until
the death, resignation or removal of such director. Proxies will be voted for
the election of the nominee named below as director unless the authority to vote
for the nominee is withheld. Mr. Taysom has indicated that he is able and
willing to serve if elected. If Mr. Taysom should become unavailable prior to
the election, the Board of Directors may recommend another person and Mr. Davis
and Mr. Ranjit, as your representatives, will vote for such person.
Our Bylaws authorize the number of directors to be not less than five.
The number of directors is currently fixed at five. Our Board of Directors is
divided into three classes. Beginning this year, one class of directors will be
elected each year for a three-year term and until their successors are selected
and qualified or until their earlier resignation or removal. Mr. Taysom is up
for election at this Annual Meeting; Messrs. Monego and Rhoads will serve until
the Company's 2001 annual meeting of stockholders; and Messrs. Davis and Grossi
will serve until the Company's 2002 annual meeting of stockholders.
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
AGE SINCE OF TERM
--- ----- -------
<S> <C> <C> <C>
NOMINEE:
John Taysom 45 1997 2000
CONTINUING DIRECTORS:
Phillip J. Monego, Sr. 52 1996 2001
Geoffrey Rhoads 37 1995 2001
Bruce Davis 47 1997 2002
Brian J. Grossi 49 1996 2002
</TABLE>
NOMINEE FOR DIRECTOR
JOHN TAYSOM has served as one of our directors since December 1997. Mr.
Taysom has been employed by Reuters, a worldwide television and news agency,
since 1982 and is currently the Managing Director of the Reuters Greenhouse
Fund. Mr. Taysom also serves on the Board of Directors of TIBCO Software Inc.
and Fantastic Corporation, a Swiss company. Mr. Taysom received a B.Sc. in
economics from Bath University.
CONTINUING DIRECTORS
PHILIP J. MONEGO, SR. has been chairman of our Board of Directors since
1996. Mr. Monego has served as chief executive officer and chairman of the Board
of Directors of Voquette, Inc., an Internet media portal company, since May
1999. Prior to that, Mr. Monego was co-founder, president and chief executive
officer of NetChannel, Inc., an Internet information delivery service, from May
1996 to June 1998. Prior to that, Mr. Monego was interim president and chief
executive officer of Yahoo! Corporation from April 1995 to September 1995. He is
an early investor in several new media startups and also currently a venture
partner in the Media Technology Venture fund. Mr. Monego received a B.A. in
management from LaSalle University.
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<PAGE>
GEOFFREY RHOADS founded Digimarc in 1995 and now serves as chief
technology officer and director. Previously, Mr. Rhoads served as our interim
president from September to November 1995, and as chairman of the Board of
Directors from January 1995 to March 1996. Prior to that, Mr. Rhoads was the
founder and president of Pinecone Imaging Corporation, a company which develops
imaging systems for telescopes, since 1992. Mr. Rhoads received his B.A. in
physics from the University of Oregon.
BRUCE DAVIS has served as our president, chief executive officer and
director since December 1997. Prior to joining us, Mr. Davis served as president
of Titan Broadband Communications, a provider of information technology and
satellite communications systems and services, from April 1997 to December 1997.
Prior to that, Mr. Davis served as president of Prevue Networks, Inc., a
supplier of electronic program guides and program promotion services for the
cable and satellite television markets, from July 1996 to February 1997. Prior
to that, Mr. Davis founded and served as president of TV Guide On Screen, a
joint venture of News Corporation and TCI which supplied electronic program
guides and navigational software for the cable television market, from January
1993 to July 1996. Mr. Davis received a B.S. in accounting and psychology and an
M.A. in criminal justice from the State University of New York at Albany, and a
J.D. from Columbia University.
BRIAN J. GROSSI has served as one of our directors since July 1996. Mr.
Grossi co-founded AVI Capital, a venture capital firm specializing in
high-technology companies, in 1994. Prior to that, Mr. Grossi was a general
partner with Alpha Partners, a venture capital firm, from 1982 to 1992. Prior to
that, he worked at the Stanford Research Institute as a research engineer and
project leader from 1976 to 1982. Currently, Mr. Grossi serves as a director of
Apptitude, Inc., Aptia, Inc., Intraspect Software, Inc., InVisio, Inc.,
nCommand, Inc., Vivant! Corporation and Pointbase, Inc. Mr. Grossi received a
B.S. and an M.S. in mechanical engineering from Stanford University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEE NAMED ABOVE.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1999, the Board of Directors met six times. Each director
attended at least 75% of the aggregate of (a) the total number of Board of
Directors meetings held during the period which he was a director and (b) the
total number of committee meetings of the Board of Directors on which he served
during the period which he was a director.
The Board of Directors has a compensation committee and an audit
committee. The Board of Directors does not have a nominating committee.
The compensation committee, consisting of Messrs. Monego and Grossi,
exercises the authority of the Board of Directors on all compensation matters,
including both cash and equity incentive compensation, and administers our
employee benefit plans. The compensation committee met six times during 1999.
The audit committee, consisting of Messrs. Monego and Grossi,
recommends the selection of independent public accountants to the Board of
Directors, reviews the scope and results of the audit and other services
provided by our independent accountants and reviews our accounting practices and
systems of internal accounting controls. The audit committee met one time during
1999.
3
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DIRECTOR COMPENSATION
Directors who are also employees of the Company receive no
additional compensation for their services as directors. Directors who are
not employees of the Company do not receive a fee for attendance in person at
meetings of the Board of Directors or committees of the Board of Directors,
but they are reimbursed for travel expenses and other out-of-pocket costs
incurred in connection with their attendance of meetings.
