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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section240.14a-11(c) or Section240.14a-12
DIGIMARC CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed per Exchange Act Rules 14a-6(i)(4) and 0-11.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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DIGIMARC CORPORATION
19801 SW 72(ND) AVENUE, SUITE 250
TUALATIN, OREGON 97062
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Digimarc Corporation:
Notice is hereby given that a Special Meeting of Stockholders (Special
Meeting) of Digimarc Corporation, a Delaware corporation (Company) will be held
on Friday, July 14, 2000 at the offices of Morrison and Foerster, 425 Market
Street, San Francisco, California at 2:00 p.m., local time. The purposes of the
Special Meeting will be:
1. APPROVAL AND RATIFICATION OF AMENDMENTS TO THE 1999
STOCK INCENTIVE PLAN. To (a) increase the number of shares
reserved for issuance under the 1999 Stock Incentive Plan by
1,500,000 shares and increase the maximum number of shares by
which the number of shares reserved for issuance under the Plan
may be increased annually from 3% to 7% of the fully-diluted
number of shares outstanding as of that date or a lesser number of
shares determined by the board, (b) increase the maximum number of
shares by which the aggregate number of shares available for
issuance as incentive stock options may be increased each year
from the lesser of 625,000 shares, 3% of the number of
fully-diluted shares outstanding as of that date or a lesser
number of shares determined by the board to the lesser of
1,200,000 shares, 7% of the number of fully-diluted shares
outstanding as of that date or a lesser number of shares
determined by the board and (c) adopt a limit on the maximum
number of shares with respect to which options and stock
appreciation rights may be granted to any grantee in any fiscal
year of the Company and certain other administrative provisions to
comply with the performance-based compensation exception to the
deduction limit of Section 162(m) of the Internal Revenue Code of
1986, as amended;
2. OTHER BUSINESS. To transact such other business as may
properly come before the Special Meeting or any adjournment or
postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The Board of Directors has fixed the close
of business on June 9, 2000 as the record date for determining the stockholders
entitled to notice of and to vote at the Special Meeting or any adjournment or
postponement thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, WE
URGE YOU TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION
AND THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING. IF YOU SEND IN YOUR PROXY
CARD AND THEN DECIDE TO ATTEND THE SPECIAL MEETING TO VOTE YOUR SHARES IN
PERSON, YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE
PROCEDURES SET FORTH IN THE PROXY STATEMENT.
By Order of the Board of Directors,
/s/ Bruce Davis
Bruce Davis
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Tualatin, Oregon
June 21, 2000
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DIGIMARC CORPORATION
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
This Proxy Statement is being furnished to the stockholders of Digimarc
Corporation (Company), a Delaware corporation, on or about June 21, 2000, in
connection with the solicitation by the Company's Board of Directors (Board of
Directors) of proxies for use in voting at the Special Meeting of Stockholders
of the Company (Special Meeting) to be held on July 14, 2000, at 2:00 p.m.,
local time, at the offices of Morrison and Foerster, 425 Market Street, San
Francisco, California, and any adjournment or postponement thereof. The shares
represented by the proxies received, properly marked, dated, executed and not
revoked will be voted at the Special Meeting.
The close of business on June 9, 2000 has been fixed as the record date
(Record Date) for determining the holders of shares of the Company's common
stock (Common Stock) entitled to notice of and to vote at the Special Meeting.
As of the close of business on the Record Date, there were 12,953,686 shares of
Common Stock outstanding and entitled to vote at the Special Meeting.
Each outstanding share of Common Stock on the Record Date is entitled to one
vote on all matters. The required quorum for the Special Meeting is a majority
of the shares outstanding on the Record Date. There must be a quorum for the
Special Meeting to be held. Our transfer agent will tabulate votes cast in
person at the Special Meeting.
REVOCABILITY OF PROXY
You may revoke your proxy and change your vote an any time prior to voting
at the Special Meeting by:
- delivering to the Company (to the attention of E.K. Ranjit, the Company's
Secretary) a written notice of revocation or a duly executed proxy bearing
a later date, or
- attending the Special Meeting and voting in person.
SOLICITATION
This solicitation of proxies is being made by and paid for by the Company.
Besides this solicitation by mail, our directors, officers and other employees
may solicit proxies. Such persons will not receive any additional compensation
for assisting in the solicitation. We will also request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners. We will reimburse such persons and our transfer agent for
their reasonable out-of-pocket expenses in forwarding such material. We may also
retain the services of proxy solicitation, information agent and/or mailing
service to perform the broker nominee search and to distribute proxy materials
to banks, brokers, nominees and intermediaries, for which the Company would not
pay more than $8,000.
VOTING PROCEDURES
- The approval of the amendments to the Stock Incentive Plan will require
the affirmative vote of a majority of the shares present or represented
and entitled to vote at the Special Meeting.
- Abstentions are shares which abstain from voting on a particular matter.
Abstentions have no effect on Proposal No. 1.
- Broker non-votes are shares held in "street name" by brokers or nominees
who indicate on their proxies that they do not have discretionary
authority to vote such shares as to a particular matter. Broker non-votes
have no effect on Proposal No. 1.
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APPROVAL OF AMENDMENTS TO THE 1999 STOCK INCENTIVE PLAN
(PROPOSAL NO. 1)
The Company's stockholders are being asked to approve amendments to the
Company's 1999 Stock Incentive Plan. The proposed amendments to the 1999 Stock
Incentive Plan will (a) increase the number of shares reserved for issuance
under the 1999 Stock Incentive Plan by 1,500,000 shares and increase the maximum
number of shares by which the number of shares reserved for issuance under the
Plan may be increased annually from 3% to 7% of the fully-diluted number of
shares outstanding as of that date or a lesser number of shares determined by
the board, (b) increase the maximum number of shares by which the aggregate
number of shares available for issuance as incentive stock options may be
increased each year from the lesser of 625,000 shares, 3% of the number of
fully-diluted shares outstanding as of that date or a lesser number of shares
determined by the board to the lesser of 1,200,000 shares, 7% of the number of
fully-diluted shares outstanding as of that date or a lesser number of shares
determined by the board and (c) adopt a limit on the maximum number of shares
with respect to which options and stock appreciation rights may be granted to
any grantee in any fiscal year of the Company and certain other administrative
provisions to comply with the performance-based compensation exception to the
deduction limit of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code).
