<PAGE>
As filed with the Securities and Exchange Commission on February 25, 2000
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------------------------
DIGIMARC CORPORATION
(Exact name of Registrant as Specified in Its Charter)
-------------------------------------------------
Delaware 93-1170830
------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
19801 S.W. 72nd Avenue, Suite 250
Tualatin, Oregon 97062
(Address of Principal Executive Offices)
Digimarc Corporation 1995 Stock Incentive Plan
Digimarc Corporation 1999 Stock Incentive Plan
Digimarc Corporation 1999 Employee Stock Purchase Plan
(Full Title of the Plan)
-----------------------------------------------------
Bruce Davis
President and Chief Executive Officer
Digimarc Corporation
19801 S.W. 72nd Avenue, Suite 250
Tualatin, Oregon 97062
(Name and Address of Agent for Service)
(503) 885-9699
(Telephone Number, Including Area Code, of Agent For Service)
With a copy to:
Gavin B. Grover, Esq.
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
(415) 268-7000
----------------------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Securities to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Share(1) Price Fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par 2,400,000 (2) $52.25 $125,400,000 $33,105.60
value per share
Common Stock, $.001 par 1,500,000 (3) $52.25 $ 78,375,000 $20,691.00
value per share
Common Stock, $.001 par 625,000 (4) $52.25 $ 32,656,250 $ 8,621.25
value per share
</TABLE>
================================================================================
(1) Calculated solely for purposes of this offering under Rule 457(h) under the
Securities Act of 1933, as amended, on the basis of the average of the high
and low price per share of Digimarc Corporation's Common Stock on the
Nasdaq National Market on February 24, 2000.
(2) To be issued in connection with the Digimarc Corporation 1995 Stock
Incentive Plan, as amended.
(3) To be issued in connection with the Digimarc Corporation 1999 Stock
Incentive Plan.
(4) To be issued in connection with the Digimarc Corporation 1999 Employee
Stock Purchase Plan, as amended.
================================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN THE
SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part 1 of Form S-8
(plan information and registrant information and employee plan annual
information) will be sent or given to employees as specified by Securities and
Exchange Commission Rule 428(b)(1). Such documents need not be filed with the
Securities and Exchange Commission either as part of this Registration Statement
or as prospectuses or prospectus supplements pursuant to Rule 424. These
documents and the documents incorporated by reference in this Registration
Statement pursuant to Item 3 of Form S-8 (Part II hereof), taken together,
constitute a prospectus that meets the requirements of Section 10(a) of the
Securities Act of 1933.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by Digimarc Corporation (the "Registrant")
with the Securities and Exchange Commission (the "Commission") are incorporated
by reference herein:
(a) The Registrant's latest prospectus filed pursuant to Rule 424(b) under
the Securities Act of 1933, as amended, filed on December 2, 1999.
(b) The description of the Registrant's Common Stock which is contained in
its Registration Statement on Form 8-A filed under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), on December 1, 1999, including any
amendment or report filed for the purpose of updating such description.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
II-1
<PAGE>
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Under Section 145 of the General Corporation Law of the State of Delaware,
the Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act. Article IX of the Registrant's Bylaws also provides for
mandatory indemnification of its directors, executive officers, employees and
agents to the fullest extent permissible under Delaware law.
Section 8 of the Registrant's Amended and Restated Certificate of
Incorporation provides that the liability of its directors for monetary damages
shall be eliminated to the fullest extent permissible under Delaware law.
Pursuant to Delaware law, this includes elimination of liability for monetary
damages for breach of the directors' fiduciary duty of care to the Registrant
and its stockholders. These provisions do not eliminate the directors' duty of
care and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
The Registrant has entered into an agreement with each of its directors and
executive officers that requires the Registrant to indemnify such persons
against any expense, liability or loss, including attorneys' fees, judgments,
fines, ERISA excise taxes and penalties, amounts paid or to be paid in
settlement, any interest, assessments or other charges imposed thereon, and any
federal state, local or foreign taxes imposed as a result of the actual or
deemed receipt of any payment thereunder, paid or incurred in connection with
investigating, defending, being a witness in, or participating in, or preparing
for any of the foregoing in, any proceeding relating to any event or occurrence
by reason of the fact that such person is or was a director or officer of the
Registrant, or is or was serving at the request of the Registrant in certain
capacities. The indemnification agreements also set forth certain procedures
that will apply in the event of a claim for indemnification thereunder.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
II-2
<PAGE>
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant has obtained a policy of directors' and officers' liability
insurance that insures the Company's directors and officers against the cost of
defense, settlement or payment of a judgment under certain circumstances.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
4.1 Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1 (Commission File No. 333-87501)
which became effective on December 1, 1999 (the "Registration
Statement on Form S-1")).
4.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to
the Registration Statement on Form S-1).
5.1 Opinion of Morrison & Foerster LLP.
23.1 Consent of KPMG LLP, Independent Certified Public Accountants.
23.2 Consent of Morrison & Foerster LLP (contained in Exhibit 5.1).
24.1 Power of Attorney (see signature page of this Registration Statement).
99.1 Digimarc Corporation 1995 Stock Incentive Plan, as amended.
99.2 Digimarc Corporation 1999 Stock Incentive Plan, including forms of
agreements thereunder.
99.3 Digimarc Corporation 1999 Employee Stock Purchase Plan, as amended,
including forms of agreements thereunder.
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
II-3
<PAGE>
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act).
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the indemnity provisions summarized in Item 6
above or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Tualatin, State of Oregon, on the 25 day of February 2000.
DIGIMARC CORPORATION
By: /s/ Bruce Davis
---------------------------------------
Bruce Davis
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, severally and not jointly, Bruce Davis
and E.K. Ranjit, with full power to act alone, as his or her true and lawful
attorney-in-fact, with the power of substitution, for and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that each said attorney-in-fact may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Bruce Davis President, Chief Executive February 25, 2000
- --------------------------
Bruce Davis Officer and Director (Principal
Executive Officer)
/s/ E.K. Ranjit Chief Financial Officer February 25, 2000
- --------------------------
E.K. Ranjit (Principal Accounting Officer)
and Secretary
/s/ Geoffrey Rhoads Chief Technology Officer and February 25, 2000
- --------------------------
Geoffrey Rhoads Director
/s/ Philip Monego, Sr. Chairman of the Board of Directors February 25, 2000
- --------------------------
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
Philip Monego, Sr. Directors
/s/ Brian J. Grossi Director February 25, 2000
- --------------------------
Brian J. Grossi
/s/ John Taysom Director February 25, 2000
- --------------------------
John Taysom
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4.1 Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1 (Commission File No. 333-87501)
which became effective on December 1, 1999 (the "Registration
Statement on Form S-1")).
4.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to
the Registration Statement on Form S-1).
5.1 Opinion of Morrison & Foerster LLP.
23.1 Consent of KPMG LLP, Independent Certified Public Accountants.
23.2 Consent of Morrison & Foerster LLP (contained in Exhibit 5.1).
24.1 Power of Attorney (see signature page of this Registration Statement).
99.1 Digimarc Corporation 1995 Stock Incentive Plan, as amended.
99.2 Digimarc Corporation 1999 Stock Incentive Plan, including forms
of agreements thereunder.
99.3 Digimarc Corporation 1999 Employee Stock Purchase Plan, as amended,
including forms of agreements thereunder.
<PAGE>
Exhibit 5.1
MORRISON & FOERSTER LLP
San Francisco, California
February 25, 2000
Digimarc Corporation
19801 S.W. 72nd Avenue, Suite 250
Tualatin, Oregon 97062
Gentlemen:
At your request, we have examined the Registration Statement on Form S-8
executed by you on February 25, 2000, and to be filed with the Securities and
Exchange Commission (the "SEC") in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 4,525,000 shares of your
common stock, $.001 par value per share (the "Common Stock") which will be
issuable under the Digimarc Corporation 1995 Stock Incentive Plan, as amended,
the Digimarc Corporation 1999 Stock Incentive Plan and the Digimarc Corporation
Employee Stock Purchase Plan, as amended (the "Plans").
As your counsel in connection with the Registration Statement, we have
examined the proceedings taken by you in connection with the adoption of the
Plans, of options previously granted pursuant to the Plans (the "Plan Shares"),
and such documents as we have deemed necessary to render this opinion.
Based upon the foregoing, it is our opinion that the Plan Shares, when
issued and outstanding pursuant to the terms of the Plan, will be validly
issued, fully paid and non-assessable shares of Common Stock.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/S/ MORRISON & FOERSTER LLP
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
The Board of Directors
Digimarc Corporation:
We consent to incorporation by reference in the Registration Statement on Form
S-8 of Digimarc Corporation of our report dated March 9, 1999, except as to note
12(b), which is as of December 1, 1999 relating to the balance sheets of
Digimarc Corporation as of December 31, 1997 and 1998, and the related
statements of operations, stockholders' equity (deficit) and cash flows for each
of the years in the three-year period ended December 31, 1998, which report
appears in the Form S-1 of Digimarc Corporation (No. 333-87501).
/s/ KPMG LLP
Portland, Oregon
February 24, 2000
<PAGE>
Exhibit 99.1
DIGIMARC CORPORATION
1995 STOCK INCENTIVE PLAN, AS AMENDED
1. Purposes and Scope of the Plan.
1.1 Purposes of Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
1.2 Scope of Plan. Options granted hereunder may be either "incentive
stock options," as defined in Section 422 of the Internal Revenue Code of 1986,
as amended, or "nonqualified stock options," at the discretion of the Board and
as reflected in the terms of the written option agreement. In addition, shares
of the Company's Common Stock may be Sold hereunder independent of any Option
grant.