We have a 1999 Non-Employee Director Option Program, which was approved
by our Board of Directors in October 1999 and became effective in December 1999.
The 1999 Non-Employee Director Option Program establishes an automatic option
grant program for the grant of awards to non-employee directors. Under this
program, existing non-employee directors and non-employee directors first
elected to our Board of Directors are automatically granted an option to acquire
10,000 shares of Common Stock at an exercise price per share equal to fair
market value of the Common Stock at the date of grant. These options vest and
become exercisable in four equal installments on each anniversary of the grant
date. Upon the date of each annual stockholders meeting, each non-employee
director who has been a member of our Board of Directors for at least six months
prior to the date of the stockholders meeting will receive an automatic grant of
options to acquire 2,500 shares of our Common Stock at an exercise price per
share equal to fair market value of the Common Stock at the date of grant. These
options will become fully exercisable on the first anniversary of the grant
date. On December 1, 1999, options to purchase 10,000 shares of Common Stock, at
an exercise price of $20.00 each, were granted to each of Mr.
Monego, Mr. Grossi and Mr. Taysom.
Additionally, in 1999 options to purchase 262,500 shares of Common
Stock at an exercise price of $1.50 per share were granted to Mr. Davis, and
options to purchase 50,000 shares of Common Stock at an exercise price of $1.65
per share were granted to Mr. Rhoads.
RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS
There are no family relationships among any of the directors or
executive officers of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of our compensation committee was at any time during the
fiscal year ended December 31, 1999 an officer or employee of the Company. No
member of our compensation committee serves as a member of the Board of
Directors or compensation committee of any entity that has any executive
officer serving as a member of our Board of Directors or compensation
committee.
4
<PAGE>
AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
(PROPOSAL NO. 2)
The Board of Directors has approved an amendment of the Amended and
Restated Certificate of Incorporation, subject to stockholder approval, to
authorize the Board of Directors to amend, at any time prior to our next annual
meeting of stockholders, Section 4.1 of the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 30,000,000 to 100,000,000. The Board of Directors directed
that this proposal be submitted to the Company's stockholders for consideration
and action. Each additional share of Common Stock authorized by the amendment to
the Amended and Restated Certificate of Incorporation described in this proposal
would have the same rights and privileges as each share of Common Stock
currently authorized or outstanding.
We believe that the availability of the additional shares will provide
the flexibility to meet business needs as they arise, to take advantage of
favorable opportunities and to respond to a changing corporate environment. For
example, shares of stock may be required to effect financings, corporate mergers
or acquisitions, an increase in the number of shares reserved under any of our
stock option or stock purchase plans, stock dividends, stock splits or other
corporate purposes. No further action or authorization by the stockholders would
be necessary prior to the issuance of additional shares unless applicable laws
or regulations require such approval.
Stockholders should note that certain disadvantages may result from the
adoption of this proposal. After the proposed amendment is effected, there would
be a greater number of shares of Common Stock available for issuance by the
Company, and stockholders could therefore experience a significant reduction in
their interest in the Company with respect to earnings per share, voting,
liquidation value and book and market value per share if the additional
authorized shares are issued. The availability for issuance of additional shares
of our Common Stock would also enable the Board of Directors to make more
difficult or discourage an attempt to obtain control of the Company. For
example, the issuance of shares in a public or private sale, merger or similar
transaction would increase the number of outstanding shares, thereby possibly
diluting the interest of a party attempting to obtain control of the Company. We
are not aware of any pending or threatened efforts to obtain control of the
Company.
The following is the text of Section 4.1 of the Company's Amended and
Restated Certificate of Incorporation, as proposed to be amended, with proposed
changes in boldface type:
"The aggregate number of shares of Capital Stock which the Corporation
shall have authority to issue is 105,000,000, consisting of 100,000,000
shares of common stock, $.001 par value ("Common Stock"), and 5,000,000
shares of preferred stock ("Preferred Stock"), $.001 par value."
If this proposal is approved by the stockholders of the Company, the
amendment to Section 4.1 of the Amended and Restated Certificate of
Incorporation would be effected on any date (the "Effective Date") selected by
the Board of Directors on or prior to our next annual meeting of stockholders,
which the Board of Directors anticipates will be held in May 2001. If this
proposal is approved, the Company will file a Certificate of Amendment of its
Amended and Restated Certificate of Incorporation with the Secretary of State of
the State of Delaware reflecting the increase in authorized shares. If the
amendment is not approved, the Company will take action to abandon the amendment
pursuant to Section 242(c) of the Delaware General Corporation Law.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE PROPOSED AMENDMENT TO
THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
5
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 3)
The Board of Directors has appointed KPMG LLP as the Company's
independent auditors to audit the Company's financial statements for the
year ending December 31, 2000. If the stockholders do not ratify the selection
of KPMG LLP as the Company's independent auditors, the Board of Directors will
reconsider the appointment. A representative of KPMG LLP, which served as the
Company's auditors in 1999, is expected to be present at the Annual Meeting to
be available to respond to appropriate questions from stockholders and to make a
statement if he or she desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF KPMG LLP AS
INDEPENDENT AUDITORS.
MANAGEMENT
OFFICERS
The following table sets forth certain information regarding our executive
officers and corporate officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS
Bruce Davis 47 President, Chief Executive Officer and Director
Geoffrey Rhoads 37 Chief Technology Officer and Director
E. K. Ranjit 50 Chief Financial Officer and Secretary
J. Scott Carr 37 Vice President and General Manager, Secure Documents
Indraneel Paul 43 Vice President and General Manager, Paper-as-Portal
CORPORATE OFFICERS
Burt W. Perry 45 Vice President of Engineering
Kathy S. Brogdon 47 Vice President of Finance and Operations
William Y. Conwell 41 Vice President of Intellectual Property
</TABLE>
Information concerning Mr. Davis and Mr. Rhoads is included under "Election of
Directors."
