EXHIBIT 10.2

CONFIDENTIAL PORTIONS OMITTED

 

Counterfeit Deterrence System

Development and License Agreement

Table of Contents:

 

1.   DEFINITIONS AND PRINCIPLES OF INTERPRETATION      3    2.   SCOPE OF THE
SERVICES      11    3.   PROGRAM MANAGEMENT      13    4.   DELIVERABLES      16
   5.   RESPONSIBILITIES OF THE CBCDG      17    6.   PRICE AND PAYMENT      18
   7.   CHANGE MANAGEMENT      20    8.   INTELLECTUAL PROPERTY MATTERS      22
   9.   INTELLECTUAL PROPERTY INDEMNIFICATION      24    10.   REPRESENTATIONS
AND WARRANTIES OF DIGIMARC      27    11.   REPRESENTATIONS AND WARRANTIES OF
THE BIS      29    12.   CONFIDENTIALITY      29    13.   AUDIT AND INSPECTION
     32    14.   DISPUTE RESOLUTION      33    15.   TERM AND TERMINATION     
33    16.   FORCE MAJEURE      36    17.   NOTICES      36    18.  
MISCELLANEOUS PROVISIONS      37   

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Counterfeit Deterrence System

Development and License Agreement

This Counterfeit Deterrence System Development and License Agreement (the
“Agreement”) is made

Between

DIGIMARC CORPORATION, a corporation incorporated under the laws of Oregon and
having its head office at 9405 SW Gemini Drive, Beaverton, Oregon, U.S.A. 97008
(“Digimarc”)

and

BANK FOR INTERNATIONAL SETTLEMENTS, created pursuant to The Hague Agreements of
January, 1930 having its head office at Centralbahnplatz 2, CH-4051 Basel,
Switzerland (“BIS”)

Recitals

WHEREAS:

Effective 1 January 1999, the predecessor to Digimarc (then also known as
Digimarc Corporation and subsequently merged into L-1 Identity Solutions Inc. in
2008) and the BIS entered into an agreement entitled the “Counterfeit Deterrence
System Development and License Agreement.”

WHEREAS:

On 14 March 2000, 28 December 2001, 1 January 2002 and 1 January 2004, the
predecessor to Digimarc and the BIS entered into Amendments to the Counterfeit
Deterrence System Development and License Agreement (hereinafter the First,
Second, Third and Fourth Amendments). On 18 August 2008, the BIS consented to
assignment of the Agreement of 1999 and its amendments to Digimarc.

WHEREAS:

 

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The parties agreed to restate the Counterfeit Deterrence System Development and
License Agreement to include the First, Second, Third and Fourth Amendments into
a new agreement and to make additional amendments. The restated and revised
agreement was effective from 1 October 2009 (the “2009 Agreement”).

WHEREAS:

The parties wish to renew and extend this Counterfeit Deterrence System
Development and License Agreement by entering into this renewal and extension
agreement effective 1 January 2013.

WHEREAS:

The parties have agreed that all Services performed prior to 1 January 2013
shall be governed by the previous versions of this Development and License
Agreement in effect at the time of those Services.

NOW THEREFORE:

Inconsideration of the promises and covenants set out in the Agreement and other
good and valuable considerations, the receipt and adequacy of which are
acknowledged by each of the parties, the parties agree as follows:

 

1. DEFINITIONS AND PRINCIPLES OF INTERPRETATION

 

1.1 Definitions – Whenever used in this Agreement, the following words and terms
shall have the meanings set out below:

“Agreement” means these articles of agreement, including the Schedules, and
those documents as specified or referenced in this Agreement as forming part of
the Agreement, all as may be amended from time to time;

“Allowable Cost” means a cost of the kind identified in Schedule F;

“Arbitration Agreement” means the agreement attached as Schedule G;

 

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“BIS Technology” means that technology that the BIS has the right to license,
including (a) [**], that the BIS licences to Digimarc on the terms set out in
clause 8.1 to use, design or implement the CDS and all Intellectual Property
Rights in that licensed [**];