The Board of Directors believes that the Company's long term success is
dependent upon the ability of the Company to attract and retain highly qualified
individuals who, by virtue of their ability and qualifications, make important
contributions to the Company. The amendments to the 1999 Stock Incentive Plan
will enable the Company to continue to grant longer-term incentives in the form
of stock options and other equity-based awards as needed in order to continue to
attract and retain employees in our highly competitive industry. The 1999 Stock
Incentive Plan is intended to enhance the Company's ability to provide
individuals with awards and incentives commensurate with their contributions and
competitive with those offered by other employers. The stock options and other
awards granted under this plan increase stockholder value by further aligning
the interests of these individuals with the interests of the Company's
stockholders, by providing our employees an opportunity to benefit from stock
price appreciation that generally accompanies improved financial performance.
Since Digimarc's inception, options have constituted an important and
significant component of the compensation offered to employees of the Company.
Especially in the highly competitive Internet and high technology industries,
the ability to attract initially, and retain over the longer term, highly
qualified employees is essential to our Company's success. The grant of stock
options in these industries is often the primary consideration of individual
employees in making employment decisions, both at the time of initial employment
and later when they consider possible employment alternatives. As a result, in
order for Digimarc to be competitive in attracting and retaining
employees--often our most important and valuable assets--it is essential that we
have a sufficient number of options available for grant under our 1999 Stock
Incentive Plan going forward.
Our Board of Directors continually evaluates the overall compensation levels
of the company's employees and officers relative to other comparable companies,
including our competitors. Our Board believes that current compensation levels
and programs, including specifically our overall option grants, are in line with
those of our peers and generally in the industry. The Board is also considering
certain adjustments in specified compensation levels, including option grants,
in order to better ensure the competitiveness of the compensation level of
certain of our employees and officers. We expect that we will continue to
evaluate our compensation levels going forward in order to continue to ensure
that we can retain current employees and attract new employees who are essential
to our continued growth and success.
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The Compensation Committee of our Board carefully considers the appropriate
level of stock option grants to be awarded in connection with new employee
hires, and to current employees in connection with ongoing incentive awards as
earlier grants vest and become exercisable. The Compensation Committee takes
into account, in addition to the option grant levels required in order for us to
successfully attract and retain employees, other factors such as the potential
dilutive impact to our stockholders, the overall ratio of our outstanding option
grants to total outstanding shares, and the similar ratios of our competitors
and peers. As a result, the additional award authority for which we are
requesting approval in this proposal will be utilized over time, as awards are
made in accordance with the mechanisms and guidelines established by our Board,
after considering this and various other relevant factors.
The affirmative vote of a majority of the shares present in person or by
proxy at the Special Meeting and entitled to vote is required for adoption of
Proposal No. 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO
THE 1999 STOCK INCENTIVE PLAN
The following summary of the 1999 Stock Incentive Plan, including the
proposed amendments, is subject in its entirety to the specific language of the
1999 Stock Incentive Plan, a copy of which is attached hereto as Exhibit A and
which is also available to any stockholder upon request.
GENERAL DESCRIPTION
The 1999 Stock Incentive Plan (the Plan) was approved by our board of
directors in October 1999 and by our stockholders in November 1999. On May 26,
2000, the Board of Directors approved amendments to the Plan, conditioned upon
and not to take effect until approval by the Company's stockholders, to
(a) increase the number of shares of common stock reserved for issuance under
the Plan by 1,500,000 shares and increase the maximum number of shares by which
the number of shares reserved for issuance under the Plan may be increased
annually from 3% to 7% of the fully-diluted number of shares outstanding as of
that date or a lesser number of shares determined by the board, (b) increase the
maximum number of shares by which the aggregate number of shares available for
issuance as incentive stock options may be increased each year from the lesser
of 625,000 shares, 3% of the number of fully-diluted shares outstanding as of
that date or a lesser number of shares determined by the board to the lesser of
1,200,000 shares, 7% of the number of fully-diluted shares outstanding as of
that date or a lesser number of shares determined by the board and (c) to adopt
a limit on the maximum number of shares with respect to which options and stock
appreciation rights may be granted to any grantee in any fiscal year of the
Company and certain other administrative provisions to comply with the
performance-based compensation exception to the deduction limit of
Section 162(m) of the Code.
As of June 1, 2000, no options to purchase shares of our common stock under
the 1999 Stock Incentive Plan have been exercised, 1,427,200 options to purchase
shares of common stock are outstanding, and options to purchase 83,654 shares of
common stock remained available for grant. The outstanding options have a
weighted average exercise price of $40.5253 per share. Outstanding options to
purchase an aggregate of 659,700 shares are held by employees and consultants
who are not officers or directors of our company. As of that same date, the
number of employees, directors and consultants eligible to receive grants under
the Plan was approximately 150 persons.
AMENDMENT TO INCREASE SHARES RESERVED. As of June 1, 2000, the number of
shares reserved for issuance under the Plan is 1,510,854. This number equals the
original 1,500,000 shares authorized for issuance at the time the Plan was
implemented, plus another 10,854 shares that were either reserved but not
granted under our 1995 Stock Incentive Plan as of the date of our initial public
offering or were awards under our 1995 Stock Incentive Plan that have been
forfeited, expired or were cancelled after our initial public offering. Under
the provisions of the Plan, the number of shares reserved under
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the Plan will be automatically increased by awards under our 1995 Stock
Incentive Plan that are forfeited, expire or are cancelled. In addition, the
Plan provides that commencing on January 1, 2001, the number of shares of stock
reserved for issuance under the Plan will be increased annually by a number
equal to 3% of the fully-diluted number of shares outstanding as of that date or
a lesser number of shares determined by the board. However, the maximum number
of shares available for issuance as incentive stock options shall be increased
by the lesser of 625,000 shares, 3% of the number of fully-diluted shares
outstanding as of that date or a lesser number of shares determined by the
board. As a result, the level of authority to issue options under the Plan has
increased, and will continue to increase.
The proposed amendment to the Plan provides that the number of shares
reserved for issuance will be increased by 1,500,000 shares, bringing the total
current reserve for issuance to 3,000,000 plus the number of shares that have
been and are forfeited, expire or are cancelled under the 1995 Stock Incentive
Plan and the automatic increases described above. With the forfeitures,
cancellations, and expirations that have occurred as of June1, 2000, this means
that, with the effectiveness of the proposed plan amendment, the total share
authority under the Plan will be 3,010,854. In addition, the proposed amendment
increases the maximum number of shares by which the number of shares reserved
for issuance under the Plan may be increased annually from 3% to 7% of the
fully-diluted number of shares outstanding as of that date or a lesser number of
shares determined by the board. The proposed amendment to the Plan also
increases the maximum number of shares by which the aggregate number of shares
available for issuance as incentive stock options may be increased each year. As
amended, the maximum number of shares available for issuance as incentive stock
options shall be increased by the lesser of 1,200,000 shares, 7% of the number
of fully-diluted shares outstanding as of that date or a lesser number of shares
determined by the board.