EXECUTIVE OFFICERS
E. K. RANJIT has served as our chief financial officer since August 1999
and as our Secretary since November 1999. Prior to that, he served as vice
president of finance and treasurer of TriQuint Semiconductor, Inc., a supplier
of integrated circuits for the wireless communications, telecommunications, data
communications and aerospace markets from July 1996 to August 1999, and as its
corporate controller from May 1991 to June 1996. Mr. Ranjit received a B.S. from
the University of Texas at Dallas and an M.B.A. from Pepperdine University.
J. SCOTT CARR has served as our vice president and general manager of
secure documents since June 1999. Prior to that, he served as our vice president
of marketing and business development from January 1998 to May 1999, and
director of business development from May 1996 to December 1997. Prior to
joining us, Mr. Carr served as vice president of marketing at nCUBE Corporation,
a manufacturer of video servers, from July 1995 to May 1996. Prior to that, Mr.
Carr worked as a staff architect at Sequent Computer Systems, Inc., a computer
equipment manufacturer, from August 1992 to July 1995. Mr. Carr received his
B.S. in computer science from Oregon State University.
6
<PAGE>
INDRANEEL PAUL has served as our vice president and general manager of
Paper-as-Portal since November 1999. From January 1995 through October 1999, Mr.
Paul held various positions with TV Guide Networks, a provider of electronic
television program guides for the cable television industry. His most recent
position at TV Guide Networks was executive vice president of operations. Prior
to that, he served as vice president of engineering and operations at Vyvx, a
provider of fiber optic transmission services for the broadcast television
industry. Mr. Paul received a B.Tech. in electrical engineering from the Indian
Institute of Technology and an M.S. in electrical engineering from Rensselaer
Polytechnic Institute.
CORPORATE OFFICERS
BURT W. PERRY has served as our vice president of engineering since July
1996 and served as interim co-president from August through December 1997. Prior
to that, Mr. Perry worked as an engineering manager at Intel, designing and
managing technology and software development, from June 1993 to July 1996. Mr.
Perry received a B.S. in computer science from the University of Delaware.
KATHY S. BROGDON has served as our vice president of finance and
operations since October 1996 and served as interim co-president from August
through December 1997. Prior to joining us, Ms. Brogdon served as vice president
of finance and operations at Active Arts, Inc., a multimedia company, from
December 1995 to October 1996. Ms. Brogdon worked as the controller and a
partner at Nova Northwest, Inc., a lending, leasing and financial advisory
company, from September 1990 to December 1995. Ms. Brogdon received a B.A. in
accounting and quantitative methods from the University of Oregon and became a
Certified Public Accountant in Oregon in 1978.
WILLIAM Y. CONWELL has served as our vice president of intellectual
property since July 1999. Prior to joining us, Mr. Conwell was a patent attorney
at Klarquist Sparkman Campbell Leigh & Whinston, LLP since 1984, and became a
partner in January 1990. Mr. Conwell received a bachelor's degree in Electrical
Engineering from Georgia Institute of Technology and a J.D. from Emory
University School of Law.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table contains information in summary form concerning the
compensation paid to our chief executive officer and each of our most highly
compensated executive officers (Named Executive Officer), whose total salary and
bonus exceeded $100,000 during the year ended December 31, 1999.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
SECURITIES (1)
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ---- ----------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Bruce Davis (2) 1999 $256,000 $50,000 262,500 --
President and Chief Executive Officer 1998 208,124 75,000 -- $76,369
1997 2,596 -- 400,000 --
Geoffrey Rhoads 1999 $125,000 $50,000 50,000 --
Chief Technology Officer 1998 123,542 75,000 -- --
1997 90,101 -- -- --
J. Scott Carr 1999 $125,000 $50,000 87,500 --
Vice President and General Manager-- 1998 109,167 45,000 -- --
Secure Documents 1997 90,000 -- 50,000 --
</TABLE>
- ----------
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation described in this table does not include medical, group life
insurance or other benefits received by the Named Executive Officers that
are available generally to all salaried employees of the Company, and
certain perquisites and other personal benefits received by the Named
Executive Officers that do not exceed the lesser of $50,000 or 10% of any
such officer's salary and bonus disclosed in this table.
(2) The salary information shown for Mr. Davis reflects compensation paid to him
in his principal position commencing on December 1997 and $76,369 of other
compensation in 1998 represents reimbursement for relocation expenses.
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<PAGE>
STOCK OPTIONS
The following table sets forth certain information with respect to
stock options granted during 1999 to each of the Named Executive Officers. In
accordance with the rules of the Securities and Exchange Commission, also shown
below is the potential realizable value over the term of the options (the period
from the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually. These amounts are based on
certain assumed rates of appreciation and do not represent the Company's
estimate of future stock price. Actual gains, if any, on stock option exercises
will be dependent on the future performance of the Company's Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED ANNUAL
TOTAL OPTIONS RATES OF STOCK PRICE
GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES PRICE EXPIRATION OPTION TERM($)
NAME GRANTED(1) IN 1999 ($/SH) DATE 5% 10%
- ---- ---------- ------- ------ ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Bruce Davis 162,500 10.9 % $1.50 5/11/09 $153,293 $388,474
100,000 6.7 2.50 8/31/09 157,224 398,435
----------- ------- ------------- -------------
262,500 17.6 % $310,517 $786,909
Geoffrey Rhoads 50,000 3.4 % $1.65 5/11/04 $22,793 $50,367
J. Scott Carr 75,000 5.0 % $1.50 5/11/09 $70,751 $179,296
12,500 .8 2.50 8/31/09 19,653 49,804
----------- ------- ------------- -------------
87,500 5.8 % $90,404 $229,100
</TABLE>
- -------------------
(1) Stock options are granted at an exercise price equal to the fair market
value of our Common Stock on the date of grant. Options granted generally
vest ratably over a 48 month period and have a ten year term.