2. Definitions. As used herein, the following definitions shall apply:
2.1 "Board" shall mean the Committee, if one has been appointed, or the
Board of Directors of the Company, if no Committee is appointed.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.3 "Common Stock" shall mean the Common Stock of the Company.
2.4 "Company" shall mean Digimarc Corporation, an Oregon corporation.
2.5 "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section of the Plan, if one is appointed.
2.6 "Consultant" shall mean any person who is engaged by the Company or
any Subsidiary to render consulting services and is compensated for such
consulting services and any director of the Company whether compensated for such
services or not.
2.7 "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board; provided that such leave is for a period
of not more than ninety days or reemployment upon the expiration of such leave
is guaranteed by contract or statute.
2.8 "Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
2.9 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
<PAGE>
2.10 "Incentive Stock Option" shall mean an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
2.11 "Nonqualified Stock Option" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
2.12 "Option" shall mean a stock option granted pursuant to the Plan.
2.13 "Optioned Stock" shall mean the Common Stock subject to an Option.
2.14 "Optionee" shall mean an Employee or Consultant who receives an
Option.
2.15 "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424 of the Code.
2.16 "Plan" shall mean this Stock Incentive Plan.
2.17 "Sale" or "Sold" shall include, with respect to the sale of Shares
under the Plan, the sale of Shares for consideration in the form of cash or
notes, as well as a grant of Shares without consideration, except past or future
services.
2.18 "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section of the Plan.
2.19 "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424 of the Code.
3. Stock Subject to the Plan.
3.1 Size of Plan Pool. Subject to the provisions of Section of the Plan,
the maximum aggregate number of Shares which may be optioned and/or Sold under
the Plan is 5,600,000 shares of Common Stock. The Shares may be authorized, but
unissued, or reacquired Common Stock.
3.2 Return of Unexercised Option Shares. If an Option should expire or
become unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future Option grants and/or Sales under
the Plan.
3.3 Return of Unvested or Restricted Shares. If Shares Sold under the Plan
or purchased upon the exercise of an Option are repurchased by the Company
pursuant to restrictions applicable to such Shares, the number of Shares
repurchased shall, unless the Plan shall have been terminated, become available
for future Option grants and/or Sales under the Plan.
3.4 Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
2
<PAGE>
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
4. Administration of the Plan.
4.1 Procedure. The Plan shall be administered by the Board of Directors of
the Company.
4.1.1 Committee. Subject to subparagraph , the Board of Directors may
appoint a Committee consisting of not less than two (2) members of the
Board of Directors to administer the Plan on behalf of the Board of
Directors, subject to such terms and conditions as the Board of Directors
may prescribe. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board of Directors. From time to time the Board
of Directors may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies however caused, or remove
all members of the Committee and thereafter directly administer the Plan.
4.1.2 Conflicts. Members of the Board who are either eligible for
Options and/or Sales or have been granted Options or Sold Shares may vote
on any matters affecting the administration of the Plan or the grant of any
Options or Sale of any Shares pursuant to the Plan, except that no such
member shall act upon the granting of an Option or Sale of Shares to
himself, but any such member may be counted in determining the existence of
a quorum at any meeting of the Board during which action is taken with
respect to the granting of Options or Sale of Shares to him.
4.1.3 Grants Following Registration, to Officers or Directors, Only
by Disinterested Persons. Notwithstanding the foregoing subparagraph , if
and in any event the Company registers any class of any equity security
pursuant to Section 12 of the Securities Exchange Act of 1934, from the
effective date of such registration until six (6) months after the
termination of such registration, any grants of Options to officers or
directors shall only be made by the Board if each member of the Board is a
disinterested person, or if every member of the Board is not a
disinterested person, by a committee of two or more directors, each of whom
is a disinterested person. A "disinterested person" is a director who has
not, during the one year period prior to service as an administrator of the
Plan, or during such service, been granted or awarded equity securities
pursuant to the Plan or any other plan of the Company or any of its
affiliates, with these qualifications:
(a) Formula Plans don't disqualify. Participation in a formula
plan meeting the conditions in paragraph (c)(2)(ii) of SEC Rule 16b-3
shall not disqualify a director from being a disinterested person.
(b) Ongoing Acquisition Plans Don't Disqualify. Participation
in an ongoing securities acquisition plan meeting the conditions in
paragraph (d)(2) (i) of SEC Rule 16b-3 shall not disqualify a director
from being a disinterested person.
3
<PAGE>
(c) Annual Retainers in Stock Don't Disqualify. An election to
receive an annual retainer fee in either cash or an equivalent amount
of securities, or partly in cash and partly in securities, shall not
disqualify a director from being a disinterested person.
(d) Disqualification applies Only To Plan In Which Director
Participates. Participation in a plan shall not disqualify a director
from being a disinterested person for the purpose of administering
another plan that does not permit participation by directors.
4.2 Powers of the Board. Subject to the provisions of the Plan, the Board
shall have the authority, in its discretion, to do any or all of these things:
4.2.1 Grant Options. To grant Incentive Stock Options in accordance
with Section 422 of the Code, or Nonqualified Stock Options.
4.2.2 Authorize Sales. To authorize Sales of Shares of Common Stock
hereunder.
4.2.3 Determine Fair Market Value. To determine, upon review of
relevant information and in accordance with Section of the Plan, the fair
market value of the Common Stock.
4.2.4 Determine Exercise or Purchase Price. To determine the
exercise/purchase price per Share of Options to be granted or Shares to be
Sold, which exercise/purchase price shall be determined in accordance with
Section of the Plan.
4.2.5 Decide Who Gets Options. To determine the Employees or
Consultants to whom, and the time or times at which, Options shall be
granted and the number of Shares to be represented by each Option.
4.2.6 Decide Who Gets Stock. To determine the Employees or
Consultants to whom, and the time or times at which, Shares shall be Sold
and the number of Shares to be Sold.
4.2.7 Interpret Plan. To interpret the Plan.
4.2.8 Make Rules About Plan. To prescribe, amend and rescind rules
and regulations relating to the Plan.
4.2.9 Set and Amend Option Terms. To determine the terms and
provisions of each Option granted (which need not be identical) and, with
the consent of the holder thereof, modify or amend each Option.
4.2.10 Set and Amend Sale Terms. To determine the terms and provisions
of each Sale of Shares (which need not be identical) and, with the consent
of the purchaser thereof, modify or amend each Sale.
4
<PAGE>
4.2.11 Change Exercise Dates of Options. To accelerate or defer (with
the consent of the Optionee) the exercise date of any Option.
4.2.12 Change Vesting Restrictions. To accelerate or defer (with the
consent of the Optionee or purchaser of Shares) the vesting restrictions
applicable to Shares Sold under the Plan or pursuant to Options granted
under the Plan.
4.2.13 Authorize Signers. To authorize any person to execute on behalf
of the Company any instrument required to effectuate the grant of an Option
or Sale of Shares previously granted or authorized by the Board.
4.2.14 Establish Shareholder Agreement Restrictions. To determine the
restrictions on transfer, vesting restrictions, repurchase rights, or other
restrictions applicable to Shares issued under the Plan.
4.2.15 Cancel and Reissue Options (subject to Price Restrictions). To
effect, at any time and from time to time, with the consent of the affected
Optionees, the cancellation of any or all outstanding Options under the
Plan and to grant in substitution therefor new Options under the Plan
covering the same or different numbers of Shares, but having an Option
price per Share consistent with the provisions of Section of this Plan as
of the date of the new Option grant.
4.2.16 Make Case by Case Exceptions at Termination of Employment. To
establish, on a case-by-case basis, different terms and conditions
pertaining to exercise or vesting rights upon termination of employment,
whether at the time of an Option grant or Sale of Shares, or thereafter.
4.2.17 Do Other Things Needed or Advisable. To make all other
determinations deemed necessary or advisable for the administration of the
Plan.
4.3 Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan or Shares Sold under the
Plan.
5. Eligibility.
5.1 Persons Eligible. Options may be granted and/or Shares Sold only to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Sold
Shares may, if he is otherwise eligible, be granted an additional Option or
Options or Sold additional Shares.
5.2 ISO Limitation. No Incentive Stock Option may be granted to an
Employee which, when aggregated with all other Incentive Stock Options granted
to such Employee by the Company or any Parent or Subsidiary, would result in
Shares having an aggregate fair market value (determined for each Share as of
the date of grant of the Option covering such Share) in excess of $100,000
becoming first available for purchase upon exercise of one or more Incentive
Stock Options during any calendar year.
5
<PAGE>
5.3 Section Limitations. Section of the Plan shall apply only to an
Incentive Stock Option evidenced by an "Incentive Stock Option Agreement" which
sets forth the intention of the Company and the Optionee that such Option shall
qualify as an Incentive Stock Option. Section of the Plan shall not apply to any
Option evidenced by a "Nonqualified Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall be a
Nonqualified Stock Option.
5.4 No Right to Continued Employment. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his right
or the Company's right to terminate his employment or consulting relationship at
any time.
6. Term of Plan. The Plan shall become effective upon the earlier to occur of
its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section of the Plan. It shall continue in effect for
a term of ten (10) years, unless sooner terminated under Section of the Plan.
7. Term of Options.
7.1 Term of ISOs to 10% or Less Holders. The term of each Incentive Stock
Option shall be ten (10) years from the date of grant thereof or such shorter
term as may be provided in the Stock Option Agreement.