AMENDMENT TO ADOPT CODE SECTION 162(M) LIMITATIONS. The Board, subject to
stockholder approval, adopted an amendment to the Plan to limit the number of
options and stock appreciation rights which may be awarded to an employee in any
fiscal year to 750,000 shares. However, in connection with his or her initial
commencement of services with the Company, a participant in the Plan may be
granted stock options and stock appreciation rights for up to an additional
750,000 shares, which shall not count against the limit set forth in the
previous sentence. The purpose of the amendment is to ensure that any options
and stock appreciation rights granted under the Plan after this Special Meeting
will qualify as "performance-based compensation" under Section 162(m) of the
Code.
Under Code Section 162(m) no deduction is allowed in any taxable year of the
Company for compensation in excess of $1 million paid to its chief executive
officer and each of its four most highly paid other executive officers who are
serving in such capacities as of the last day of such taxable year. An exception
to this rule applies to compensation that is paid pursuant to a stock incentive
plan approved by the Company's stockholders that specifies, among other things,
the maximum number of shares with respect to which options and stock
appreciation rights may be granted to eligible employees under such plan during
a specified period. Compensation paid pursuant to options and stock appreciation
rights granted under such a plan and with an exercise price equal to the fair
market value of Company common stock on the date of grant is deemed to be
inherently performance-based, since such awards provide value to employees only
if the stock price appreciates. Although Code Section 162(m) generally became
effective in 1994, a special rule allows options and stock appreciation rights
granted under the Plan to be treated as qualifying under Code Section 162(m)
without having a per-person share limit until the stockholders approve a
material modification of the Plan, after the initial public offering occurs,
such as the increase in the number of shares of common stock which may be issued
under the Plan.
If the stockholders do not approve the Code Section 162(m) amendment, any
compensation expense of the Company associated with the options and stock
appreciation rights granted under the
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Plan in excess of the shares currently available for issuance (together with all
other non-performance based compensation) in excess of $1 million for any of the
Company's five highest paid officers will not be deductible under the Code.
OTHER TERMS OF THE PLAN. The purpose of the Plan is to attract and retain
the best available personnel, to provide additional incentive to our employees,
directors and consultants and our related entities and to promote the success of
our business. The Plan provides for the granting to employees of incentive stock
options, and the granting to our employees, directors and consultants and our
related entities of non-statutory stock options, stock appreciation rights,
dividend equivalent rights, restricted stock, performance units, performance
shares and other equity-based rights.
Under the Plan, our board of directors, or the compensation committee,
administers the granting of stock and options to directors and officers in a way
that allows these grants of stock to be exempt from Section 16(b) of the
Securities Exchange Act and determines the provisions, terms and conditions of
each award. With respect to Awards under the Plan subject to Code
Section 162(m), the Compensation Committee is comprised solely of two or more
"outside directors" as defined under Code Section 162(m) and applicable tax
regulations. When stock or options are granted to other participants in the
Plan, our board, or the compensation committee administers these awards and
determines the provisions, terms and conditions of each award. For grants of
awards to individuals not subject to Rule 16b-3 and Code Section 162(m), the
Board may authorize one or more officers to grant such awards.
During their lifetime, those who hold the incentive stock options granted
under this plan cannot transfer these options. The options may be distributed by
a will or the laws of descent upon the death of the option holder. No one is
allowed to exercise the incentive stock options except the person to whom the
options were first issued while that person is alive. Stock or options other
than incentive stock options which are issued under the Plan can be transferred
to the extent agreed upon at the time of the award.
The term of awards under the Plan will be determined by the board or the
compensation committee; however, the term of an incentive stock option may not
be for more than ten years (or five years in the case of incentive options
granted to any grantee who owns stock representing more than 10% of the combined
voting power of Digimarc or any of our parent or subsidiary corporations). Where
the award agreement permits the exercise or purchase of an award for a period of
time following the recipient's termination of service with us, disability or
death, that award will terminate to the extent not exercised or purchased on the
last day of the specified period or the last day of the original term of the
award, whichever occurs first.
The exercise price or purchase price, if any, of awards under the Plan that
are not incentive stock options will be determined by the board or the
compensation committee. In the case of incentive options, that price cannot be
less than 100% (or 110%, in the case of incentive options granted to any grantee
who owns stock representing more than 10% of the combined voting power of
Digimarc or any of our parent or subsidiary corporations) of the fair market
value of the common stock on the date the option is granted. The exercise price
of non-qualified stock options shall not be less than 50% of the fair market
value of the stock. The aggregate fair market value of the common stock with
respect to any incentive stock options that are exercisable for the first time
by an eligible employee in any calendar year may not exceed $100,000.
The form of payment for the shares of common stock when options are
exercised or stock is purchased under an award will be determined by the board
or the compensation committee and may include cash, check, shares of common
stock or the assignment of part of the proceeds from the sale of shares acquired
upon exercise or purchase of the award.
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If a third party acquires the Company through the purchase of all or
substantially all of our assets, a merger or other business combination, except
as otherwise provided in an individual award agreement, all unexercised options
will terminate unless assumed by the successor corporation. Unless terminated
sooner, the Plan will terminate automatically in 2009. The board has the
authority to amend, suspend or terminate the Plan, subject to stockholder
approval of certain amendments. However, no action may be taken which will
affect awards previously granted under the Plan unless agreed to by the affected
grantees.
CERTAIN FEDERAL TAX CONSEQUENCES. The grant of a non-qualified stock option
under the Plan does not result in any federal income tax consequences to the
optionee or to the Company. Upon exercise of a non-qualified stock option, the
optionee is subject to income taxes at the rate applicable to ordinary
compensation income on the difference between the option exercise price and the
fair market value of the shares on the date of exercise. This income is subject
to withholding for federal income and employment tax purposes. The Company is
entitled to an income tax deduction in the amount of the income recognized by
the optionee. Any gain or loss on the optionee's subsequent disposition of the
shares of common stock will receive long or short-term capital gain or loss
treatment, depending on whether the shares are held for more than one year
following exercise. The Company does not receive a tax deduction for any such
gain.