The following table provides summary information, as to the Named
Executive Officers, concerning stock options exercised during 1999 and the
number of shares subject to both exercisable and unexercisable stock options as
of December 31, 1999.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME EXERCISE (#) REALIZED ($)(1) FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
- ---- ------------ --------------- ------------------- ----------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce Davis 40,400 $40,300 159,600 462,500 $7,900,200 $22,531,250
Geoffrey Rhoads -- -- 0 50,000 0 2,417,500
J. Scott Carr -- -- 88,555 108,945 4,404,473 5,292,777
</TABLE>
- -------------------
(1) Value realized is equal to the fair market value of the purchased
shares on the option exercise date less the exercise price paid for
those shares. Fair market value prior to December 2, 1999 (the date our
stock began trading on the Nasdaq National Market), was determined by
the Board of Directors, and was based upon its assessment of our
overall business prospects and financial condition.
(2) The value of unexercised in -the-money options is calculated based on
the closing price of our Common Stock on December 31, 1999, $50.00 per
share. Amounts reflected are based on the assumed value minus the
exercise price and do not necessarily indicated that the optionee sold
such stock.
9
<PAGE>
EMPLOYMENT ARRANGEMENTS
In July 1999, we adopted a policy regarding the vesting of stock
options, including prior grants, for all existing officers at such date. All
shares subject to their options that have not vested will immediately vest if
the following two conditions are met:
- -- we merge with another company and there is a change of control of our
company or we sell substantially all of our assets to another company;
and
- -- any officer's employment is terminated, or constructively terminated,
within twelve months thereafter.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE
ACT, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN
WHOLE OR IN PART, THE FOLLOWING REPORT AND THE PERFORMANCE GRAPH WHICH FOLLOWS
SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
We have a compensation committee of the Board of Directors (Compensation
Committee) which has the authority and responsibility to approve the overall
compensation strategy, administer our annual and long-term compensation plans,
and review and make recommendations to the Board of Directors with respect to
executive compensation. The Compensation Committee is comprised of independent,
non-employee board of director members.
GENERAL COMPENSATION POLICY
The Compensation Committee's overall policy is to offer our executive
officers competitive compensation opportunities. The Compensation Committee
utilizes competitive data and summaries provided by Radford Associates and the
American Electronics Association to develop compensation recommendations
competitive with other companies in the communications industry. The
Compensation Committee's objectives are to
- -- create a performance oriented environment with variable compensation
based upon the achievement of annual and longer-term business results;
- -- focus management on maximizing stockholder value through stock-based
compensation aligned to stockholders' return; and
- -- provide compensation opportunities dependent upon the Company's
performance relative to its competitors and changes in its own
performance over time.
The Compensation Committee is authorized to establish and maintain
compensation guidelines for salaries and merit pay increases throughout the
Company. The compensation committee also makes specific recommendations to the
Board of Directors concerning the compensation of our executive officers,
including the Chief Executive Officer. The Compensation Committee also
administers our 1995 Stock Incentive Plan, our 1999 Stock Incentive Plan and our
1999 Employee Stock Purchase Plan.
FACTORS
The primary factors considered in establishing the components of each
executive officer's compensation package for the year ended December 31, 1999
are summarized below. The Compensation Committee may in its discretion apply
entirely different factors, such as different measures of financial performance,
for future fiscal years.
10
<PAGE>
BASE SALARY. The base salary for each officer is set on the basis of
personal performance, the salary levels in effect for comparable positions with
other companies in the industry, and internal comparability considerations.
Generally, Company performance and profitability are not taken into account in
establishing base salary. Salaries paid to the our executive officers for the
year ended December 31, 1999 ranged from the 50th percentile at the low end to
the 75th percentile at the high end of the compensation data surveyed for the
industry. A number of adjustments were made to the surveyed compensation data
for the industry to reflect differences in management style, organizational
structure and corporate culture, geographic location, product development stage
and market capitalization between us and the surveyed entities. As a result of
these adjustments, there is not a meaningful correlation between the companies
in the industry which were taken into account for comparative compensation
purposes and the companies included in the industry group index which appears
later in this Proxy Statement for purposes of evaluating the price performance
of the Company's Common Stock. See "Stock Performance Graph."
ANNUAL INCENTIVE COMPENSATION. For the year ended December 31, 1999,
specific financial and organizational objectives, including revenue and orders
targets, were established as the basis for the incentive bonuses to be paid to
the executive officers of the Company.
Specific bonus awards, set as a target percentage of salary, were
established for each officer's position and were to be earned on the basis of
achieving the specified corporate goals and the accomplishment of specific
individual objectives. The corporate goals for 1999 were met, and incentive
bonuses were paid to officers for 1999 based on this plan.
LONG-TERM STOCK-BASED INCENTIVE COMPENSATION. Generally, the
Compensation Committee awards stock options to each of our executive officers
following the initial hiring and from time to time thereafter. The option grants
are designed to align the interests of the executive officer with those of the
stockholders and to provide each individual with a significant incentive to
manage the Company from the perspective of an owner with an equity stake in the
business.