7.2 Term of Nonqualified Options to 10% or Less Holders. The term of each
Nonqualified Stock Option shall be ten (10) years and one (1) day from the date
of grant thereof or such other term as may be provided in the Stock Option
Agreement.
7.3 Terms for Holders of More than 10%. In the case of an Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, (a) if the Option is an Incentive Stock
Option, the term of the Option shall be five (5) years from the date of grant
thereof or such shorter time as may be provided in the Stock Option Agreement,
or (b) if the Option is a Nonqualified Stock Option, the term of the Option
shall be five (5) years and one (1) day from the date of grant thereof or such
other term as may be provided in the Stock Option Agreement.
8. Exercise/Purchase Price and Consideration.
8.1 Exercise/Purchase Price. The per-Share exercise/purchase price for the
Shares to be issued pursuant to exercise of an Option or a Sale (other than a
Sale which is a grant for which no purchase price is payable) shall be such
price as is determined by the Board, but shall be subject to the requirements of
this Section.
8.2 ISO Price.
8.2.1 ISO Price to Holders of more than 10%. In the case of an
Incentive Stock Option granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per
6
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Share exercise price shall be no less than one hundred ten percent (110%)
of the fair market value per Share on the date of the grant.
8.2.2 ISO Price to Holders of 10% or Less. In the case of an
Incentive Stock Option granted to any other Employee, the per Share
exercise price shall be no less than one hundred percent (100%) of the fair
market value per Share on the date of grant.
8.3 Nonqualified Option and Sale Price.
8.3.1 Nonqualified Price to Holders of More than 10%. In the case of
a Nonqualified Stock Option or Sale granted or Sold to a person who, at the
time of the grant of such Option or authorization of such Sale, owns stock
representing more than ten percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary, the per Share
exercise/purchase price shall be no less than one hundred ten percent
(110%) of the fair market value per Share on the date of the grant or
authorization of Sale, unless otherwise expressly determined by the Board
of Directors.
8.3.2 Nonqualified Price to Holders of 10% or Less. In the case of a
Nonqualified Stock Option or Sale granted or Sold to any other person, the
per Share exercise/purchase price shall be no less than eighty-five percent
(85%) of the fair market value per Share on the date of grant or
authorization of Sale, unless otherwise expressly determined by the Board
of Directors.
8.3.3 Requirement for Below Market Options and Sales. Any
determination to sell stock at less than fair market value on the date of
the grant or authorization of Sale shall be accompanied by an express
finding by the Board of Directors specifying that the sale is in the best
interest of the Company, and specifying both the fair market value and the
grant or sale price of the stock.
8.4 Sales After Registration. In the case of an Option granted or Sale
authorized on or after the effective date of registration of any class of equity
security of the Company pursuant to Section 12 of the Exchange Act and prior to
six (6) months after the termination of such registration, the per Share
exercise/purchase price shall be no less than one hundred percent (100%) of the
fair market value per Share on the date of grant or authorization of Sale.
8.5 Fair Market Value. The fair market value per Share shall be determined
by the Board in its discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the
closing price of the Common Stock for the date of grant or authorization of
Sale, as reported in The Wall Street Journal (or, if not so reported, as
-----------------------
otherwise reported by the National Association of Securities Dealers Automated
Quotation (NASDAQ) System) or, in the event the Common Stock is listed on a
stock exchange, the fair market value per Share shall be the closing price on
such exchange on the date of grant of the Option or authorization of Sale, as
reported in The Wall Street Journal.
-----------------------
8.6 Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option or pursuant to a Sale, including the method of
payment, shall be determined by the Board and may consist in whole or part of:
7
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8.6.1 Cash, Check, Note. Cash, Check, or Promissory Note.
8.6.2 Transferred or Withheld Shares. Transfer to the Company of
Shares having a Fair Market Value at the time of such exercise equal to the
Option exercise price, or delivery of instructions to the Company to
withhold from the Shares that would otherwise be issued on the exercise
that number of Shares having a Fair Market Value at the time of such
exercise equal to the Option exercise price. If the Fair Market Value of
the number of whole Shares transferred or the number of whole Shares
surrendered is less than the total exercise price of the Option, the
shortfall must be made up in cash or by check.
9. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
10. Option Agreement. Options shall be evidenced by written option agreements
in such form as the Board shall approve.
11. Nontransferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will, or by the laws of descent and distribution, and may be exercised during
the lifetime of the Optionee only by the Optionee or, if incapacitated, by his
or her legal guardian or legal representative.
12. Exercise of Option.
12.1 When Exercisable. Any Option granted hereunder shall be exercisable at
such times and under such conditions as determined by the Board, including
performance criteria with respect to the Company and/or the Optionee, and as
shall be permissible under the terms of the Plan.
12.2 No Fractional Shares. An Option may not be exercised for a fraction of
a Share.
12.3 How Exercised. An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section of the Plan.
12.3.1 Deposits for Withholding Taxes. Each Optionee who exercises an
Option shall, upon notification of the amount due (if any) and prior to or
concurrent with delivery of the certificate representing the Shares, pay to
the Company amounts necessary to satisfy applicable federal, state and
local tax withholding requirements.
12.3.2 Shareholder Agreements. An Optionee must also provide a duly
executed copy of any stock transfer agreement then in effect and determined
to be applicable by the Board.
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12.4 No Shareholder Rights or Adjustments Until Issuance. Until the
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section of the Plan.
12.5 Effect of Exercise on Plan Pool. Exercise of an Option in any manner
shall result in a decrease in the number of Shares which thereafter may be
available, both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.
12.6 Termination of Status as an Employee or Consultant. If an Employee or
Consultant ceases to serve as an Employee or Consultant (as the case may be), he
may, but only within three (3) months (or such other period of time not
exceeding the limitations of Section above as is determined by the Board at the
time of grant of an Option or thereafter) after the date he ceases to be an
Employee or Consultant (as the case may be) of the Company, exercise his Option
to the extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
12.7 Disability of Optionee. Notwithstanding the provisions of Section
above, in the event an Employee or Consultant is unable to continue his
employment or consulting relationship (as the case may be) with the Company as a
result of his total and permanent disability (as defined in Section 22(e)(3) of
the Code), he may, but only within twelve (12) months (or such other period of
time not exceeding the limitations of Section above as is determined by the
Board at the time of grant of an Option or thereafter) from the date of
termination, exercise his Option to the extent he was entitled to exercise it at
the date of such termination. To the extent that he was not entitled to exercise
the Option at the date of termination, or if he does not exercise such Option
(which he was entitled to exercise) within the time specified herein, the Option
shall terminate.
12.8 Death of Optionee. In the event of the death of an Optionee during the
term of the Option who is at the time of his death an Employee or Consultant of
the Company and who shall have been in Continuous Status as an Employee or
Consultant since the date of grant of the Option, the Option may be exercised,
at any time within twelve (12) months (or such other period of time not
exceeding the limitations of Section above as is determined by the Board at the
time of grant of an Option or thereafter) following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise as of
the date of death.
13. Adjustments Upon Changes in Capitalization or Merger.
13.1 Stock Splits and the Like. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and the number of shares of Common Stock which have been
authorized for issuance under the Plan
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but as to which no Options have yet been granted or Sales made or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
13.2 Termination on Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Option will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board. The Board may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a date fixed by
the Board and give each Optionee the right to exercise his Option as to all or
any part of the Optioned Stock, including Shares as to which the Option would
not otherwise be exercisable.
13.3 Substitution or Exercise on Sale or Merger. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify the Optionee that the Option shall be fully exercisable for a
period of thirty (30) days from the date of such notice or such shorter period
as the Board may specify in the notice, and the Option will terminate upon the
expiration of such period.
14. Amendment and Termination of the Plan.
14.1 Amendment and Termination. The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable; provided,
however, that if required to qualify the Plan under Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934, as amended ("Rule 16b-3"), no
amendment shall be made more than once every six months that would change the
amount, price or timing of the option grants, other than to comport with changes
in the Code, or the rules and regulations promulgated thereunder; and provided,
further, that, if required to qualify the Plan under Rule 16b-3, no amendment
shall be made without the approval of the stockholders of the Company in the
manner described in Section of the Plan and within the times required by Section
422 of the Code (if any), if the amendment would:
10
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14.1.1 Increase Shares. Increase the number of Shares subject to the
Plan, other than in connection with an adjustment under Section 13 of the
Plan;
14.1.2 Change Class of Employee or Consultant Eligible. Make a change
in the designation of the class of Employees or Consultants eligible to be
granted Options; or
14.1.3 Increase Benefits After Registration. If the Company has a
class of equity security registered under Section 12 of the Exchange Act at
the time of such revision or amendment, cause any material increase in the
benefits accruing to participants under the Plan.
14.2 Stockholder Approval. If any amendment requiring stockholder approval
under Section of the Plan is made subsequent to the first registration of any
class of equity security by the Company under Section 12 of the Exchange Act,
such stockholder approval shall be solicited as described in Section of the
Plan.
14.3 Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted, and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares.
15.1 General Compliance Requirement. Shares shall not be issued pursuant to
the exercise of an Option or a Sale unless the exercise of such Option or
consummation of the Sale and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, applicable state securities
laws, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange (including NASDAQ) upon which the Shares
may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
15.2 Investment Intent Warranty. As a condition to the exercise of an
Option or a Sale, the Company may require the person exercising such Option or
to whom Shares are being Sold to represent and warrant at the time of any such
exercise or Sale that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve months before or after
the date the Plan is adopted. If such stockholder approval is obtained at a duly
held stockholders' meeting, it may be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company, such holders
being present or represented and entitled to vote thereon. If and in the event
that the Company registers any class of any equity security pursuant to Section
12 of the Exchange Act, the approval of such stockholders of the Company shall
be obtained as follows:
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16.1 Solicitation. Approval shall be solicited substantially in accordance
with Section 14(a) of the Exchange Act and the rules and regulations promulgated
thereunder, or solicited after the Company has furnished in writing to the
holders entitled to vote substantially the same information concerning the Plan
as that which would be required by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is furnished.