The grant of an incentive stock option under the Plan does not result in any
federal income tax consequences to the optionee or to the Company. An optionee
recognizes no federal taxable income upon exercising an incentive option
(subject to the alternative minimum tax rules discussed below), and the Company
receives no deduction at the time of exercise. In the event of a disposition of
stock acquired upon exercise of an incentive option, the tax consequences depend
upon how long the optionee has held the shares of common stock. If the optionee
does not dispose of the shares within two years after the incentive stock option
was granted, nor within one year after the option was exercised, the optionee
will recognize a long-term capital gain (or loss) equal to the difference
between the sale price of the shares and the exercise price. The Company is not
entitled to any deduction under these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods, he
or she must recognize ordinary income in the year of the disposition (referred
to as a "disqualifying disposition"). The amount of such ordinary income
generally is the lesser of (i) the difference between the amount realized on the
disposition and the exercise price, or (ii) the difference between the fair
market value of the stock on the exercise date and the exercise price. Any gain
in excess of the amount taxed as ordinary income will be treated as a long or
short-term capital gain, depending on whether the stock was held for more than
one year. The Company, in the year of the disqualifying disposition, is entitled
to a deduction equal to the amount of ordinary income recognized by the
optionee.
The "spread" under an incentive stock option--i.e., the difference between
the fair market value of the shares at exercise and the exercise price--is
classified as an item of adjustment in the year of exercise for purposes of the
alternative minimum tax.
The grant of restricted stock will subject the recipient to ordinary
compensation income on the difference between the amount paid for such stock and
the fair market value of the shares on the date that the restrictions lapse.
This income is subject to withholding for federal income and employment tax
purposes. The Company is entitled to an income tax deduction in the amount of
the ordinary income recognized by the recipient, subject to possible limitations
imposed by Section 162(m) of the Code. Any gain or loss on the recipient's
subsequent disposition of the shares will receive long or short-term capital
gain or loss treatment depending on whether the shares are held for more than
one year and depending on how long the stock has been held since the
restrictions lapsed. The Company does not receive a tax deduction for any such
gain.
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Recipients of restricted stock may make an election under Internal Revenue
Code Section 83(b) ("Section 83(b) Election") to recognize as ordinary
compensation income in the year that such restricted stock is granted the amount
equal to the spread between the amount paid for such stock and the fair market
value on the date of the issuance of the stock. If such an election is made, the
recipient recognizes no further amounts of compensation income upon the lapse of
any restrictions and any gain or loss on subsequent disposition will be long or
short-term capital gain to the recipient. The Section 83(b) Election must be
made within thirty days from the time the restricted stock is issued.
Recipients of stock appreciation rights generally should not recognize
income until such rights are exercised (assuming there is no ceiling on the
value of the right). Upon exercise, the participating individual will normally
recognize ordinary compensation income for federal income tax purposes equal to
the amount of cash and the fair market value of stock, if any, received upon
such exercise. Participating individuals who are employees will be subject to
withholding with respect to income recognized upon exercise of a stock
appreciation right.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the participating individual, so long
as the Company withholds the appropriate taxes with respect to such income and
the individual's total compensation is deemed reasonable in amount.
Participating individuals will recognize gain upon the disposition of any stock
received on exercise of a stock appreciation right equal to the excess of
(1) the amount realized on such disposition over (2) the ordinary income
recognized with respect to such stock under the principles set forth above. That
gain will be taxable as long or short term capital gain depending on whether the
stock was held for more than one year.
THE FOREGOING IS ONLY A SUMMARY OF THE CURRENT EFFECT OF FEDERAL INCOME
TAXATION UPON THE GRANTEE AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED
UNDER THE PLAN. REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE
CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF A
GRANTEE'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY TO WHICH THE GRANTEE MAY BE SUBJECT.
AMENDED PLAN BENEFITS. As of the date of this Proxy Statement, no executive
officer, director and no associates of any executive officer or director, has
been granted any options subject to stockholder approval of the proposed
amendment. The benefits to be received pursuant to the Plan amendments by the
Company's executive officers, directors and employees are not determinable at
this time.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table contains information in summary form concerning the
compensation paid to our chief executive officer and each of our most highly
compensated executive officers (Named Executive Officer), whose total salary and
bonus exceeded $100,000 during the year ended December 31, 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
--------------------------- -------- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Bruce Davis(2)......................... 1999 250,000 133,500 262,500 3,632
President and Chief Executive Officer 1998 208,124 75,000 -- 76,369
1997 2,596 -- 400,000 --
Geoffrey Rhoads........................ 1999 125,000 81,250 50,000 --
Chief Technology Officer 1998 123,542 75,000 -- --
1997 90,101 -- -- --
J. Scott Carr.......................... 1999 125,000 78,750 87,500 --
Vice President and General Manager-- 1998 109,167 45,000 -- --
Secure Documents 1997 90,000 -- 50,000 --
</TABLE>
------------------------
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation described in this table does not include medical, group life
insurance or other benefits received by the Named Executive Officers that
are available generally to all salaried employees of the Company.
(2) The salary information shown for Mr. Davis reflects compensation paid to him
in his principal position commencing on December 1997 and $76,369 of other
compensation in 1998 represents reimbursement for relocation expenses.
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STOCK OPTIONS
The following table sets forth certain information with respect to stock
options granted during 1999 to each of the Named Executive Officers. In
accordance with the rules of the Securities and Exchange Commission, also shown
below is the potential realizable value over the term of the options (the period
from the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually. These amounts are based on
certain assumed rates of appreciation and do not represent the Company's
estimate of future stock price. Actual gains, if any, on stock option exercises
will be dependent on the future performance of the Company's Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES OF
PERCENT OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM($)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) IN 1999(%) ($/SH) DATE 5% 10%
---- ------------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bruce Davis........................... 162,500 10.9 1.50 5/11/09 153,293 388,474
100,000 6.7 2.50 8/31/09 157,224 398,435
------- ---- ------- -------
262,500 17.6 310,517 786,909
Geoffrey Rhoads....................... 50,000 3.4 1.65 5/11/04 22,793 50,367
J. Scott Carr......................... 75,000 5.0 1.50 5/11/09 70,751 179,296
12,500 .8 2.50 8/31/09 19,653 49,804
------- ---- ------- -------
87,500 5.8 90,404 229,100
</TABLE>
--------------------------
(1) Stock options are granted at an exercise price equal to the fair market
value of our Common Stock on the date of grant. Options granted generally
vest 25% at the end of the first year and then ratably each quarter over the
next 36 months and have a ten year term.
The following table provides summary information, as to the Named Executive
Officers, concerning stock options exercised during 1999 and the number of
shares subject to both exercisable and unexercisable stock options as of
December 31, 1999.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON FISCAL YEAR-END(#) FISCAL YEAR-END($)(2)
EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce Davis.................... 40,400 40,300 159,600 462,500 7,900,200 22,531,250
Geoffrey Rhoads................ -- -- 0 50,000 0 2,417,500
J. Scott Carr.................. -- -- 88,555 108,945 4,404,473 5,292,777
</TABLE>
--------------------------
(1) Value realized is equal to the fair market value of the purchased shares on
the option exercise date less the exercise price paid for those shares. Fair
market value prior to December 2, 1999 (the date our stock began trading on
the Nasdaq National Market), was determined by the Board of Directors, and
was based upon its assessment of our overall business prospects and
financial condition.