Generally, the size of the option grant made to each executive officer
is set at a level which the Compensation Committee deems appropriate to create a
meaningful opportunity for stock ownership based upon the individual's current
position with the Company, but the Compensation Committee also takes into
account comparable awards to individuals in similar positions in the industry,
as reflected in external surveys, the individual's potential for future
responsibility and promotion, the individual's performance in recent periods and
the number of unvested options held by the individual at the time of the grant.
The relative weight given to each of these factors will vary from individual to
individual in the Compensation Committee's discretion. Each of Mr. Davis, Mr.
Rhoads and Mr. Carr received stock option grants in 1999.
Each grant allows the executive officer to acquire shares of the
Company's Common Stock at a fixed price per share (the market price on the grant
date) over a specified period of time (up to 10 years). The option will
generally become exercisable in installments over a four-year period, contingent
upon the executive officer's continued employment with the Company. Accordingly,
the option will provide a return to the executive officer only if he remains in
the Company's employ, and then only if the market price of the Company's Common
Stock appreciates over the option term.
CEO COMPENSATION
The Compensation Committee established Mr. Davis' base salary with
the objective of maintaining the competitiveness of Mr. Davis' base salary
with salaries paid to similarly situated chief executive officers. With
respect to Mr. Davis' base salary, it was the Compensation Committee's intent
to provide him with a level of stability and certainty each year and not have
this particular component of compensation affected to any significant degree
by Company performance factors. Mr. Davis' base salary for the 1999 fiscal
year was set at the 75th percentile of the salary data surveyed for other
chief executive officers in the industry. In addition, Mr. Davis received a
bonus of $50,000 and stock options to purchase 262,500 shares of Common Stock
in 1999.
11
<PAGE>
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million paid to certain executive officers. The limitation applies only to
compensation which is not considered to be performance-based. The
non-performance-based compensation paid to our executive officers in 1999 did
not exceed the $1 million limit per officer.
The Compensation Committee is aware of the limitations imposed by
Section 162(m), and its exemptions, and will address the issue of deductibility
when and if circumstances warrant.
Submitted by the Compensation Committee of the Company's Board of
Directors:
PHILLIP J. MONEGO, SR.
BRIAN J. GROSSI
STOCK PERFORMANCE GRAPH
The following graph compares the performance of our Common Stock with the
performance of the Nasdaq US Index and the companies included in SIC Code 7373 -
Computer Integrated Systems Design (our peer group) for the period ended
December 31, 1999. We registered our Common Stock under the Securities Act of
1933, as amended, effective December 2, 1999. Accordingly, the following graph
includes the required information from December 2, 1999 through December 31,
1999. The comparison assumes $100 was invested on December 2, 1999 in our Common
Stock and in each of the other two indices and assumes reinvestment of any
dividends.
[GRAPH]
<TABLE>
<CAPTION>
INDEXED DATA
-------------------------
DEC. 9, DEC. 31,
1999 1999
----------- ----------
<S> <C> <C>
Digimarc Corporation $100 $ 88.30
Nasdaq US Index $100 $117.27
Peer Group $100 $101.46
</TABLE>
12
<PAGE>
COMPANIES INCLUDED IN THE PEER GROUP INDEX ARE AS FOLLOWS:
<TABLE>
<S> <C> <C>
1MAGE SOFTWARE INC ELTRAX SYS INC NETZEE INC
3SI HOLDINGS INC ENSTAR INC NHANCEMENT TECH.INC
4FRONT TECHNOLOGIES INC ENTEX INFORMATION SVCS INC NICOLLET PROCESS ENG.
A C S ELECTRONICS LTD ESHARE TECHNOLOGIES INC OSAGE SYSTEMS GROUP INC
ACE COMM CORP ESOFT INC PACE HEALTH MGMT SYS INC
ALADDIN KNOWLEDGE SYS LTD EXIGENT INTL INC PAMET SYSTEMS INC
ALLIN CORP F5 NETWORKS INC PATHWAYS GROUP INC
ALTRIS SOFTWARE INC FAIR ISAAC & COMPANY INC PATIENT INFOSYSTEMS INC
AMERICAN MILLENIUM CORP FEDERAL DATA CORP PEROT SYSTEMS CORP
APACHE MEDICAL SYSTEMS INC FIRST CONSULTING GROUP INC PREMIS CORP
AREL COMMUNICATIONS & SFTWRE FONIX CORP PRINTRAK INT'L INC
ASA INTL LTD FORMULA SYS 1985 LTD -ADR PROPHET 21 INC
AUTO-TROL TECHNOLOGY CORP FUJITSU LTD -SPON ADR QUALITY SYSTEMS INC