16.2 Time. Approval shall be obtained at or prior to the first annual
meeting of stockholders held subsequent to the first registration of any class
of equity securities of the Company under Section 12 of the Exchange Act.
16.3 If by Written Consent: Compliance with State Law. If such stockholder
approval is obtained by written consent, it must be obtained by the written
consent of stockholders of the Company in compliance with the requirements of
applicable state law.
17. Six Month Holding Period for Affiliates. If the Company registers any class
of any equity security pursuant to Section 12 of the Exchange Act, then from the
effective date of such registration until six (6) months after the termination
of such registration (the Public Period), these limits will apply to each
officer, director and beneficial owner of ten percent (10%) or more of any class
of equity securities of the Company (Affiliates.) During the Public Period, any
Affiliate shall hold Shares Sold hereunder at least six months from the date of
Sale. During the Public Period, at least six months must elapse from the date of
grant of an Option to an Affiliate to the date the Affiliate disposes of the
Shares acquired upon exercise of the Option, or (if the Option is disposed of
other than by exercise) to the date of disposition of the Option itself.
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Exhibit 99.2
DIGIMARC CORPORATION
RESTATED 1999 STOCK INCENTIVE PLAN
----------------------------------
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
--------------------
attract and retain the best available personnel, to provide additional incentive
to Employees, Directors and Consultants and to promote the success of the
Company's business.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(c) "Award" means the grant of an Option, SAR, Dividend Equivalent
-----
Right, Restricted Stock, Performance Unit, Performance Share, or other right or
benefit under the Plan.
(d) "Award Agreement" means the written agreement evidencing the grant
---------------
of an Award executed by the Company and the Grantee, including any amendments
thereto.
(e) "Board" means the Board of Directors of the Company.
-----
(f) "Code" means the Internal Revenue Code of 1986, as amended.
----
(g) "Committee" means any committee appointed by the Board to
---------
administer the Plan.
(h) "Common Stock" means the common stock of the Company.
------------
(i) "Company" means Digimarc Corporation, a Delaware corporation.
-------
(j) "Consultant" means any person (other than an Employee or a
----------
Director, solely with respect to rendering services in such person's capacity as
a Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(k) "Continuous Service" means that the provision of services to the
------------------
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entity, or any successor, in any capacity of
Employee, Director or Consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity
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of Employee, Director or Consultant (except as otherwise provided in the Award
Agreement). An approved leave of absence shall include sick leave, military
leave, or any other authorized personal leave. For purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.
(l) "Director" means a member of the Board or the board of directors
--------
of any Related Entity.
(m) "Disability" means that a Grantee would qualify for benefit
----------
payments under the long-term disability policy of the Company or the Related
Entity to which the Grantee provides services regardless of whether the Grantee
is covered by such policy
(n) "Dividend Equivalent Right" means a right entitling the Grantee to
-------------------------
compensation measured by dividends paid with respect to Common Stock.
(o) "Employee" means any person, including an Officer or Director, who
--------
is an employee of the Company or any Related Entity. The payment of a director's
fee by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(q) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price was
reported on that date, on the last trading date on which a closing price was
reported) on the stock exchange determined by the Plan Administrator to be the
primary market for the Common Stock or the Nasdaq National Market, whichever is
applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Plan Administrator deems reliable; or
(ii) In the absence of an established market for the Common Stock
of the type described in (i), above, the Fair Market Value thereof shall be
determined by the Plan Administrator in good faith.
(r) "Grantee" means an Employee, Director or Consultant who receives
-------
an Award pursuant to an Award Agreement under the Plan.
(s) "Immediate Family" means any child, stepchild, grandchild, parent,
----------------
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive
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relationships, any person sharing the Grantee's household (other than a tenant
or employee), a trust in which these persons have more than fifty percent (50%)
of the beneficial interest, a foundation in which these persons (or the Grantee)
control the management of assets, and any other entity in which these persons
(or the Grantee) own more than fifty percent (50%) of the voting interests.
(t) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(u) "Non-Qualified Stock Option" means an Option not intended to
--------------------------
qualify as an Incentive Stock Option.
(v) "Officer" means a person who is an officer of the Company or a
-------
Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
(w) "Option" means an option to purchase Shares pursuant to an Award
------
Agreement granted under the Plan.
(x) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(y) "Performance Shares" means Shares or an Award denominated in
------------------
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Plan Administrator.
(z) "Performance Units" means an Award which may be earned in whole
-----------------
or in part upon attainment of performance criteria established by the Plan
Administrator and which may be settled for cash, Shares or other securities or a
combination of cash, Shares or other securities as established by the Plan
Administrator.
(aa) "Plan" means this 1999 Stock Incentive Plan.
----
(bb) "Plan Administrator" means either the Board or a committee of the
------------------
Board that is responsible for the administration of the Plan as is designated
from time to time by resolution of the Board.
(cc) "Registration Date" means the first to occur of (i) the closing
-----------------
of the first sale to the general public of (A) the Common Stock or (B) the same
class of securities of a successor corporation (or its Parent) issued pursuant
to a Corporate Transaction in exchange for or in substitution of the Common
Stock, pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended; and (ii) in the event of a Corporate Transaction, the date of the
consummation of the Corporate Transaction if the same class of securities of the
successor corporation (or its Parent) issuable in such Corporate Transaction
shall have been sold to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange
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Commission under the Securities Act of 1933, as amended on or prior to the date
of consummation of such Corporate Transaction.
(dd) "Related Entity" means any Parent, Subsidiary and any business,
--------------
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
(ee) "Restricted Stock" means Shares issued under the Plan to the
----------------
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Plan Administrator.
(ff) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
----------
or any successor thereto.
(gg) "SAR" means a stock appreciation right entitling the Grantee to
---
Shares or cash compensation, as established by the Plan Administrator, measured
by appreciation in the value of Common Stock.
(hh) "Share" means a share of the Common Stock.
-----
(ii) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan.
-------------------------
(a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards is
1,500,000 Shares, increased by (i) any Shares available for future Awards under
the Company's 1995 Stock Incentive Plan as of the Registration Date, (ii) any
Shares that are represented by Awards under the Company's 1995 Stock Incentive
Plan which are forfeited, expire or are cancelled without delivery of Shares or
which result in the forfeiture of Shares back to the Company on or after the
Registration Date, and (iii) an annual increase to be added on the first day of
the Company's fiscal year beginning in 2001 equal to three percent (3%) of the
fully-diluted number of Shares outstanding as of such date or a lesser number of
Shares determined by the Plan Administrator. Notwithstanding the foregoing,
subject to the provisions of Section 10, below, of the number of Shares
specified above, the maximum aggregate number of Shares available for grant of
Incentive Stock Options shall be 1,500,000 Shares, plus an annual increase to be
added on the first day of the Company's fiscal year beginning in 2001 equal to
the lesser of (x) 625,000 Shares, (y) three percent (3%) of the fully-diluted
number of Shares outstanding as of such date, or (z) a lesser number of Shares
determined by the Plan Administrator. For purposes of determining the
outstanding number of Shares under this Section 3(a), all outstanding classes of
securities of the Company, convertible notes, Awards and warrants that are
convertible or exercisable presently or in the future by the holder into Shares
(excluding options awarded under the Company's 1999 Employee Stock Purchase
Plan), shall be deemed to have been fully converted or exercised
(notwithstanding any limits on such conversions or exercises) into the number of
Shares represented by such securities,
4
<PAGE>
notes, Awards and warrants calculated using the treasury stock method. The
Shares to be issued pursuant to Awards may be authorized, but unissued, or
reacquired Common Stock.
(b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company upon exercise of an Award in order to satisfy the exercise price
for such Award or any withholding taxes due with respect to such Award, such
retained Shares subject to such Award shall become available for future issuance
under the Plan (unless the Plan has terminated). Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
4. Administration of the Plan.
--------------------------
(a) Plan Administrator.
------------------
(i) Administration with Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Awards to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board.
(ii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Awards to Employees or Consultants who are
- ---------
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. Subject to Applicable Laws, the Board may
authorize one or more Officers to grant such Awards and may limit such authority
as the Board determines from time to time.
(iii) Administration Errors. In the event an Award is granted in
---------------------
a manner inconsistent with the provisions of this subsection (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Plan Administrator. Subject to Applicable Laws and
--------------------------------
the provisions of the Plan (including any other powers given to the Plan
Administrator hereunder), and except as otherwise provided by the Board, the
Plan Administrator shall have the authority, in its discretion:
5
<PAGE>
(i) to select the Employees, Directors and Consultants to whom
Awards may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the
Plan;
(v) to determine the terms and conditions of any Award granted
hereunder;
(vi) to amend the terms of any outstanding Award granted under
the Plan, provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;
(vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan, including without limitation, any notice of Award
or Award Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with the
provisions of the Plan; and
(ix) to take such other action, not inconsistent with the terms
of the Plan, as the Plan Administrator deems appropriate.
5. Eligibility. Awards other than Incentive Stock Options may be granted
-----------
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Plan
Administrator may determine from time to time.