9
<PAGE>
(2) The value of unexercised in-the-money options is calculated based on the
closing price of our Common Stock on December 31, 1999, $50.00 per share.
Amounts reflected are based on the assumed value minus the exercise price
and do not necessarily indicated that the optionee sold such stock.
EMPLOYMENT ARRANGEMENTS
In July 1999, we adopted a policy regarding the vesting of stock options to
certain employees, which was extended to all our officers in January 2000,
including prior grants. All shares subject to their options that have not vested
will immediately vest if the following two conditions are met:
- we merge with another company and there is a change of control of our
company or we sell substantially all of our assets to another company; and
- any officer's employment is terminated, or constructively terminated,
within twelve months thereafter.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE
ACT, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN
WHOLE OR IN PART, THE FOLLOWING REPORT AND THE PERFORMANCE GRAPH WHICH FOLLOWS
SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
We have a compensation committee of the Board of Directors (Compensation
Committee) which has the authority and responsibility to approve the overall
compensation strategy, administer our annual and long-term compensation plans,
and review and make recommendations to the Board of Directors with respect to
executive compensation. The Compensation Committee is comprised of independent,
non-employee board of director members.
GENERAL COMPENSATION POLICY
The Compensation Committee's overall policy is to offer our executive
officers competitive compensation opportunities. The Compensation Committee
utilizes competitive data and summaries provided by Radford Associates and the
American Electronics Association to develop compensation recommendations
competitive with other companies in the communications industry. The
Compensation Committee's objectives are to:
- create a performance oriented environment with variable compensation based
upon the achievement of annual and longer-term business results;
- focus management on maximizing stockholder value through stock-based
compensation aligned to stockholders' return; and
- provide compensation opportunities dependent upon the Company's
performance relative to its competitors and changes in its own performance
over time.
The Compensation Committee is authorized to establish and maintain
compensation guidelines for salaries and merit pay increases throughout the
Company. The compensation committee also makes specific recommendations to the
Board of Directors concerning the compensation of our executive officers,
including the Chief Executive Officer. The Compensation Committee also
administers our 1995 Stock Incentive Plan, our 1999 Stock Incentive Plan, our
1999 Employee Stock Purchase Plan, and our 2000 Non-Officer Employee Stock
Incentive Plan.
FACTORS
The primary factors considered in establishing the components of each
executive officer's compensation package for the year ended December 31, 1999
are summarized below. The
10
<PAGE>
Compensation Committee may in its discretion apply entirely different factors,
such as different measures of financial performance, for future fiscal years.
BASE SALARY. The base salary for each officer is set on the basis of
personal performance, the salary levels in effect for comparable positions with
other companies in the industry, and internal comparability considerations.
Generally, Company performance and profitability are not taken into account in
establishing base salary. Salaries paid to the our executive officers for the
year ended December 31, 1999 ranged from the 50th percentile at the low end to
the 75th percentile at the high end of the compensation data surveyed for the
industry. A number of adjustments were made to the surveyed compensation data
for the industry to reflect differences in management style, organizational
structure and corporate culture, geographic location, product development stage
and market capitalization between us and the surveyed entities. As a result of
these adjustments, there is not a meaningful correlation between the companies
in the industry which were taken into account for comparative compensation
purposes and the companies included in the industry group index which appears
later in this Proxy Statement for purposes of evaluating the price performance
of the Company's Common Stock. See "Stock Performance Graph."
ANNUAL INCENTIVE COMPENSATION. For the year ended December 31, 1999,
specific financial and organizational objectives, including revenue and orders
targets, were established as the basis for the incentive bonuses to be paid to
the executive officers of the Company.
Specific bonus awards, set as a target percentage of salary, were
established for each officer's position and were to be earned on the basis of
achieving the specified corporate goals and the accomplishment of specific
individual objectives. The corporate goals for 1999 were met, and incentive
bonuses were paid to officers for 1999 based on this plan.
LONG-TERM STOCK-BASED INCENTIVE COMPENSATION. Generally, the Compensation
Committee awards stock options to each of our executive officers following the
initial hiring and from time to time thereafter. The option grants are designed
to align the interests of the executive officer with those of the stockholders
and to provide each individual with a significant incentive to manage the
Company from the perspective of an owner with an equity stake in the business.
Generally, the size of the option grant made to each executive officer is
set at a level which the Compensation Committee deems appropriate to create a
meaningful opportunity for stock ownership based upon the individual's current
position with the Company, but the Compensation Committee also takes into
account comparable awards to individuals in similar positions in the industry,
as reflected in external surveys, the individual's potential for future
responsibility and promotion, the individual's performance in recent periods and
the number of unvested options held by the individual at the time of the grant.
The relative weight given to each of these factors will vary from individual to
individual in the Compensation Committee's discretion. Each of Mr. Davis,
Mr. Rhoads and Mr. Carr received stock option grants in 1999.
Each grant allows the executive officer to acquire shares of the Company's
Common Stock at a fixed price per share (the market price on the grant date)
over a specified period of time (up to 10 years). The option will generally
become exercisable in installments over a four-year period, contingent upon the
executive officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if he remains in the
Company's employ, and then only if the market price of the Company's Common
Stock appreciates over the option term.
CEO COMPENSATION
The Compensation Committee established Mr. Davis' base salary with the
objective of maintaining the competitiveness of Mr. Davis' base salary with
salaries paid to similarly situated chief executive officers. With respect to
Mr. Davis' base salary, it was the Compensation Committee's intent to provide
11
<PAGE>
him with a level of stability and certainty each year and not have this
particular component of compensation affected to any significant degree by
Company performance factors. Mr. Davis' base salary for the 1999 fiscal year was
set at the 75th percentile of the salary data surveyed for other chief executive
officers in the industry. In addition, Mr. Davis received a bonus of $133,500
and stock options to purchase 262,500 shares of Common Stock in 1999.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
As discussed in Proposal #1 above, section 162(m) of the Internal Revenue
Code, enacted in 1993, generally disallows a tax deduction to publicly held
companies for compensation exceeding $1 million paid to certain executive
officers. The limitation applies only to compensation which is not considered to
be performance-based. The non-performance-based compensation paid to our
executive officers in 1999 did not exceed the $1 million limit per officer.
The Compensation Committee is aware of the limitations imposed by
Section 162(m), and its exemptions, and will address the issue of deductibility
when and if circumstances warrant.