AW COMPUTER SYSTEMS -CL A FUNDTECH LTD RADIANT SYSTEMS INC
AWARE INC GENERAL AUTOMATION RAMP NETWORKS INC
AZTEC TECHNOLOGY PRTNRS INC GENERAL MAGIC INC RARE MEDIUM GROUP INC
AZUL HOLDINGS INC GLOBALDIGITALCOMMERCE.COM RAVISENT TECHNOLOGIES INC
BALTIMORE TECHNOL PLC -ADR GREATE BAY CASINO CORP REDBACK NETWORKS INC
BE FREE INC H T E INC ROBOCOM SYSTEMS INTL INC
BELL INDUSTRIES INC HALIFAX CORP RWD TECHNOLOGIES INC
BITWISE DESIGNS INC HALIS INC S1 CORPORATION
BREAKAWAY SOLUTIONS INC HENRY (JACK) & ASSOCIATES SABRE HLDGS CORP -CL A
BRISTOL RETAIL SOLUTIONS INC HYBRID NETWORKS INC SAFELINK CORPORATION
BROADVISION INC I B S INTERACTIVE INC SAP AG -ADR
BTG INC IDENTIX INC SEACHANGE INT'L INC
CACI INTL INC -CL A IKOS SYSTEMS INC SENTO CORP
CAM DATA SYSTEMS INC IMAGEMATRIX CORP SHARED MEDICAL SYS. CORP
CAVION TECHNOLOGIES INC IMAGEMAX INC SOCRATES TECH. CORP
CELERITY SOLUTIONS INC IMATEC LTD SOFTECH INC
CELERITY SYSTEMS INC INET TECHNOLOGIES INC SONIC SOLUTIONS
CELLULAR TECHNICAL SERVICES INSCI-STATEMENTS.COM CORP STRAT. SOLUTIONS GRP INC
CERNER CORP INTEGRAL SYSTEMS INC/MD SUNQUEST INFO. SYS INC
CITATION COMPUTER SYS INC INTEGRATED SPATIAL INFO SOL SYSCOMM INT'L CORP
CLARENT CORP INTELLIGROUP INC TALX CORP
COBALT NETWORKS INC INTERFACE SYSTEMS INC TANNING TECHNOLOGY CORP
COMMAND SYSTEMS INC INTERGRAPH CORP TECHNOLOGY SOLUTIONS CO
COMPU-DAWN INC INTERNET COMMERCE CP -CL A TEKINSIGHT.COM INC
COMPUTRAC INC INTL SPORTS WAGERING INC TELESCIENCES INC
CONVERGENT COMMUNICATIONS INTRANET SOLUTIONS INC TELOS CORP/MD -CL A
COOPERATIVE COMPUTING INC JENKON INTL INC TELTRONICS INC
CORSAIR COMMUNICATIONS INC LANVISION SYSTEMS INC TENET INFO. SVCS INC
CPS SYSTEMS INC LATITUDE COMM. INC TIBCO SOFTWARE INC
CREATIVE COMPUTER APPL LITTON INDUSTRIES INC TITAN CORP
CREDIT MGMT SOLUTIONS INC LORONIX INFORMATION SYS INC TOWNE SERVICES INC
CSP INC MAI SYSTEMS CORP TREEV INC
CYSIVE INC MANATRON INC TRIPLE P NV
DASSAULT SYSTEMES S A -ADR MANHATTAN ASSOCIATES INC TROY GROUP INC
DATA RESEARCH ASSOC INC MARINE MGMT SYSTEMS INC TTI TEAM TELECOM INTL LTD
DATA RETURN CORP MDSI MOBILE DATA SOLUTIONS TVG TECHNOLOGIES LTD
DATA SYSTEMS NETWORK CORP MEDCOM USA INC UNICOMP INC
DATALINK CORP MEDIWARE INFO. SYSTEMS UNISYS CORP
DATATEC SYSTEMS INC MENTOR GRAPHICS CORP UNITRONIX CORP
DIGITAL DESCRIPTOR SYS INC MERCURY COMPUTER SYS. INC USWEB CORP
DYNAMIC HEALTHCARE TECH INC MERGE TECHNOLOGIES INC VA LINUX SYSTEMS INC
DYNAMICS RESEARCH CORP MICRO-INTEGRATION CORP VERONEX TECHNOLOGIES INC
EBIX.COM INC MICROS SYSTEMS INC VIALINK CO
ECLIPSYS CORP NAT'L TRANSACTION NETWORK VIISAGE TECHNOLOGY INC
ECSOFT GROUP PLC -ADR NAVIDEC INC VISUAL DATA CORP
EFAX.COM INC NEOMEDIA TECHNOLOGIES INC VISUAL NETWORKS INC
ELBIT SYSTEMS LTD NETGATEWAY INC VITALCOM INC
ELBIT VISION SYSTEMS LTD NETSCOUT SYSTEMS INC WAVETECH INT'L INC
ELECTRONIC DATA SYSTEMS CORP NETSMART TECHNOLOGIES INC ZAPME CORP
ELITE INFORMATION GROUP INC NETWORK SIX INC
</TABLE>
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our Common
Stock as of March 17, 2000 by:
- -- each person or entity known by us to own beneficially more than five
percent of our Common Stock;
- -- our chief executive officer, each of the other Named Executive
Officers and each of our directors; and
- -- all of our executive officers and directors as a group.
The beneficial ownership is calculated based on [12,764,145] shares of our
Common Stock outstanding as of March 17, 2000. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Unless otherwise indicated, each person or entity named in the table
has sole voting power and investment power, or shares voting and investment
power with his or her spouse, with respect to all shares of capital stock listed
as owned by that person. Shares issuable upon the exercise of options that are
currently exercisable or become exercisable within sixty days of March 17, 2000
are considered outstanding for the purpose of calculating the percentage of
outstanding shares of our Common Stock held by the individual, but not for the
purpose of calculating the percentage of outstanding shares of our Common Stock
held by any other individual. The address of each of the executive officers and
directors is c/o Digimarc Corporation, 19801 S.W. 72nd Avenue, Tualatin, Oregon
97062.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE OF
BENEFICIALLY SHARES BENEFICIALLY
NAME AND ADDRESS OWNED OWNED
- ---------------- ----- -----
<S> <C> <C>
5% STOCKHOLDERS
Macrovision Corporation 924,475 7.2%
1341 Orleans Drive
Sunnyvale, California 94089
Reuters Group PLC (1) 899,300 7.0%
c/o Reuters Ltd.