“Business Day” means a day on which both the BIS and Digimarc are open for
business at their respective addresses noted above;

“CBCDG” means a committee of representatives from various [**] called “Central
Bank Counterfeit Deterrence Group”, previously known as “[**]”;

“CBCDG Contract Authority” means the chairman of the CBCDG Executive Committee;

“CBCDG Project Director” means the project director appointed by the CBCDG
Contract Authority from time to time on notice to the Digimarc Contract
Authority;

“CBCDG Project Office” means the project office established by the CBCDG
Contract Authority, or its staff as the case may be, and that is responsible for
the oversight of the overall relationship among the BIS, the CBCDG, the [**] the
CDS Technology, and Digimarc and for the key day-to-day contract management;

“CBCDG Task” has the meaning assigned to it by clause 5.1;

“CDS Technology” collectively, means whatever of the BIS Technology, the
Digimarc Technology and the Project Technology is incorporated into the CDS;

[**]

“Confidential Information” means information disclosed during the Term of this
Agreement in any form which, if disclosed in tangible form, is labelled
“Confidential”, “Proprietary” or with a similar legend, or if disclosed orally
is information that by its nature would be understood to be confidential to the
Discloser;

“Contract Authority” means either the CBCDG or Digimarc Contract Authority, as
the context requires;

“Counterfeit Deterrence System” or “CDS” or “System” means a system for [**]
that includes [**]. The System incorporates means for [**];

 

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“Deliverable” means a product, document or tool to be delivered by Digimarc
identified in a Statement of Work;

“Dependency” means any of the following dependencies of Digimarc on [**] and
their employees, agents, representatives and subcontractors:

  (a) performing a task upon which Digimarc’s performance of any part of the
Services is dependent;

  (b) timely providing to Digimarc the relevant technical information, [**];

  (c) timely returning/negotiating [**], documents of understanding as necessary
to protect Digimarc or BIS intellectual property;

  (d) having attendance of the relevant [**] employees or consultants at key
briefings and review meetings; and

  (e) such dependencies as are expressly identified in a Statement of Work;

“Device” means any device in which the [**] device;

“[**]” means the [**] of a [**];

“Digimarc Contract Authority” means the individual designated by Digimarc in
writing to the CBCDG Contract Authority from time to time;

“Digimarc Project Director” means the Project Director appointed by the Digimarc
Contract Authority in accordance with the provisions of clause 3.3;

“Digimarc Technology” means:

 

  (a) the technology partially described in Schedule B developed or owned by
Digimarc prior to 1 January 1999 to the extent that it forms part of the CDS;

  (b) all Improvements to the technology described in (a) made by or on behalf
of Digimarc other than under this Agreement to the extent that they form part of
the CDS;

  (c) all Improvements to the technology described in (a) made by or on behalf
of Digimarc under this Agreement to the extent that they relate to or form part
of the CDS; and

  (d) all Intellectual Property Rights in all such technology and Improvements;

 

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“Digital Watermark” refers to [**] (including [**]) that are [**] from [**] by
[**] of [**], which [**] of [**] and yet do not significantly [**] from the
aesthetics of the [**] or [**] thereby. Examples include:

 

  (a) generally imperceptible changes to [**] or placement in [**];

  (b) [**] of a substrate, where the [**] substantially uniform to human touch;

  (c) slight localized changes to [**] or [**] of a printed document;

  (d) slight changes to [**]; or

  (e) [**] of substantially [**];

“Discloser” means a party which has disclosed or otherwise made available its
Confidential Information to the other party;

“DLA Labour Costs” means the labour costs defined in Schedule F;

“DLA Labour Rates” means the rates for Services set in accordance with Schedule
F;

[**]

“Effective Date” means 1 January 2013;

[**]

“[**] Support Services” means Integration Support, Training and conducting
Verification Tests;

“Escrow Agent” means a custodian appointed by the CBCDG Contract Authority;