Submitted by the Compensation Committee of the Company's Board of Directors:
PHILLIP J. MONEGO, SR.
BRIAN J. GROSSI
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the performance of our Common Stock with the
performance of the Nasdaq US Index and the companies included in SIC Code
7373--Computer Integrated Systems Design (our peer group) for the period ended
December 31, 1999. We registered our Common Stock under the Securities Act of
1933, as amended, effective December 2, 1999. Accordingly, the following graph
includes the required information from December 2, 1999 through December 31,
1999. The comparison assumes $100 was invested on December 2, 1999 in our Common
Stock and in each of the other two indices and assumes reinvestment of any
dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DIGIMARC CORPORATION NASDAQ US INDEX PEER GROUP
<S> <C> <C> <C>
Dec. 2, 1999 $100 $100 $100
Dec. 31, 1999 $88.30 $117.27 $101.46
</TABLE>
<TABLE>
<CAPTION>
INDEXED DATA
-------------------
DEC. 2, DEC. 31,
1999 1999
-------- --------
<S> <C> <C>
Digimarc Corporation........................ $100 $ 88.30
Nasdaq US Index............................. $100 $117.27
Peer Group.................................. $100 $101.46
</TABLE>
13
<PAGE>
COMPANIES INCLUDED IN THE PEER GROUP INDEX ARE AS FOLLOWS:
<TABLE>
<S> <C> <C>
1MAGE SOFTWARE INC ELTRAX SYS INC NETZEE INC
3SI HOLDINGS INC ENSTAR INC NHANCEMENT TECH.INC
4FRONT TECHNOLOGIES INC ENTEX INFORMATION SVCS INC NICOLLET PROCESS ENG.
A C S ELECTRONICS LTD ESHARE TECHNOLOGIES INC OSAGE SYSTEMS GROUP INC
ACE COMM CORP ESOFT INC PACE HEALTH MGMT SYS INC
ALADDIN KNOWLEDGE SYS LTD EXIGENT INTL INC PAMET SYSTEMS INC
ALLIN CORP F5 NETWORKS INC PATHWAYS GROUP INC
ALTRIS SOFTWARE INC FAIR ISAAC & COMPANY INC PATIENT INFOSYSTEMS INC
AMERICAN MILLENIUM CORP FEDERAL DATA CORP PEROT SYSTEMS CORP
APACHE MEDICAL SYSTEMS INC FIRST CONSULTING GROUP INC PREMIS CORP
AREL COMMUNICATIONS & SFTWRE FONIX CORP PRINTRAK INT'L INC
ASA INTL LTD FORMULA SYS 1985 LTD -ADR PROPHET 21 INC
AUTO-TROL TECHNOLOGY CORP FUJITSU LTD -SPON ADR QUALITY SYSTEMS INC
AW COMPUTER SYSTEMS -CL A FUNDTECH LTD RADIANT SYSTEMS INC
AWARE INC GENERAL AUTOMATION RAMP NETWORKS INC
AZTEC TECHNOLOGY PRTNRS INC GENERAL MAGIC INC RARE MEDIUM GROUP INC
AZUL HOLDINGS INC GLOBALDIGITALCOMMERCE.COM RAVISENT TECHNOLOGIES INC
BALTIMORE TECHNOL PLC -ADR GREATE BAY CASINO CORP REDBACK NETWORKS INC
BE FREE INC H T E INC ROBOCOM SYSTEMS INTL INC
BELL INDUSTRIES INC HALIFAX CORP RWD TECHNOLOGIES INC
BITWISE DESIGNS INC HALIS INC S1 CORPORATION
BREAKAWAY SOLUTIONS INC HENRY (JACK) & ASSOCIATES SABRE HLDGS CORP -CL A
BRISTOL RETAIL SOLUTIONS INC HYBRID NETWORKS INC SAFELINK CORPORATION
BROADVISION INC I B S INTERACTIVE INC SAP AG -ADR
BTG INC IDENTIX INC SEACHANGE INT'L INC
CACI INTL INC -CL A IKOS SYSTEMS INC SENTO CORP
CAM DATA SYSTEMS INC IMAGEMATRIX CORP SHARED MEDICAL SYS. CORP
CAVION TECHNOLOGIES INC IMAGEMAX INC SOCRATES TECH. CORP
CELERITY SOLUTIONS INC IMATEC LTD SOFTECH INC
CELERITY SYSTEMS INC INET TECHNOLOGIES INC SONIC SOLUTIONS
CELLULAR TECHNICAL SERVICES INSCI-STATEMENTS.COM CORP STRAT. SOLUTIONS GRP INC
CERNER CORP INTEGRAL SYSTEMS INC/MD SUNQUEST INFO. SYS INC
CITATION COMPUTER SYS INC INTEGRATED SPATIAL INFO SOL SYSCOMM INT'L CORP
CLARENT CORP INTELLIGROUP INC TALX CORP
COBALT NETWORKS INC INTERFACE SYSTEMS INC TANNING TECHNOLOGY CORP
COMMAND SYSTEMS INC INTERGRAPH CORP TECHNOLOGY SOLUTIONS CO
COMPU-DAWN INC INTERNET COMMERCE CP -CL A TEKINSIGHT.COM INC
COMPUTRAC INC INTL SPORTS WAGERING INC TELESCIENCES INC
CONVERGENT COMMUNICATIONS INTRANET SOLUTIONS INC TELOS CORP/MD -CL A
COOPERATIVE COMPUTING INC JENKON INTL INC TELTRONICS INC
CORSAIR COMMUNICATIONS INC LANVISION SYSTEMS INC TENET INFO. SVCS INC
CPS SYSTEMS INC LATITUDE COMM. INC TIBCO SOFTWARE INC
CREATIVE COMPUTER APPL LITTON INDUSTRIES INC TITAN CORP
CREDIT MGMT SOLUTIONS INC LORONIX INFORMATION SYS INC TOWNE SERVICES INC
CSP INC MAI SYSTEMS CORP TREEV INC
CYSIVE INC MANATRON INC TRIPLE P NV
DASSAULT SYSTEMES S A -ADR MANHATTAN ASSOCIATES INC TROY GROUP INC
DATA RESEARCH ASSOC INC MARINE MGMT SYSTEMS INC TTI TEAM TELECOM INTL LTD
DATA RETURN CORP MDSI MOBILE DATA SOLUTIONS TVG TECHNOLOGIES LTD
DATA SYSTEMS NETWORK CORP MEDCOM USA INC UNICOMP INC
DATALINK CORP MEDIWARE INFO. SYSTEMS UNISYS CORP
DATATEC SYSTEMS INC MENTOR GRAPHICS CORP UNITRONIX CORP
DIGITAL DESCRIPTOR SYS INC MERCURY COMPUTER SYS. INC USWEB CORP
DYNAMIC HEALTHCARE TECH INC MERGE TECHNOLOGIES INC VA LINUX SYSTEMS INC
DYNAMICS RESEARCH CORP MICRO-INTEGRATION CORP VERONEX TECHNOLOGIES INC
EBIX.COM INC MICROS SYSTEMS INC VIALINK CO
ECLIPSYS CORP NAT'L TRANSACTION NETWORK VIISAGE TECHNOLOGY INC
ECSOFT GROUP PLC -ADR NAVIDEC INC VISUAL DATA CORP
EFAX.COM INC NEOMEDIA TECHNOLOGIES INC VISUAL NETWORKS INC
ELBIT SYSTEMS LTD NETGATEWAY INC VITALCOM INC
ELBIT VISION SYSTEMS LTD NETSCOUT SYSTEMS INC WAVETECH INT'L INC
ELECTRONIC DATA SYSTEMS CORP NETSMART TECHNOLOGIES INC ZAPME CORP
ELITE INFORMATION GROUP INC NETWORK SIX INC
</TABLE>
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our Common Stock
as of June 1, 2000 by:
- each person or entity known by us to own beneficially more than five
percent of our Common Stock;
- our chief executive officer, each of the other Named Executive Officers
and each of our directors; and
- all of our executive officers and directors as a group.