85 Fleet Street
London, EC4P 4AJ
England
AVI Capital Management L.P. and affiliates (2) 887,549 7.0%
One First Street
Los Altos, California 94022
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Philip J. Monego, Sr. (3) 257,215 2.0%
Bruce Davis (4) 232,255 1.8%
Geoffrey Rhoads (5) 755,221 5.9%
J. Scott Carr (6) 96,556 *
Brian J. Grossi (7) 893,549 7.0%
John Taysom (8) 916,700 7.2%
All executive officers and directors as a group (6 persons) (9) 3,151,496 24.2%
</TABLE>
-----------
* Less than 1%.
14
<PAGE>
(1)Represents 699,300 shares held by Reuters, Ltd. and 200,000 shares held by
Reuters Holdings Switzerland, S.A., affiliates of Reuters Group PLC.
(2)Brian Grossi is a partner of AVI Capital Management, L.P. and of AVI
Management Partners III, L.P. The shares listed represent 754,531 shares
held by AVI Capital, L.P., 104,325 shares held by Associated Venture
Investors III, L.P., 21,452 shares held by AVI Partners Growth Fund II, L.P.
and 7,241 shares held by AVI Silicon Valley Partners, L.P. AVI Capital
Management, L.P. is the general partner of AVI Capital, L.P., and AVI
Management Partners III, L.P. is the general partner of Associated Ventures
Investors III, L.P., AVI Partners Growth Fund II, L.P. and AVI Silicon
Valley Partners, L.P. In such capacity, AVI Capital Management L.P. and AVI
Management Partners III, L.P., through a committee comprised of all of their
partners, exercises sole voting and investment power with respect to all
shares held of record by the respective named investment partnerships;
individually, no partner of AVI Capital Management, L.P. or of AVI
Management Partners III, L.P., is deemed to have or share such voting or
investment power.
(3)Includes options for 90,000 shares of Common Stock exercisable within 60
days of March 17, 2000 and 10,250 shares owned by Mr. Monego's spouse.
(4)Includes options for 51,855 shares exercisable within 60 days of March 17,
2000 and 5,000 shares owned by Gary and Kimberly Davis, 5,000 shares owned
by Joseph and Barbara Davis, 5,000 shares owned by Thomas and Donna Davis,
5,000 shares owned by George and Candace Richard, 5,000 shares owned by John
and Halene Richard, 5,000 shares owned by Robert Bradford, Jr. and Grace
Richard, 5,000 shares owned by Robert Bradford III and Darcy Richard and
5,000 shares owned by Gary and Karen Gorney, all of whom are relatives of
Bruce Davis. Mr. Davis disclaims beneficial ownership of these shares owned
by his relatives.
(5)Includes options for 5,441 shares of Common Stock exercisable within 60
days of March 17, 2000. Includes 13,000 shares owned by Amanda Rhoads Trust,
13,000 shares owned by Hudson Rhoads Trust, 1,050 shares owned by Craig and
Laura Mikkelson, 10,210 shares owned by Barbara K. Rhoads, 850 shares owned
by Bryan Gurrie Rhoads, 950 shares owned by Cynthia Brooke Rhoads, 44,740
shares owned by Gurrie and Alice Rhoads, 100 shares owned by Nicole
Rhoads--Trustee for the Children of Geoffrey and Nicole Rhoads, 13,000
shares owned by Trevor Rhoads Trust, 750 shares owned by Mittie Hellmich,
750 shares owned by Taylor James Pierce and 750 shares owned by Dirk Pierce,
all of whom are relatives of Geoffrey Rhoads or trusts established for their
benefit. Mr. Rhoads disclaims beneficial ownership of these shares owned by
his relatives.
(6)Represents options for 96,556 shares of Common Stock exercisable within 60
days of March 17, 2000.
(7)Includes 887,549 shares held by AVI Capital L.P. and affiliates of which Mr.
Grossi is a general partner. Mr. Grossi disclaims beneficial ownership of
these shares except to the extent of his pecuniary interest as a general
partner.
(8)Includes 899,300 shares held by Reuters Group. Mr. Taysom disclaims
beneficial ownership of the shares held by Reuters Group.
(9)Includes options for 243,852 shares of Common Stock exercisable within 60
days of March 17, 2000.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRIVATE PLACEMENT TRANSACTIONS
During 1999 we issued in private placement transactions shares of
preferred stock, which were converted into shares of Common Stock in connection
with the Company's initial public offering as follows:
-- an aggregate of 1,266,000 shares of Series D preferred stock
at $5.00 per share in June 1999 to 14 investors, including
Philip Monego, Sr., Adobe Ventures L.P., AVI Capital L.P. and
affiliates, Macrovision Corporation and Reuters Holdings
Switzerland, S.A.; and
-- an aggregate of 160,000 shares of Series D-X preferred stock
at $5.00 per share in August 1999 to three investors,
including Philip Monego, Sr.
INVESTORS' RIGHTS AGREEMENT
On November 2, 1999, the Company entered into an Amended and Restated
Investor Rights Agreement with certain holders of its Common Stock (Holders)
including Philip Monego, Sr., Adobe Ventures L.P., AVI Capital L.P.
and its affiliates, Macrovision Corporation and Reuters Group PLC.