“Escrowed Materials” means any and all materials deposited or to be deposited by
Digimarc with the Escrow Agent under this Agreement including the Improvements
pertaining to the CDS Technology which shall include the following:

 

  (a) all Deliverables and work completed by Digimarc (including all [**], [**]
and [**] deliverables, supporting documentation, tools and any other product
created by Digimarc) in support of delivery of the Services since the last
escrow deposit;

  (b) details of the deposit including: full name and version details, number of
media items, media type and density, file or archive format, list or retrieval
commands, archive hardware and operating system details;

 

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  (c) name and functionality of each module or application of the Escrowed
Materials;

  (d) names and versions of development tools;

  (e) documentation describing the procedures for building, compiling, executing
and using the software which forms part of the Escrowed Materials (e.g.,
technical notes, user guides);

  (f) hardcopy directory listings and tables of the contents of the computer
media, manuals and other materials; and

  (g) name and contact details of employee(s) with knowledge of how to maintain
and support the Escrowed Materials;

[**]

“Improvement” means any change in the CDS Technology made by or at the direction
of Digimarc after 1 January 1999 which enhances, whether by improvement,
enhancement, correction, addition or otherwise, the properties, characteristics
or manufacture of the CDS and any change to the CDS Technology and/or the [**]
made by any [**] in connection with the [**] of the CDS by any [**] that
Digimarc has rights in, including customization, improvements, enhancements,
corrections, and changes to the [**] so that it can interface properly to a
[**];

“Integration Support” means the consulting and programming services to be
provided by Digimarc as requested by a [**] to assist the [**] to ensure that
the [**] is [**] in a [**];

“Intellectual Property Rights” means all intellectual property rights existing
now and in the future including trade secrets, trademarks, copyright, database
rights, know-how, topographies, patents and patent applications;

“[**]” means an entity responsible for [**];

“[**]” means the template license agreement with that name agreed upon between
the CBCDG and Digimarc, as amended from time to time;

“[**]” means the template license agreement with that name agreed upon between
the CBCDG and Digimarc, as amended from time to time;

“Key Personnel” mean those personnel identified in clause 3.5;

 

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“[**]” means an [**] licensed by Digimarc pursuant to clause 2.2;

“[**]” means an entity that is authorized by a [**] and/or the CBCDG Contract
Authority and [**] containing [**] pursuant to clause 2.3;

“[**]” means the template license agreement agreed upon between the CBCDG and
Digimarc, as amended from time to time;

“Person” means any individual or other legal entity, including a sole
proprietorship, partnership, unincorporated association, unincorporated
syndicate, unincorporated organization, trust, body corporate, or a natural
person in the capacity of trustee, executor, administrator or other legal
representative;

“Plan Budget” means the document approved under clause 3.12 defining a minimum
spend commitment for a particular calendar year by the CBCDG, subject to clause
3.13;

“Planning Process” means the process for the development of the Statements of
Work and Roadmap as agreed to in writing between the CBCDG Project Office and
Digimarc;

“Pricing Formula” means the formula defined in Schedule F, clause 9;

“[**]” means the template license agreement with that name agreed upon between
the CBCDG and Digimarc, as amended from time to time;

“[**]” means the template license agreement with that name agreed upon between
the CBCDG and Digimarc, as amended from time to time;

“Problem Report” means a report of a problem in a format agreed to by the CBCDG
Project Director and Digimarc;

“Project Director” means either the CBCDG or Digimarc Project Director, as the
context requires;

“Project Technology” means the technology described in Schedule C developed by
or on behalf of Digimarc under this Agreement after 1 January 1999, all
Improvements to that technology or to the BIS Technology, and all Intellectual
Property Rights in that technology and those Improvements;

 

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“Properly Embedded” when used in reference to a [**] means that the [**] is [**]
in accordance with the written instructions provided with the [**] used to [**]
and is capable of passing the Verification Test;

“Recipient” means a party to which the Confidential Information of the other
party has been disclosed or otherwise made available;

“Roadmap” means the rolling five year project and budget plan agreed to in
writing by the CBCDG Contract Authority and Digimarc and updated annually;