The beneficial ownership is calculated based on 12,928,286 shares of our
Common Stock outstanding as of June 1, 2000. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities. Unless
otherwise indicated, each person or entity named in the table has sole voting
power and investment power, or shares voting and investment power with his or
her spouse, with respect to all shares of capital stock listed as owned by that
person. Shares issuable upon the exercise of options that are currently
exercisable or become exercisable within sixty days of June 1, 2000 are
considered outstanding for the purpose of calculating the percentage of
outstanding shares of our Common Stock held by the individual, but not for the
purpose of calculating the percentage of outstanding shares of our Common Stock
held by any other individual. The address of each of the executive officers and
directors is c/o Digimarc Corporation, 19801 S.W. 72nd Avenue, Tualatin, Oregon
97062.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED BENEFICIALLY OWNED
---------------- ------------------ --------------------
<S> <C> <C>
5% STOCKHOLDERS
Macrovision Corporation ................................... 924,475 7.2%
1341 Orleans Drive
Sunnyvale, California 94089
Reuters Group PLC(1) ...................................... 899,300 7.0%
c/o Reuters Ltd.
85 Fleet Street
London, EC4P 4AJ
England
Adobe Systems Incorporated(2) ............................. 719,688 5.6%
c/o Adobe Incentive Partners
345 Park Avenue
San Jose, California 95110
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Philip J. Monego, Sr.(3)................................... 257,215 2.0%
Bruce Davis(4)............................................. 243,083 1.9%
Geoffrey Rhoads(5)......................................... 711,574 5.5%
J. Scott Carr(6)........................................... 99,426 *
Brian J. Grossi(7)......................................... 468,828 3.6%
John Taysom(8)............................................. 916,700 7.1%
Peter Smith(9)............................................. 5,000 *
All executive officers and directors as a group (7 2,701,826 20.4%
persons)(10).............................................
</TABLE>
------------------------
* Less than 1%.
15
<PAGE>
(1) Represents 699,300 shares held by Reuters, Ltd. and 200,000 shares held by
Reuters Holdings Switzerland, S.A., affiliates of Reuters Group PLC.
(2) Represents 719,688 shares held by Adobe Incentive Partners. Adobe Systems
Incorporated is the general partner of Adobe Incentive Partners.
(3) Includes options for 68,000 shares of Common Stock exercisable within
60 days of June 1, 2000 and 10,250 shares owned by Mr. Monego's spouse.
(4) Includes options for 122,682 shares exercisable within 60 days of June 1,
2000
(5) Includes options for 21,844 shares of Common Stock exercisable within
60 days of June 1, 2000. Includes 13,000 shares owned by Amanda Rhoads
Trust, 13,000 shares owned by Hudson Rhoads Trust, 100 shares owned by
Nicole Rhoads--Trustee for the Children of Geoffrey and Nicole Rhoads, and
13,000 shares owned by Trevor Rhoads Trust. Mr Rhoads disclaims beneficial
ownership of the shares held in Trust.
(6) Represents options for 99,426 shares of Common Stock exercisable within
60 days of June 1, 2000.
(7) Includes 443,775 shares held by AVI Capital L.P. and affiliates of which
Mr. Grossi is a general partner. Mr. Grossi disclaims beneficial ownership
of these shares except to the extent of his pecuniary interest as a general
partner.
(8) Includes 899,300 shares held by Reuters Group. Mr. Taysom disclaims
beneficial ownership of the shares held by Reuters Group.
(9) Represents options for 5,000 shares of Common Stock exercisable within
60 days of June 1, 2000. Peter Smith was appointed to our Board of Directors
on April 14, 2000. Most recently, Mr. Smith served as president of News
Technology for News America. In that capacity he coordinated technology
throughout News Corporation and served as a technology advisor to the board
of directors. Prior to that, Mr. Smith held various executive positions at
media and broadcasting companies in the United States, the United Kingdom,
and Australia. Mr. Smith received a B.A. in science and engineering from the
University of Sydney.
(10) Includes options for 316,952 shares of Common Stock exercisable within
60 days of June 1, 2000.
16
<PAGE>
OTHER MATTERS
STOCKHOLDER PROPOSALS
Proposals of our stockholders that are intended to be presented by such
stockholders at our 2001 Annual Meeting must be received no later than
December 6, 2000 and comply with certain rules and regulations promulgated by
the Securities and Exchange Commission, in order that they may be included in
the proxy statement and form of proxy relating to that meeting. The deadline for
submitting a stockholder's proposal that will not be included in the proxy
statement and form of proxy for our 2001 Annual Meeting but nonetheless will be
eligible for consideration is February 14, 2001.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Special Meeting. Should any other matter requiring a
vote of the stockholders arise, the enclosed proxy card gives authority to the
persons listed on the card to vote at their discretion in the best interest of
the Company.
It is important that your shares be represented at the Special Meeting,
regardless of the number of shares you hold. We urge you to promptly execute and
return the accompanying proxy in the envelope, which has been enclosed for your
convenience. Stockholders who are present at the Special Meeting may revoke
their proxies and vote in person or, if they prefer, may abstain from voting in
person and allow their proxies to be voted.