6. Terms and Conditions of Awards.
------------------------------
(a) Type of Awards. The Plan Administrator is authorized under the
--------------
Plan to award any type of arrangement to an Employee, Director or Consultant
that is not inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Shares, (ii) an Option, a SAR or
similar right with a fixed or variable price related to the Fair Market Value of
the Shares and with an exercise or conversion privilege related to the passage
of time, the occurrence of one or more events, or the satisfaction of
performance criteria or other
6
<PAGE>
conditions, or (iii) any other security with the value derived from the value of
the Shares. Such awards include, without limitation, Options, SARs, sales or
bonuses of Restricted Stock, Dividend Equivalent Rights, Performance Units or
Performance Shares, and an Award may consist of one such security or benefit, or
two (2) or more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the Award
--------------------
Agreement. In the case of an Option, the Option shall be designated as either an
Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar year (under all
plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options, to the extent of the Shares covered thereby in excess of the foregoing
limitation, shall be treated as Non-Qualified Stock Options. For this purpose,
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares shall be determined as of
the date the Option with respect to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the Plan
-------------------
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Plan Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Plan Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(d) Acquisitions and Other Transactions. The Plan Administrator may
-----------------------------------
issue Awards under the Plan in settlement, assumption or substitution for,
outstanding awards or obligations to grant future awards in connection with the
Company or a Related Entity acquiring another entity, an interest in another
entity or an additional interest in a Related Entity whether by merger, stock
purchase, asset purchase or other form of transaction.
(e) Deferral of Award Payment. The Plan Administrator may establish
-------------------------
one or more programs under the Plan to permit selected Grantees the opportunity
to elect to defer receipt of consideration upon exercise of an Award,
satisfaction of performance criteria, or other event that absent the election
would entitle the Grantee to payment or receipt of Shares or other consideration
under an Award. The Plan Administrator may establish the election procedures,
the timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the Plan
Administrator deems advisable for the administration of any such deferral
program.
7
<PAGE>
(f) Award Exchange Programs. The Plan Administrator may establish one
-----------------------
or more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as determined by the Plan Administrator from time to time.
(g) Separate Programs. The Plan Administrator may establish one or
-----------------
more separate programs under the Plan for the purpose of issuing particular
forms of Awards to one or more classes of Grantees on such terms and conditions
as determined by the Plan Administrator from time to time.
(h) Early Exercise. The Award Agreement may, but need not, include a
--------------
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be subject
to a repurchase right in favor of the Company or a Related Entity or to any
other restriction the Plan Administrator determines to be appropriate.
(i) Term of Award. The term of each Award shall be the term stated in
-------------
the Award Agreement, provided, however, that the term of an Incentive Stock
Option shall be no more than ten (10) years from the date of grant thereof.
However, in the case of an Incentive Stock Option granted to a Grantee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Award Agreement.
(j) Transferability of Awards. Incentive Stock Options may not be
-------------------------
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's Incentive
Stock Option in the event of the Grantee's death on a beneficiary designation
form provided by the Plan Administrator. Other Awards may be transferred by gift
or through a domestic relations order to members of the Grantee's Immediate
Family to the extent provided in the Award Agreement or in the manner and to the
extent determined by the Plan Administrator.
(k) Time of Granting Awards. The date of grant of an Award shall for
-----------------------
all purposes be the date on which the Plan Administrator makes the determination
to grant such Award, or such other date as is determined by the Plan
Administrator. Notice of the grant determination shall be given to each
Employee, Director or Consultant to whom an Award is so granted within a
reasonable time after the date of such grant.
7. Award Exercise or Purchase Price, Consideration, and Taxes.
----------------------------------------------------------
(a) Exercise or Purchase Price. The exercise or purchase price, if
--------------------------
any, for an Award shall be as follows:
8
<PAGE>
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant; or
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than fifty percent (50%) of the Fair Market
Value per Share on the date of grant unless otherwise determined by the Plan
Administrator.
(iii) In the case of other Awards, such price as is determined by
the Plan Administrator.
(iv) Notwithstanding the foregoing provisions of this Section
7(a), in the case of an Award issued pursuant to Section 6(d), above, the
exercise or purchase price for the Award shall be determined in accordance with
the principles of Section 424(a) of the Code.
(b) Consideration. Subject to Applicable Laws, the consideration to be
-------------
paid for the Shares to be issued upon exercise or purchase of an Award including
the method of payment, shall be determined by the Plan Administrator (and, in
the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Plan Administrator
may determine, the Plan Administrator is authorized to accept as consideration
for Shares issued under the Plan the following, provided that the portion of the
consideration equal to the par value of the Shares must be paid in cash or other
legal consideration permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Plan Administrator
determines as appropriate;
(iv) if the exercise or purchase occurs on or after the
Registration Date, surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Plan Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award shall
be exercised (but only to the extent that such exercise of the Award would not
result in an
9
<PAGE>
accounting compensation charge with respect to the Shares used to pay the
exercise price unless otherwise determined by the Plan Administrator);
(v) with respect to Options, if the exercise occurs on or
after the Registration Date, payment through a broker-dealer sale and remittance
procedure pursuant to which the Grantee (A) shall provide written instructions
to a Company designated brokerage firm to effect the immediate sale of some or
all of the purchased Shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased Shares and (B) shall provide written
directives to the Company to deliver the certificates for the purchased Shares
directly to such brokerage firm in order to complete the sale transaction; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any Grantee
-----
or other person until such Grantee or other person has made arrangements
acceptable to the Plan Administrator for the satisfaction of any foreign,
federal, state, or local income and employment tax withholding obligations,
including, without limitation, obligations incident to the receipt of Shares or
the disqualifying disposition of Shares received on exercise of an Incentive
Stock Option. Upon exercise of an Award, the Company shall withhold or collect
from Grantee an amount sufficient to satisfy such tax obligations.
8. Exercise of Award.
-----------------
(a) Procedure for Exercise; Rights as a Stockholder.
-----------------------------------------------
(i) Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the Plan Administrator under
the terms of the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to pay
the purchase price as provided in Section 7(b)(v). Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Award. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in the Award Agreement or Section 10, below.
(b) Exercise of Award Following Termination of Continuous Service.
-------------------------------------------------------------
10
<PAGE>
(i) An Award may not be exercised after the termination date
of such Award set forth in the Award Agreement and may be exercised following
the termination of a Grantee's Continuous Service only to the extent provided in
the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an
Award following the termination of the Grantee's Continuous Service for a
specified period, the Award shall terminate to the extent not exercised on the
last day of the specified period or the last day of the original term of the
Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the
extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Service shall convert automatically to a Non-Qualified Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its terms
for the period specified in the Award Agreement.
9. Conditions Upon Issuance of Shares.
----------------------------------
(a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Options
and SARs may be granted to any Employee in any fiscal year of the Company, as
well as any other terms that the Plan Administrator determines require
adjustment shall be proportionately adjusted for (i) any increase or decrease in
the number of issued Shares resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Shares, or similar event
affecting the Shares, (ii) any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company, or (iii)
as the Plan Administrator may determine in its discretion, any other transaction
with respect to Common Stock to which Section 424(a) of the Code applies or any
similar transaction; provided, however that conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the Plan
Administrator and its determination shall be final, binding and conclusive.
Except as the Plan Administrator determines, no issuance by the Company of
shares of stock of any class, or
11
<PAGE>
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason hereof shall be made with respect to, the number or price
of Shares subject to an Award.
11. Effective Date and Term of Plan. The Plan shall become effective upon
-------------------------------
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 16, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
12. Amendment, Suspension or Termination of the Plan.
------------------------------------------------
(a) The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 11, above) shall not affect Awards already
granted, and such Awards shall remain in full force and effect as if the Plan
had not been amended, suspended or terminated, unless mutually agreed otherwise
between the Grantee and the Plan Administrator, which agreement must be in
writing and signed by the Grantee and the Company.
13. Reservation of Shares.
----------------------
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
14. No Effect on Terms of Employment/Consulting Relationship. The Plan
--------------------------------------------------------
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause.
15. No Effect on Retirement and Other Benefit Plans. Except as
-----------------------------------------------
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or
12
<PAGE>
amount of benefits is related to level of compensation. The Plan is not a
"Retirement Plan" or "Welfare Plan" under the Employee Retirement Income
Security Act of 1974, as amended.
16. Stockholder Approval. The grant of Incentive Stock Options under the
--------------------
Plan shall be subject to approval of the Plan by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder approval shall
be obtained in the degree and manner required under Applicable Laws. The Plan
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is not
obtained within the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Non-Qualified
Stock Options.
13
<PAGE>
Exhibit 99.3
DIGIMARC CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
(Amended and Restated on November 5, 1999)
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of Digimarc Corporation.
1. Purpose. The purpose of the Plan is to provide employees of
-------
the Company and its Designated Parents or Subsidiaries with an opportunity to
purchase Common Stock of the Company through accumulated payroll deductions. It
is the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Code. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.
2. Definitions. As used herein, the following definitions shall
-----------
apply:
(a) "Applicable Laws" means the legal requirements relating to the
administration of employee stock purchase plans, if any, under applicable
provisions of federal securities laws, state corporate and securities laws, the
Code, the rules of any applicable stock exchange or national market system, and
the rules of any foreign jurisdiction applicable to participation in the Plan by
residents therein.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Change in Control" means a change in ownership or control of the
-----------------
Company effected through the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Common Stock" means the common stock of the Company.
------------
(f) "Company" means Digimarc Corporation, a Delaware corporation.