“Schedule” means a schedule to this Agreement;

[**]

“Security Requirements” means the requirements for physical security including
electronic systems security set out in Schedule D;

“Services” means the services required to be performed by Digimarc as set out in
clause 2, and other services reasonably necessary to comply with its obligations
under this Agreement;

“SOW Budget” means the amount approved under clause 3.11 defining a minimum
spend commitment related to a Statement of Work for a particular calendar year
by the CBCDG, subject to clause 3.13;

“Specifications” for the CDS or any part thereof means the technical
specifications for the products and tools of the CDS or part thereof to be
delivered or already accepted by the CBCDG Project Director under this
Agreement;

“Statement of Work” means the document that captures and defines the work
activities, deliverables and timeline Digimarc will execute against in
performance of specified work developed in accordance with the Planning Process;

“Term” means the period commencing on the Effective Date and ending on
31 December 2024;

“Training” means the training in the use and operation of the [**] described in
Schedule E; and

 

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“Verification Test” means a test or tests to determine if [**]. The Verification
Test is defined in the Verification Test procedure and is executed using the
Verification Test tool.

 

1.2 Interpretation – in this Agreement:

 

  1.2.1 unless otherwise specified, all references to money amounts are to the
currency of the United States of America;

 

  1.2.2 the use of words in the singular or plural, or with a particular gender,
shall not limit the scope or exclude the application of any provision of this
Agreement to such Person or Persons or circumstances as the context otherwise
permits;

 

  1.2.3 whenever a provision of this Agreement requires an acceptance, approval
or consent by a party to this Agreement and notice of such acceptance, approval
or consent is not delivered within the applicable time, then the party shall be
conclusively deemed to have withheld the acceptance, consent or approval;

 

  1.2.4 unless otherwise specified, the number of days within or following which
any payment is to be made or act is to be done shall be interpreted to be
continuous and shall be calculated by excluding the day on which the period
commences and including the day which ends the period and by extending the
period to the next Business Day if the last day of the period is not a Business
Day;

 

  1.2.5 unless otherwise specified, the order of precedence for interpreting
this Agreement shall be:

 

  (a) the terms of this Agreement, excluding Schedules;

  (b) the Schedules;

  (c) the Statement of Work;

  (d) as between the delivery schedules forming part of a Statement of Work, and
other provisions for such Statement of Work, the delivery schedules shall take
precedence;

 

  1.2.6 for greater certainty, a party or representative to which this Agreement
grants the right to make a decision or determination in the sole discretion of
the party or representative is not required to act reasonably in making the
decision or determination and no such decision or determination may be
challenged by the other party under the Arbitration Agreement or otherwise;

 

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  1.2.7 the words “includes” or “including” will be construed as meaning
“includes without limitation” and “including without limitation” as the case may
be; and

 

  1.2.8 a clause or Schedule, unless the context requires otherwise, is a
reference to a clause to, a Schedule of, or a paragraph of a Schedule to, this
Agreement, as amended from time to time in accordance with this Agreement.

 

1.3 Applicable Law – The Agreement and all amendments thereto shall be construed
in accordance with the laws of England to the exclusion of its rules of
conflicts of laws.

 

1.4 Schedules – The Schedules to this Agreement, listed below, are an integral
part of this Agreement.

Schedule    Description Schedule A    System Description Schedule B    Digimarc
Technology Schedule C    Project Technology Schedule D    Security Requirements
Schedule E    Training Schedule F    Allowable Costs Schedule G    Arbitration
Agreement

 

2. SCOPE OF THE SERVICES

 

2.1 Digimarc shall provide the Services as stated in the Statements of Work.

 

2.2 Digimarc shall, when requested by the CBCDG Contract Authority, make an
irrevocable offer to an [**] to grant the [**] a [**] to the relevant CDS
Technology in connection with the banknotes of the [**] on terms no less
favourable to the Issuing Authority than those set out in the [**] for CBCDG
Members or the [**], as applicable.