By Order of the Board of Directors,
/s/ Bruce Davis
Bruce Davis
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Tualatin, Oregon
June 20, 2000
17
<PAGE>
EXHIBIT A
DIGIMARC CORPORATION
RESTATED 1999 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED ON MAY 26, 2000)
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 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) "COVERED EMPLOYEE" means an Employee who is a "covered employee"
under Section 162(m)(3) of the Code.
(m) "DIRECTOR" means a member of the Board or the board of directors
of any Related Entity.
1
<PAGE>
(n) "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
(o) "DIVIDEND EQUIVALENT RIGHT" means a right entitling the Grantee
to compensation measured by dividends paid with respect to Common Stock.
(p) "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.
(q) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(r) "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.
(s) "GRANTEE" means an Employee, Director or Consultant who receives
an Award pursuant to an Award Agreement under the Plan.
(t) "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 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.
(u) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(v) "NON-QUALIFIED STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(w) "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.
(x) "OPTION" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.
(y) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
2
<PAGE>
(z) "PERFORMANCE--BASED COMPENSATION" means compensation qualifying
as "performance-based compensation" under Section 162(m) of the Code.
(aa) "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.
(bb) "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.
(cc) "PLAN" means this 1999 Stock Incentive Plan.
(dd) "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.
(ee) "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 Commission
under the Securities Act of 1933, as amended on or prior to the date of
consummation of such Corporate Transaction.
(ff) "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.
(gg) "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.
(hh) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor thereto.
(ii) "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.
(jj) "SHARE" means a share of the Common Stock.
(kk) "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
3,000,000 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
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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 seven percent (7%) 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 3,000,000 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) 1,200,000
Shares, (y) seven percent (7%) 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, 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 WITH RESPECT TO COVERED EMPLOYEES.
Notwithstanding the foregoing, grants of Awards to any Covered
Employee intended to qualify as Performance-Based Compensation shall be made
only by a Committee (or subcommittee of a Committee) which is comprised solely
of two or more Directors eligible to serve on a committee making Awards
qualifying as Performance-Based Compensation. In the case of such Awards granted
to Covered Employees,
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references to the "Administrator" or to a "Committee" shall be deemed to be
references to such Committee or subcommittee.
(iv) 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:
(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 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
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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.
(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) INDIVIDUAL OPTION AND SAR LIMIT. The maximum number of Shares
with respect to which Options and SARs may be granted to any Grantee in
any fiscal year of the Company shall be seven hundred and fifty thousand
(750,000) Shares. In connection with a Grantee's commencement of
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Continuous Service, a Grantee may be granted Options and SARs for up to an
additional seven hundred and fifty thousand (750,000) Shares which shall not
count against the limit set forth in the previous sentence. The foregoing
limitations shall be adjusted proportionately in connection with any change in
the Company's capitalization pursuant to Section 10, below. To the extent
required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitations with respect to a Grantee, if any Option or
SAR is canceled, the canceled Option or SAR shall continue to count against the
maximum number of Shares with respect to which Options and SARs may be granted
to the Grantee. For this purpose, the repricing of an Option (or in the case of
a SAR, the base amount on which the stock appreciation is calculated is reduced
to reflect a reduction in the Fair Market Value of the Common Stock) shall be
treated as the cancellation of the existing Option or SAR and the grant of a new
Option or SAR.
(i) 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.
(j) 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.
(k) 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.
(l) 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:
(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
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(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 Awards intended to qualify as
Performance-Based Compensation, the exercise or purchase price, if
any, shall be not less than one hundred percent (100%) of the Fair Market Value
per Share on the date of grant.
(iv) In the case of other Awards, such price as is determined by
the Plan Administrator.
(v) 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 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
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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.
(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
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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 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
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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.
16. STOCKHOLDER APPROVAL. The Plan became effective when adopted by the
Board in October 1999. On May 26, 2000, the Board adopted and approved an
amendment and restatement of the Plan (a) to increase the number of Shares
available for issuance under the Plan, (b) to increase the maximum number of
shares by which the aggregate number of Shares available for issuance under the
Plan and the aggregate number of Shares available for grant of Incentive Stock
Options may be increased each year and (c) to adopt a limit on the maximum
number of Shares with respect to which Options and SARs may be granted to any
Grantee in any fiscal year of the Company and certain other administrative
provisions to comply with the performance-based compensation exception to the
deduction limit of Section 162(m) of the Code, which amendments are subject to
approval by the stockholders of the Company.
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ON BEHALF OF THE BOARD OF DIRECTORS OF DIGIMARC CORPORATION
The undersigned hereby constitutes and appoints Bruce Davis and E.K.
Ranjit, and each of them, his true and lawful attorneys-in-fact and agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Stockholders of Digimarc Corporation to be held at the
offices of Morrison & Foerster, 425 Market Street, San Francisco, CA 94105 on
Friday, July 14, 2000 at 2:00 p.m. local time, and at any adjournment or
postponement thereof, and to vote all shares of common stock that the
undersigned would be entitled to vote if then and there personally present on
the matters set forth below.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this
Proxy will be voted for Proposal No. 1 and as the proxy holder may determine in
his discretion with regard to any other matter properly brought before this
Special Shareholder Meeting.
1. APPROVAL AND RATIFICATION OF AMENDMENTS TO THE 1999 STOCK INCENTIVE PLAN.
To (a) increase the number of shares reserved for issuance under
the 1999 Stock Incentive Plan by 1,500,000 shares and increase the
maximum number of shares by which the number of shares reserved for
issuance under the Plan may be increased annually from 3% to 7% of the
fully-diluted number of shares outstanding as of that date or a lesser
number of shares determined by the board, (b) increase the maximum
number of shares by which the aggregate number of shares available for
issuance as incentive stock options may be increased each year from the
lesser of 625,000 shares, 3% of the number of fully-diluted shares
outstanding as of that date or a lesser number of shares determined by
the board to the lesser of 1,200,000 shares, 7% of the number of
fully-diluted shares outstanding as of that date or a lesser number of
shares determined by the board and (c) adopt a limit on the maximum
number of shares with respect to which options and stock appreciation
rights may be granted to any grantee in any fiscal year of the Company
and certain other administrative provisions to comply with the
performance-based compensation exception to the deduction limit of
Section 162(m) of the Internal Revenue Code of 1986, as amended;
FOR AGAINST ABSTAIN
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 1.
DATED: , 2000
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(Signature)
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(Signature)
This Proxy should be marked, dated
and signed by the shareholder(s)
exactly as his or her name appears
hereon, and returned promptly in the
enclosed envelope. Persons signing
in a fiduciary capacity should so
indicate. If shares are held by
joint tenants or as community
property, both should sign.