-------
(g) "Compensation" means an Employee's base salary and other cash
------------
payments for commissions, overtime, bonuses, annual awards, and other cash
incentive payments from the Company or one or more Designated Parents or
Subsidiaries, including such amounts as are deferred by the Employee (i) under a
qualified cash or deferred arrangement described in Section 401(k) of the Code,
or (ii) to a plan qualified under Section 125 of the Code. Compensation does
1
<PAGE>
not include reimbursements or other expense allowances, fringe benefits (cash or
noncash), moving expenses, deferred compensation, contributions (other than
contributions described in the first sentence) made on the Employee's behalf by
the Company or one or more Designated Parents or Subsidiaries under any employee
benefit or welfare plan now or hereafter established, and any other payments not
specifically referenced in the first sentence.
(h) "Corporate Transaction" means any of the following transactions:
---------------------
(1) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose
of which is to change the state in which the Company is incorporated;
(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital
stock of the Company's subsidiary corporations) in connection with
complete liquidation or dissolution of the Company;
(3) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from those
who held such securities immediately prior to such merger; or
(4) acquisition by any person or related group of persons
(other than the Company or by a Company-sponsored employee benefit
plan) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Company's outstanding
securities (whether or not in a transaction also constituting a Change
in Control), but excluding any such transaction that the Plan
Administrator determines shall not be a Corporate Transaction
(i) "Designated Parents or Subsidiaries" means the Parents or
----------------------------------
Subsidiaries which have been designated by the Plan Administrator from time to
time as eligible to participate in the Plan.
(j) "Effective Date" means the effective date of the Registration
--------------
Statement relating to the Company's initial public offering of its Common Stock.
However, should any Designated Parent or Subsidiary become a participating
company in the Plan after such date, then such entity shall designate a separate
Effective Date with respect to its employee-participants.
(k) "Employee" means any individual, including an officer or director,
--------
who is an employee of the Company or a Designated Parent or Subsidiary for
purposes of Section 423 of the Code. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the individual's employer.
Where the period of leave exceeds ninety (90) days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship
2
<PAGE>
will be deemed to have terminated on the ninety-first (91st) day of such leave,
for purposes of determining eligibility to participate in the Plan.
(l) "Enrollment Date" means the first day of each Offer Period.
---------------
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(n) "Exercise Date" means the last day of each Purchase Period.
-------------
(o) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(1) Where there exists a public market for the Common stock,
the Fair Market Value shall be (A) the closing price for a share of
Common Stock for the last market trading day prior to the time of the
determination (or, if no closing price was reported on that date, on
the last trading date on which a closing price was reported) on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock or the Nasdaq National Market, whichever
is applicable or (B) if the Common Stock is not traded on any such
exchange or national market system, the average of the closing bid and
asked prices of a share of Common Stock on the Nasdaq Small Cap Market
for the day prior to the time of the determination (or, if no such
prices were reported on that date, on the last date on which such
prices were reported), in each case, as reported in The Wall Street
Journal or such other source as the Plan Administrator deems reliable;
or
(2) In the absence of an established market of the type
described in (1), above, for the Common Stock, the Fair Market Value
thereof shall be determined by the Plan Administrator in good faith.
(p) "Offer Period" means an Offer Period established pursuant to
------------
Section 4 hereof.
(q) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(r) "Participant" means an Employee of the Company or Designated
-----------
Parent or Subsidiary who is actively participating in the Plan.
(s) "Plan" means this Employee Stock Purchase Plan.
----
(t) "Plan Administrator" means either the Board or a committee of the
------------------
Board that is responsible for the administration of the Plan as is designated
from time to time by resolution of the Board.
(u) "Purchase Period" means a period of approximately six months,
---------------
commencing on June 1 and December 1 of each year and terminating on the next
following November 30 or
3
<PAGE>
May 31, respectively; provided, however, that the first Purchase Period shall
commence on the Effective Date and shall end on May 31, 2000.
(u) "Purchase Period" means a period specified as such pursuant to
---------------
Section 4(b) hereof.
(v) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(w) "Reserves" means the sum of the number of shares of Common
--------
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(x) "Subsidiary" means a "subsidiary corporation,"
----------
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Eligibility.
-----------
(a) General. Any individual who is an Employee on a given Enrollment
-------
Date shall be eligible to participate in the Plan for the Offer Period
commencing with such Enrollment Date.
(b) Limitations on Grant and Accrual. Any provisions of the Plan to
--------------------------------
the contrary notwithstanding, no Employee shall be granted an option under the
Plan (i) if, immediately after the grant, such Employee (taking into account
stock owned by any other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of any
Parent or Subsidiary, or (ii) which permits the Employee's rights to purchase
stock under all employee stock purchase plans of the Company and its Parents or
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time. The determination of the accrual of the right to
purchase stock shall be made in accordance with Section 423(b)(8) of the Code
and the regulations thereunder.
(c) Other Limits on Eligibility. Notwithstanding Subsection (a),
---------------------------
above, the following Employees shall not be eligible to participate in the Plan
for any relevant Offer Period: (i) Employees whose customary employment is fewer
than 20 hours per week; (ii) Employees whose customary employment is for not
more than 5 or fewer months in any calendar year; (iii) Employees who have been
employed for 10 or fewer days; and (iv) Employees who are subject to rules or
laws of a foreign jurisdiction that prohibit or make impractical the
participation of such Employees in the Plan.
4
<PAGE>
4. Offer Periods.
-------------
(a) The Plan shall be implemented through overlapping or consecutive
Offer Periods until such time as the Plan shall have been terminated in
accordance with Section 19 or 22 hereof. The maximum duration of an Offer Period
shall be twenty-seven (27) months. Initially, the Plan shall be implemented
through overlapping Offer Periods of twenty-four (24) months' duration
commencing each June 1 and December 1 following the Effective Date (except that
the initial Offer Period shall commence on the Effective Date and shall end on
November 30, 2001).
(b) A Participant shall be granted a separate option for each Offer
Period in which he or she participates. The option shall be granted on the
Enrollment Date and shall be automatically exercised in successive installments
on the Exercise Dates ending within the Offer Period.
(c) An Employee may participate in only one Offer Period at a time.
Accordingly, except as provided in Section 4(d), an Employee who wishes to join
a new Offer Period must withdraw from the current Offer Period in which the
Employee is participating and must also enroll in the new Offer Period prior to
the Enrollment Date for that Offer Period.
(d) If on the first day of any Purchase Period in an Offer Period in
which a Participant is participating, the Fair Market Value of the Common Stock
is less than the Fair Market Value of the Common Stock on the Enrollment Date of
the Offer Period (after taking into account any adjustment during the Offer
Period pursuant to Section 18(a)), the Offer Period shall be terminated
automatically and the Participant shall be enrolled automatically in the new
Offer Period which has its first Purchase Period commencing on that date,
provided the Participant is eligible to participate in the Plan on that date and
has not elected to terminate participation in the Plan.
(e) Except as specifically provided herein, the acquisition of Common
Stock through participation in the Plan for any Offer Period shall neither limit
nor require the acquisition of Common Stock by a Participant in any subsequent
Offer Period.
5. Participation.
-------------
(a) An eligible Employee may become a Participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the designated payroll office
of the Company at least ten (10) business days prior to the Enrollment Date for
the Offer Period in which such participation will commence, unless a later time
for filing the subscription agreement is set by the Plan Administrator for all
eligible Employees with respect to a given Offer Period.
(b) Payroll deductions for a Participant shall commence with
the first partial or full payroll period beginning on the Enrollment Date and
shall end on the last complete payroll period during the Offer Period, unless
sooner terminated by the Participant as provided in Section 10.
5
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a Participant files a subscription agreement,
the Participant shall elect to have payroll deductions made during the Offer
Period in amounts between one percent (1%) and not exceeding fifteen percent
(15%) of the Compensation which the Participant receives during the Offer
Period.
(b) All payroll deductions made for a Participant shall be
credited to the Participant's account under the Plan and will be withheld in
whole percentages only. A Participant may not make any additional payments into
such account.
(c) A Participant may discontinue participation in the Plan as
provided in Section 10, or may increase or decrease the rate of payroll
deductions during the Offer Period by completing and filing with the Company a
change of status notice in the form of Exhibit B to this Plan authorizing an
increase or decrease in the payroll deduction rate. Any increase or decrease in
the rate of a Participant's payroll deductions shall be effective with the first
full payroll period commencing ten (10) business days after the Company's
receipt of the change of status notice unless the Company elects to process a
given change in participation more quickly. A Participant's subscription
agreement (as modified by any change of status notice) shall remain in effect
for successive Offer Periods unless terminated as provided in Section 10. The
Plan Administrator shall be authorized to limit the number of payroll deduction
rate changes during any Offer Period.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
Participant's payroll deductions may be decreased to 0% at such time during any
Purchase Period which is scheduled to end during the current calendar year (the
"Current Purchase Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such Participant's subscription
agreement, as amended, at the beginning of the first Purchase Period which is
scheduled to end in the following calendar year, unless terminated by the
Participant as provided in Section 10.
7. Grant of Option. On the Enrollment Date, each Participant shall be
---------------
granted an option to purchase (at the applicable Purchase Price) three thousand
(3,000) shares of the Common Stock, subject to adjustment as provided in Section
18 hereof; provided (i) that such option shall be subject to the limitations set
forth in Sections 3(b), 6 and 12 hereof, and (ii) the maximum number of shares
of Common Stock a Participant shall be permitted to purchase in any Purchase
Period shall be seven hundred fifty (750) shares, subject to adjustment as
provided in Section 18 hereof. Exercise of the option shall occur as provided in
Section 8, unless the Participant has withdrawn pursuant to Section 10, and the
option, to the extent not exercised, shall expire on the last day of the Offer
Period.