 

2.3 Digimarc shall, when requested by the CBCDG Contract Authority and/or [**]:

 

  (a) make an irrevocable offer to [**] designated by the CBCDG Contract
Authority and/or [**] a [**] to the relevant CDS Technology in connection with
[**] of a [**], on terms no less favourable to the [**] than those set out in
the [**] as applicable; and

 

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  (b) deliver the relevant CDS Technology to the [**] referred to above at no
charge and provide the Training to the [**] for the charges to the [**]
described in clause 2.6 within thirty (30) Business Days after the [**]
acceptance of the offer to [**], or at such other times as may be agreed between
Digimarc and the [**].

 

2.4 No later than sixty (60) Business Days after every written request made by a
[**] during the Term, Digimarc shall provide Integration Support to the [**] on
a date or dates agreed between Digimarc and the [**] for the charges described
in clause 2.6.

 

2.5 No later than twenty (20) Business Day after every written request made by a
[**] during the Term, Digimarc shall conduct Verification Tests of [**] on a
date or dates agreed between Digimarc and the [**], as the case may be, for the
charges specific in clause 2.6.

 

2.6 The amount charged by Digimarc to the [**] for [**] Support Services will be
in accordance with the Allowable Costs.

 

2.7 Digimarc shall continue to provide support to [**] for the two (2) most
recently released versions of the [**] unless the CBCDG Project Director
instructs otherwise.

 

2.8 Digimarc [**] the relevant CDS Technology to all [**] at the request of the
CBCDG Project Director on terms no less favourable to the [**] than those set
out in the [**].

 

2.9 Digimarc shall continue to support all deployed versions of the [**] and
[**] as instructed by the CBCDG Project Director.

 

2.10 The BIS hereby grants Digimarc a [**] the BIS may have or acquire under
clause 8.2 of the Agreement.

 

2.11 Digimarc shall be responsible for compliance with laws and regulations
governing export from the United States. As between Digimarc and the CBCDG
Contract Authority, the CBCDG Contract Authority shall be responsible for
advising those using the CDS on compliance with laws and regulations governing
export from their countries and on compliance with United States law concerning
re-export. Upon request from the CBCDG Project Director, Digimarc shall provide
assistance to support the CBCDG Project Director advising such users of the CDS
on compliance with laws and regulations governing export from their countries
and on compliance with United States law concerning re-export. Costs that
Digimarc incurs in compliance with this clause 2.11 are an Allowable Cost.

 

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[**]

 

2.12 Digimarc acknowledges and confirms the BIS’ right to enforce clauses 2.2,
2.3 and 2.8 by an application for specific performance or otherwise.

 

2.13 Digimarc shall at all times comply, and shall ensure that its employees,
agents and subcontractors comply, with the Security Requirements.

 

2.14 The CBCDG Project Office and Digimarc shall develop a plan that establishes
a procedure which, upon notice of termination of this Agreement, facilitates the
orderly winding down of the Services or the orderly, effective and efficient
transition of the operational capability, knowledge of the Services and the
responsibility for the provision of the Services, from Digimarc to an alternate
supplier (“Termination Assistance Plan” or “TAP”). The TAP shall be reviewed
annually and updated as required. The CBCDG Contract Authority agrees to pay for
such assistance as provided under the TAP.

 

3. PROGRAM MANAGEMENT

 

3.1 The BIS designates the CBCDG Contract Authority, the CBCDG Project Director
and the CBCDG Project Office as its agents to carry out the responsibilities
designated to each of them respectively throughout this Agreement. They shall
each have only the powers specified in the respective provisions of this
Agreement. The BIS hereby agrees to procure the performance of any obligations
that are expressed to be performed by any of the CBCDG, the CBCDG Contract
Authority, the CBCDG Project Director or the CBCDG Project Office.