Under the terms of this agreement, if we propose to register any of our
securities under the Securities Act, we must give the Holders 30 days' prior
notice of registration and include a portion of their shares of common stock in
the registration. Additionally, upon written demand of Holders, we will use our
best efforts to promptly register the securities that the Holders request to be
registered, provided, among other limitations, that the aggregate offering price
to the public exceeds $10 million. We are not required to register securities
more than twice under the Holders' rights to demand these registrations. We will
be required to file a registration statement on form S-3 or any similar
short-form registration statement if requested to do so by any of these Holders,
provided that the aggregate offering price for the securities to be sold is more
than $1,000,000. Furthermore, we are only required to effect one demand
registration on form S-3 within any 12-month period. The Holders cannot demand
that we file a registration statement prior to the date 180 days following the
effective date of any registration statement filed by us.
All expenses in effecting these registrations will be borne by us,
excluding underwriting discounts, selling commissions and stock transfer taxes,
which shall be borne proportionately by the Holders of the securities that have
been registered. These registration rights are subject to conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares included in the registration. We have agreed to indemnify
the Holders of these registration rights, and each Holder has agreed to
indemnify us, against liabilities under the Securities Act, the Securities
Exchange Act or other applicable federal or state law.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
The Company has entered into indemnification agreements with each of
its directors and executive officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by Delaware law.
All future transaction between the Company and its officers, directors,
principal stockholders and affiliates will be approved by a majority of the
Board of Directors, including a majority of the disinterested non-employee
directors on the Board of Directors, and will be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
16
<PAGE>
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
(Exchange Act) requires our directors and executive officers, and persons who
own more than ten percent of a registered class of our equity securities
(Reporting Persons), to file initial reports of ownership and changes in
beneficial ownership of Common Stock and other equity securities of the Company
with the Securities and Exchange Commission and the Nasdaq Stock Market, Inc.
Copies of these reports are also required to be delivered to the Company.
To our knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations from certain
Reporting Persons, during the year ended December 31, 1999, all of the
Reporting Persons complied with applicable Section 16(a) filing requirements,
except as follows: (1) Mr. Paul inadvertently failed to file his initial
statement of beneficial ownership on Form 3 in connection with the
registration of the Company's Common Stock under the Exchange Act; such Form
3 was subsequently filed. (2) Mr. Monego, Mr. Taysom and Mr. Grossi each
inadvertently failed to include options to purchase 10,000 shares of Common
Stock, which were automatically granted under the 1999 Non-Employee Director
Option Program in December 1999. These option grants were subsequently
reported on amended Form 3's for each of these individuals.
STOCKHOLDER PROPOSALS
The deadline for stockholder proposals intended to be considered for
inclusion in our Proxy Statement for next year's Annual Meeting of Stockholders
is expected to be December 6, 2000. Such proposals may be included in next
year's Proxy Statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission.
FORM 10-K
A copy of our Annual Report to Stockholders for the year ended December
31, 1999 accompanies this Proxy Statement. We will provide, without charge upon
the written request of any beneficial owner of shares of our Common Stock
entitled to vote at the Annual Meeting, a copy of our Annual Report on Form 10-K
as filed with the SEC for the year ended December 31, 1999. Written requests
should be mailed to the Secretary, Digimarc Corporation, 19801 SW 72nd Avenue,
Suite 250, Tualatin, Oregon 97062.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting. Should any other matter requiring a
vote of the stockholders arise, the enclosed proxy card gives authority to the
persons listed on the card to vote at their discretion in the best interest of
the Company.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares you hold. We urge you to promptly execute and
return the accompanying proxy in the envelope, which has been enclosed for your
convenience. Stockholders who are present at the Annual Meeting may revoke their
proxies and vote in person or, if they prefer, may abstain from voting in person
and allow their proxies to be voted.
By Order of the Board of Directors,
Bruce Davis
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Tualatin, Oregon
April 5, 2000
17
<PAGE>
ON BEHALF OF THE BOARD OF DIRECTORS OF DIGIMARC CORPORATION
The undersigned hereby constitutes and appoints Bruce Davis and E.K.
Ranjit, and each of them, his true and lawful attorneys-in-fact and agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Stockholders of Digimarc Corporation to be held at the
RiverPlace Hotel, 1510 SW Harbor Way, Portland, Oregon 97201 on Thursday, May
11, 2000 at 2:00 p.m. local time, and at any adjournment or postponement
thereof, and to vote all shares of common stock that the undersigned would be
entitled to vote if then and there personally present on the matters set forth
below.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this
Proxy will be voted for the nominee to the board of directors named in Proposal
No. 1, for Proposals No. 2 and 3 and as the proxy holder may determine in his
discretion with regard to any other matter properly brought before the Annual
Meeting.
1. ELECTION OF A DIRECTOR:
<TABLE>
<S><C>
____ FOR the nominee listed below ____ WITHHOLD AUTHORITY to vote for the
(except as indicated) nominee listed below
</TABLE>
JOHN TAYSOM
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE NAMED ABOVE. IF YOU
WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE THROUGH SUCH
NOMINEE'S NAME LISTED ABOVE.
2. PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS TO AMEND THE RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
AUTHORIZED FOR ISSUANCE BY THE COMPANY FROM 30,000,000 TO 100,000,000:
<TABLE>
<S><C>
_____ FOR _____ AGAINST _____ ABSTAIN
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
3. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF
DIGIMARC CORPORATION FOR THE YEAR ENDING DECEMBER 31, 2000:
<TABLE>
<S><C>
_____ FOR _____ AGAINST _____ ABSTAIN
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
DATED: _____________________, 2000
-----------------------------------
(Signature)
-----------------------------------
(Signature)
This Proxy should be marked, dated
and signed by the shareholder(s)
exactly as his or her name appears
hereon, and returned promptly in
the enclosed envelope. Persons
signing in a fiduciary capacity
should so indicate. If shares are
held by joint tenants or as
community property, both should
sign.