8. Exercise of Option. Unless a Participant withdraws from the
------------------
Plan as provided in Section 10, below, the Participant's option for the purchase
of shares will be exercised
6
<PAGE>
automatically on each Exercise Date, by applying the accumulated payroll
deductions in the Participant's account to purchase the number of full shares
subject to the option by dividing such Participant's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price. No fractional
shares will be purchased; any payroll deductions accumulated in a Participant's
account which are not sufficient to purchase a full share shall be carried over
to the next Purchase Period or Offer Period, whichever applies, or returned to
the Participant, if the Participant withdraws from the Plan. Notwithstanding the
foregoing, any amount remaining in a Participant's account following the
purchase of shares on the Exercise Date due to the application of Section
423(b)(8) of the Code or Section 7, above, shall be returned to the Participant
and shall not be carried over to the next Offer Period. During a Participant's
lifetime, a Participant's option to purchase shares hereunder is exercisable
only by the Participant.
9. Delivery. Upon receipt of a request from a Participant after each
--------
Exercise Date on which a purchase of shares occurs, the Company shall arrange
the delivery to such Participant, as promptly as practicable, of a certificate
representing the shares purchased upon exercise of the Participant's option.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A Participant may either (i) withdraw all but not less than all
the payroll deductions credited to the Participant's account and not yet used to
exercise the Participant's option under the Plan or (ii) terminate future
payroll deductions, but allow accumulated payroll deductions to be used to
exercise the Participant's option under the Plan at any time by giving written
notice to the Company in the form of Exhibit B to this Plan. If the Participant
elects withdrawal alternative (i) described above, all of the Participant's
payroll deductions credited to the Participant's account will be paid to such
Participant as promptly as practicable after receipt of notice of withdrawal,
such Participant's option for the Offer Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offer Period. If the Participant elects withdrawal alternative (ii)
described above, no further payroll deductions for the purchase of shares will
be made during the Offer Period, all of the Participant's payroll deductions
credited to the Participant's account will be applied to the exercise of the
Participant's option on the next Exercise Date, and after such Exercise Date,
such Participant's option for the Offer Period will be automatically terminated.
If a Participant withdraws from an Offer Period, payroll deductions will not
resume at the beginning of the succeeding Offer Period unless the Participant
delivers to the Company a new subscription agreement.
(b) Upon termination of a Participant's employment relationship
(as described in Section 2(k)) at any time prior to the next scheduled Exercise
Date, the payroll deductions credited to such Participant's account during the
Offer Period but not yet used to exercise the option will be returned to such
Participant or, in the case of his/her death, to the person or persons entitled
thereto under Section 14, and such Participant's option will be automatically
terminated.
7
<PAGE>
11. Interest. No interest shall accrue on the payroll deductions
--------
credited to a Participant's account under the Plan.
12. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 18, the maximum number of shares of Common Stock
which shall be made available for sale under the Plan shall be 625,000 shares,
plus an annual increase to be added on the first day of the Company's fiscal
year beginning in 2001 equal to the lesser of (i) 250,000 shares, (ii) one
percent (1%) of the fully-diluted number of outstanding shares on such date, or
(iii) a lesser number of shares determined by the Plan Administrator. For
purposes of determining the outstanding number of Shares under this Section
12(a), all outstanding classes of securities of the Company, convertible notes,
stock options, other equity compensation arrangements (excluding options granted
under this Plan), and warrants that are convertible or exercisable presently or
in the future by the holder into Shares, shall be deemed to have been fully
converted or exercised (notwithstanding any limits on such conversions or
exercises) into the number of Shares represented by such securities, notes,
stock options, other equity compensation arrangements, and warrants calculated
using the treasury stock method. If on a given Exercise Date the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Plan Administrator shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) A Participant will have no interest or voting right in
shares covered by the Participant's option until such shares are actually
purchased on the Participant's behalf in accordance with the applicable
provisions of the Plan. No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date of such purchase.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his or her spouse.
13. Administration. The Plan shall be administered by the Plan
--------------
Administrator which shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Plan Administrator shall, to the full
extent permitted by Applicable Law, be final and binding upon all persons.
14. Designation of Beneficiary.
--------------------------
(a) Each Participant will file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the Participant's account
under the Plan in the event of such Participant's death. If a Participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.
8
<PAGE>
(b) Such designation of beneficiary may be changed by the Participant
(and the Participant's spouse, if any) at any time by written notice. In the
event of the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living (or in existence) at the time of such
Participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Plan
Administrator), the Plan Administrator shall deliver such shares and/or cash to
the spouse (or domestic partner, as determined by the Administrator) of the
Participant, or if no spouse (or domestic partner) is known to the Plan
Administrator, then to the issue of the Participant, such distribution to be
made per stirpes (by right of representation), or if no issue are known to the
Plan Administrator, then to the heirs at law of the Participant determined in
accordance with Section 27.
15. Transferability. Neither payroll deductions credited to a
---------------
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Plan Administrator may treat such act as an election to
withdraw funds from an Offer Period in accordance with Section 10.
16. Use of Funds. All payroll deductions received or held by the
------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
-------
Participant in the Plan. Statements of account will be given to Participants at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization; Corporate
-----------------------------------------------------
Transactions.
- ------------
(a) Adjustments Upon Changes in Capitalization. Subject to any
------------------------------------------
required action by the stockholders of the Company, the Reserves, the Purchase
Price, as well as any other terms that the Plan Administrator determines require
adjustment shall be proportionately adjusted for (i) any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, (ii) any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company, or
(iii) as the Plan Administrator may determine in its discretion, any other
transaction with respect to Common Stock to which Section 424(a) of the Code
applies; provided, however that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Plan Administrator and its
determination shall be final, binding and conclusive. Except as the Plan
Administrator determines, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
9
<PAGE>
affect, and no adjustment by reason hereof shall be made with respect to, the
Reserves and the Purchase Price.
(b) Corporate Transactions. In the event of a proposed Corporate
----------------------
Transaction, each option under the Plan shall be assumed by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Plan Administrator determines, in the exercise of its sole discretion and in
lieu of such assumption, to shorten the Offer Period then in progress by setting
a new Exercise Date (the "New Exercise Date"). If the Plan Administrator
shortens the Offer Period then in progress in lieu of assumption in the event of
a Corporate Transaction, the Plan Administrator shall notify each Participant in
writing, at least ten (10) days prior to the New Exercise Date, that the
Exercise Date for the Participant's option has been changed to the New Exercise
Date and that the Participant's option will be exercised automatically on the
New Exercise Date, unless prior to such date the Participant has withdrawn from
the Offer Period as provided in Section 10. For purposes of this Subsection, an
option granted under the Plan shall be deemed to be assumed if, in connection
with the Corporate Transaction, the option is replaced with a comparable option
with respect to shares of capital stock of the successor corporation or Parent
thereof. The determination of option comparability shall be made by the Plan
Administrator prior to the Corporate Transaction and its determination shall be
final, binding and conclusive on all persons.
19. Amendment or Termination.
------------------------
(a) The Plan Administrator may at any time and for any reason
terminate or amend the Plan. Except as provided in Section 18, no such
termination can affect options previously granted, provided that an Offer Period
may be terminated by the Plan Administrator on any Exercise Date if the Plan
Administrator determines that the termination of the Offer Period is in the best
interests of the Company and its stockholders. Except as provided in Section 18,
no amendment may make any change in any option theretofore granted which
adversely affects the rights of any Participant without the consent of affected
Participants. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other Applicable Law), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the Plan
Administrator shall be entitled to limit the frequency and/or number of changes
in the amount withheld during Offer Periods, change the length of Purchase
Periods within any Offer Period, determine the length of any future Offer
Period, whether future Offer Periods shall be consecutive or overlapping,
establish the exchange ratio applicable to amounts withheld in a currency other
than U.S. dollars, establish additional terms, conditions, rules or procedures
to accommodate the rules or laws of applicable foreign jurisdictions, permit
payroll withholding in excess of the amount designated by a Participant in order
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each Participant properly
correspond with amounts withheld from the
10
<PAGE>
Participant's Compensation, and establish such other limitations or procedures
as the Plan Administrator determines in its sole discretion advisable and which
are consistent with the Plan.
20. Notices. All notices or other communications by a Participant to
-------
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Plan Administrator at the
location, or by the person, designated by the Plan Administrator for the receipt
thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all Applicable
Laws and shall be further subject to the approval of counsel for the Company
with respect to such compliance. As a condition to the exercise of an option,
the Company may require the Participant to represent and warrant at the time of
any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned Applicable Laws. In addition, no options shall be exercised
or shares issued hereunder before the Plan shall have been approved by
stockholders of the Company as provided in Section 23.
22. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 19.
23. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under Applicable Laws.
24. No Employment Rights. The Plan does not, directly or indirectly,
--------------------
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company or
a Designated Parent or Subsidiary, and it shall not be deemed to interfere in
any way with such employer's right to terminate, or otherwise modify, an
employee's employment at any time.
25. No Effect on Retirement and Other Benefit Plans. Except as
-----------------------------------------------
specifically provided in a retirement or other benefit plan of the Company or a
Designated Parent or Subsidiary, participation in the Plan shall not be deemed
compensation for purposes of computing benefits or contributions under any
retirement plan of the Company or a Designated Parent or Subsidiary, and shall
not affect any benefits under any other benefit plan of any kind or any benefit
plan subsequently instituted under which the availability or amount of benefits
is related to level of compensation. The Plan is not a "Retirement Plan" or
"Welfare Plan" under the Employee Retirement Income Security Act of 1974, as
amended.