 

3.2 The CBCDG Project Director shall be responsible for coordinating fulfillment
by the BIS of its obligations under this Agreement and directing Digimarc in
respect of prioritizing effort and timing of Services in relation to any [**]
and/or [**] in accordance with the agreed upon Statement of Work and changes
thereto. Except as expressly set out in this Agreement, the CBCDG Project
Director shall have no authority to amend this Agreement, approve payments or
approve or accept Deliverables or other Services or proposals on behalf of the
BIS.

 

3.3 Digimarc shall designate a responsible individual with adequate authority
and competence as the Digimarc Project Director. The Digimarc Project Director
shall be responsible for coordinating the performance of the Services by
Digimarc including serving as project leader and primary interface with the
CBCDG, but shall have no authority to agree to an amendment of this Agreement on
behalf of Digimarc.

 

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3.4 The respective Project Directors or Contract Authorities may from time to
time appoint one or more persons to represent him or her on prior written notice
to the other Project Director or Contract Authority.

 

3.5 The CBCDG Project Director and Digimarc Project Director shall agree on the
list of Key Personnel whose knowledge and skill set make them critical to the
delivery of the Services. The list of Key Personnel shall be sent to the CBCDG
Contract Authority annually by 31 December. If it becomes necessary for Digimarc
to provide substitute or add Key Personnel for any reason, the CBCDG Contract
Authority must approve such Key Personnel in advance, which approval shall not
be unreasonably withheld. Digimarc shall, at Digimarc’s cost, train the
replacement Key Personnel about the job specifics so the replacement personnel
shall be able to perform the Services of the replaced Key Personnel at the
particular state the Services had reached when the personnel change occurred.

 

3.6 Digimarc shall replace within a reasonable time under the circumstances any
of its employees or authorized subcontractors engaged in fulfilling its
obligations under this Agreement, including its Project Director, whose removal
is required by the CBCDG Contract Authority, provided that the CBCDG Contract
Authority specifies reasonable cause for such removal in writing.

 

3.7 Digimarc undertakes that all personnel assigned to perform the Services
shall be employees or a non-material subcontractor of Digimarc. Digimarc shall
provide reasonable prior written notice of its intent to use a material
subcontractor. The CBCDG Project Director shall have the right to approve all
material subcontractors, which approval shall not be unreasonably withheld.
Digimarc undertakes that it shall obtain from each subcontractor prior to
permitting that subcontractor to do any part of the Services a written
undertaking that all Intellectual Property Rights in any work developed by that
subcontractor while providing the Services shall vest absolutely in Digimarc
upon the date of creation. Digimarc shall remain responsible for any obligations
which are performed by a subcontractor and for the conduct of subcontractors as
if they were the acts or omissions of Digimarc.

 

3.8

Digimarc shall report on progress of the Services in the format and with the
frequency directed in writing by the CBCDG Contract Authority. Digimarc will
attend such review meetings as requested by the CBCDG Project Director. There
will be at least six (6) such review meetings per year or as otherwise agreed by
the parties to review technical, planning and resource matters. Each such
meeting will last no more than two (2) days

 

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unless otherwise agreed upon in advance and will be held at a mutually agreeable
date and location. At least half of the review meetings will be held at
Digimarc. Digimarc will also provide a presentation for the CBCDG [**] on
development and [**] progress at least once per year if requested by the CBCDG
Project Director.

 

3.9 In the event that it becomes evident to a Project Director that a failure or
delay to perform in accordance with a party’s obligations under this Agreement
will result in a material impact on the completion of the Services in accordance
with the applicable Statement of Work, then the relevant Project Director shall
immediately bring the issue to the attention of the other Project Director.

 

3.10 As of the Effective Date, the CBCDG Contract Authority shall have approved
the 2013 Statement of Work and the 2014 Plan Budget.

 

3.11 The Statement of Work and associated SOW Budget for the next calendar year
(starting with 2014) shall be prepared by Digimarc in collaboration with the
CBCDG Project Director and provided to the CBCDG no later than 31 May of each
year or such later date as agreed between the CBCDG Project Director and
Digimarc. The CBCDG Contract Authority shall, by 30 June of each year or such
later date as agreed between the CBCDG Project Director and Digimarc, notify
Digimarc in writing of the CBCDG’s approval of the Statement of Work and
associated SOW Budget for the next calendar year.

