Company: DMRC
Filing Date: 2025-03-25
Form Type: DEF 14A
Source: 0001437749-25-009135
Chunk: 71

Company: Digimarc CORP
Filing Date: 2025-03-25
Form: DEF 14A
Chunk 71
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 compensation of executives and employees and long-term shareholder value creation.

In order to continue to have an appropriate supply of shares for equity incentives to recruit, hire and retain the talent required to successfully execute our business plans, our Board of Directors believes that we will need an additional 950,000 new shares to be available under the Digimarc Corporation 2018 Incentive Plan (the “2018 Plan”). Although the additional 950,000 new shares to be available under the 2018 Plan will increase the potential dilution to shareholders, the Board of Directors believes our equity compensation plans are well-managed and that our total equity “overhang” will remain well within market norms with the addition of the new shares. Over the last three fiscal years, our annual gross burn rate has averaged 2.23%. We calculated the annual gross burn rate for each year by summing the restricted stock, restricted stock unit, and option awards granted with the performance stock units earned in the year and dividing that sum by the weighted average shares outstanding.

In considering this proposal, we emphasize for our shareholders that Digimarc uses stock as the primary basis of incentive compensation for its officers and employees, unlike our peers, that typically use cash bonus incentives for a more significant component of their executive compensation program. Over the last two years, the relative proportion of restricted stock units and option awards granted to employees and Named Executive Officers was 77% and 23%, respectively. Accordingly, Digimarc generally requires more stock than its peers to deliver the same level of compensation to its officers and employees. However, we believe that our approach better aligns the compensation of our officers and employees with the interests of our shareholders as compared to relying more on cash bonus programs, because additional value is only delivered if the performance of the officers and employees contributes to a meaningful appreciation in stock price.

In addition, Digimarc as part of measures to conserve cash recently provided that a portion of the salary of non-executive salaried U.S. employees would instead be paid as equity awards such that those affected employees’ compensation would be aligned to Company performance. In addition, Digimarc expanded its annual incentive program to certain management employees with payouts possible solely in equity. The Board of Directors determined that these additional uses of equity to provide incentives to employees to align their interests with shareholders while Digimarc conserves cash makes it prudent to request additional shares for the 2018 Plan.

Our equity compensation program incorporates the following key features:

| ● | No Share Recycling for Stock Options or Stock