26. Effect of Plan. The provisions of the Plan shall, in accordance
--------------
with its terms, be binding upon, and inure to the benefit of, all successors of
each Participant, including,
11
<PAGE>
without limitation, such Participant's estate and the executors, administrators
or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy
or representative of creditors of such Participant.
27. Governing Law. The Plan is to be construed in accordance with and
-------------
governed by the internal laws of the State of Oregon without giving effect to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of Oregon to the rights
and duties of the parties, except to the extent the internal laws of the State
of Oregon are superseded by the laws of the United States. Should any provision
of the Plan be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
28. Dispute Resolution. The provisions of this Section 28 shall be the
------------------
exclusive means of resolving disputes arising out of or relating to the Plan.
The Company, the Grantee, and the Grantee's beneficiary pursuant to Section 14
(the "parties") shall attempt in good faith to resolve any disputes arising out
of or relating to the Plan by negotiation between individuals who have authority
to settle the controversy. Negotiations shall be commenced by either party by
notice of a written statement of the party's position and the name and title of
the individual who will represent the party. Within thirty (30) days of the
written notification, the parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to resolve the
dispute. If the dispute has not been resolved by negotiation, the parties agree
that any suit, action, or proceeding arising out of or relating to the Plan
shall be brought before the U.S. District Court, District of Oregon, and that
the parties shall submit to the jurisdiction of such court. If the U.S. District
Court, District of Oregon, does not have jurisdiction over the dispute, the
parties agree that any suit, action, or proceeding arising out of or related to
the Plan shall be brought before the Oregon Circuit Court, 4th Judicial
District, located in Portland, Oregon, and that the parties shall submit to the
jurisdiction of such court. The parties irrevocably waive, to the fullest extent
permitted by law, any objection the party may have to the laying of venue for
any such suit, action or proceeding brought in such courts. THE PARTIES ALSO
EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH
SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 28
shall for any reason be held invalid or unenforceable, it is the specific intent
of the parties that such provisions shall be modified to the minimum extent
necessary to make it or its application valid and enforceable.
12
<PAGE>
Exhibit A
<TABLE>
<CAPTION>
Digimarc Corporation 1999 Employee Stock Purchase Plan
SUBSCRIPTION AGREEMENT
Effective with the Offer Period beginning on:
[_] ESPP Effective Date [_] June 1, 200__ or [_] December 1, 200__
<S> <C>
1. Personal Information
Legal Name (Please Print) _________________________________________________________ __________________ _____________
(Last) (First) (MI)_ Location Department
Street Address_____________________________________________________________________ _________________________________
Daytime Telephone
City, State/Country, Zip___________________________________________________________ _________________________________
E-Mail Address
Social Security No. __ __ __ - __ __ - __ __ __ __ Employee I.D. No. ____________ _________________________________
Manager Mgr. Location
</TABLE>
2. Eligibility Any Employee whose customary employment is more than 20 hours
per week and more than 5 months per calendar year, who has been an Employee
for more than 10 days and who does not hold (directly or indirectly) five
percent (5%) or more of the combined voting power of the Company, a parent
or a subsidiary, whether in stock or options to acquire stock is eligible
to participate in the Digimarc Corporation 1999 Employee Stock Purchase
Plan (the "ESPP"); provided, however, that Employees who are subject to the
rules or laws of a foreign jurisdiction that prohibit or make impractical
the participation of such Employees in the ESPP are not eligible to
participate.
3. Definitions Each capitalized term in this Subscription Agreement shall
have the meaning set forth in the ESPP.
4. Subscription I hereby elect to participate in the ESPP and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the ESPP. I have received a complete copy of the
ESPP and a prospectus describing the ESPP and understand that my
participation in the ESPP is in all respects subject to the terms of the
ESPP. The effectiveness of this Subscription Agreement is dependent on my
eligibility to participate in the ESPP.
5. Payroll Deduction Authorization I hereby authorize payroll deductions from
my Compensation during the Offer Period in the percentage specified below
(payroll reductions may not exceed 15% of Compensation nor $21,250 per
calendar year):
- -------------------------------------------------------------------------------
Percentage to be Deducted (circle one)
1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%
- --------------------------------------------------------------------------------
6. ESPP Accounts and Purchase Price I understand that all payroll deductions
will be credited to my account under the ESPP. No additional payments may
be made to my account. No interest will be credited on funds held in the
account at any time including any refund of the account caused by
withdrawal from the ESPP. All payroll deductions shall be accumulated for
the purchase of Company Common Stock at the applicable Purchase Price
determined in accordance with the ESPP.
7. Withdrawal and Changes in Payroll Deduction I understand that I may
discontinue my participation in the ESPP at any time prior to an Exercise
Date as provided in Section 10 of the ESPP, but if I do not withdraw from
the ESPP, any accumulated payroll deductions will be applied automatically
to purchase Company Common Stock. I may increase or decrease the rate of my
payroll deductions in whole percentage increments to not less than one
percent (1%) on one occasion during any Purchase Period by completing and
timely filing a Change of Status Notice. Any increase or decrease will be
effective for the full payroll period occurring after ten (10) business
days from the Company's receipt of the Change of Status Notice.
A-1
<PAGE>
8. Perpetual Subscription I understand that this Subscription Agreement
shall remain in effect for successive Offer Periods until I withdraw from
participation in the ESPP, or termination of the ESPP.
9. Taxes I have reviewed the ESPP prospectus discussion of the federal tax
consequences of participation in the ESPP and consulted with tax
consultants as I deemed advisable prior to my participation in the ESPP. I
hereby agree to notify the Company in writing within thirty (30) days of
any disposition (transfer or sale) of any shares purchased under the ESPP
if such disposition occurs within two (2) years of the Enrollment Date (the
first day of the Offer Period during which the shares were purchased) or
within one (1) year of the Exercise Date (the date I purchased such
shares), and I will make adequate provision to the Company for foreign,
federal, state or other tax withholding obligations, if any, which arise
upon the disposition of the shares. In addition, the Company may withhold
from my Compensation any amount necessary to meet applicable tax
withholding obligations incident to my participation in the ESPP, including
any withholding necessary to make available to the Company any tax
deductions or benefits contingent on such withholding.
10. Designation of Beneficiary In the event of my death, I hereby designate
the following person or trust as my beneficiary to receive all payments and
shares due to me under the ESPP: [_] I am single [_] I am married
<TABLE>
<S> <C>
Beneficiary (please print) ________________________________________________________ Relationship to Beneficiary (if any)
(Last) (First) (MI)
Street Address ____________________________________________________________________ _________________________________
City, State/Country, Zip __________________________________________________________
</TABLE>
11. Termination of ESPP I understand that the Company has the right,
exercisable in its sole discretion, to amend or terminate the ESPP at any
time, and a termination may be effective as early as an Exercise Date
(after purchase of shares on such date) within each outstanding Offer
Period.
Date: ____________________ Employee Signature:___________________________
___________________________
spouse's signature (if
beneficiary is other than
spouse)
A-2
<PAGE>
Exhibit B
Digimarc Corporation 1999 Employee Stock Purchase Plan
CHANGE OF STATUS NOTICE
- --------------------------------------------------------------
Participant Name (Please Print)
- --------------------------------------------------------------
Social Security Number
================================================================================
Withdrawal From ESPP
I hereby withdraw from the Digimarc Corporation 1999 Employee Stock
Purchase Plan (the "ESPP") and agree that my option under the
applicable Offer Period will be automatically terminated and all
accumulated payroll deductions credited to my account will be refunded
to me or applied to the purchase of Common Stock depending on the
alternative indicated below. No further payroll deductions will be
made for the purchase of shares in the applicable Offer Period and I
shall be eligible to participate in a future Offer Period only by
timely delivery to the Company of a new Subscription Agreement.
[_] Withdrawal and Purchase of Common Stock
Payroll deductions will terminate, but your account balance will be
applied to purchase Common Stock on the next Exercise Date. Any
remaining balance will be refunded.
[_] Withdrawal Without Purchase of Common Stock
Entire account balance will be refunded to me and no Common Stock will
be purchased on the next Exercise Date provided this notice is
submitted to the Company ten (10) business days prior to the next
Exercise Date.
================================================================================
[_] Change in Payroll Deduction
I hereby elect to change my rate of payroll deduction under the ESPP
as follows (select one):
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage to be Deducted (circle one)
1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following rule under the ESPP applies to changing your payroll
deduction rate:
An increase or a decrease in payroll deduction will be effective
for the first full payroll period commencing no fewer than ten
(10) business days following the Company's receipt of this
notice, unless this change is processed more quickly.
================================================================================
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<PAGE>
<TABLE>
<S> <C> <C>
====================================================================================================================================
[_] Change of Beneficiary [_] I am single [_] I am married
This change of beneficiary shall terminate my previous beneficiary designation under the ESPP. In the event of my death, I
hereby designate the following person or trust as my beneficiary to receive all payments and shares due to me under the ESPP:
Beneficiary (please print) _______________________________________________________ Relationship to Beneficiary (if any)
(Last) (First) (MI)
Street Address ___________________________________________________________________ ___________________________________________
City, State/Country, Zip _________________________________________________________
====================================================================================================================================
Date: _________________________________ Employee Signature:_________________________________________________________________
--------------------------------------------------------------
spouse's signature (if beneficiary is other than spouse)
</TABLE>
B-1