 

3.12 The Plan Budget for the calendar year following the next calendar year
(starting with 2015) shall be prepared by Digimarc in collaboration with the
CBCDG Project Director and provided to the CBCDG no later than 31 May of each
year or such later date as agreed between the CBCDG Project Director and
Digimarc. The CBCDG Contract Authority shall, by 30 June of each year or such
later date as agreed between the CBCDG Project Director and Digimarc, notify
Digimarc in writing of the CBCDG’s approval of such Plan Budget for the calendar
year following the next calendar year. The Plan Budget for any given calendar
year shall be the basis for creating the SOW Budget for that same calendar year.

 

3.13 If Digimarc is ready, willing and able to provide the Services at the level
of such SOW Budget amounts and such Plan Budget amounts and is not otherwise in
material breach of this Agreement, the CBCDG Contract Authority shall pay
Digimarc at least such SOW Budget amounts and such Plan Budget amounts for the
relevant years. In the event of any termination of the Agreement, the terms of
clause 15 shall take precedence over this clause.

 

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3.14 The total value of the Services set out in the Statement of Work for any
given year must be greater or equal to the initial approved Plan Budget for that
year.

 

3.15 The CBCDG Project Office and Digimarc shall hold planning meetings in
accordance with the Planning Process as needed to review the scope and status of
current and planned projects under the Statement of Work and Roadmap relative to
the schedule, expenditures and budgets and to establish Statements of Work for
subsequent periods.

 

3.16 The CBCDG Project Office and Digimarc shall meet at least once in each
calendar year to discuss [**] and similar issues related to the development,
[**] and [**] of the CDS. If both parties agree that this meeting is not
required in any given year, the meeting will not be held.

 

4. DELIVERABLES

 

4.1 Deliverables shall be approved by the CBCDG Contract Authority in accordance
with the timing and criteria set out in the relevant Statement of Work.

 

4.2 Where a Deliverable depends upon acceptance and Digimarc fails to produce a
Deliverable acceptable to the CBCDG Contract Authority in accordance with the
acceptance criteria set out in the applicable Statement of Work then the CBCDG
Contract Authority may, in its sole discretion, by written notice to Digimarc,
either:

 

  (a) allow additional time for Digimarc to produce a Deliverable acceptable to
the CBCDG Contract Authority, whereupon the time for completion of all other
Deliverables which depend on the acceptance shall automatically be extended by
one day for each additional day or such other period as may be agreed in writing
between the respective Contract Authorities; or

 

  (b) cancel any further work on the Deliverable and all Deliverables which
depend on the acceptance, whereupon the Statement of Work which provides for the
cancelled work or Deliverables which depend on the acceptance shall be deemed to
be amended to exclude them.

 

4.3 Digimarc shall not be responsible to the extent any failure by Digimarc to
perform the Services in accordance with this Agreement is directly attributable
to: a) a delay to perform any CBCDG Task applicable to the affected part of the
Services; b) a Dependency applicable to the affected part of the Services not
being fulfilled by a [**]; or c) a force majeure event (as defined in clause
16.1).

 

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4.4 If any version of the [**] fails to meet the Specifications for that version
within one (1) year of the date of acceptance thereof by the CBCDG Contract
Authority, and such failure could not have been discovered by the CBCDG Contract
Authority using reasonable diligence during the acceptance procedure for that
version, then Digimarc shall, at its own expense, within sixty (60) days after
receipt of a Problem Report from the CBCDG Project Director or such other period
as the CBCDG Project Director may agree, rectify the failure and at the
direction of the CBCDG Project Director provide a corrected [**] to which
Digimarc had previously provided the [**].

 

4.5 If any version of a [**] provided by Digimarc to any Person during the Term
for incorporation into any Device, fails to meet the relevant Specifications
within one (1) year of the date of acceptance thereof by the CBCDG Contract
Authority, and such failure could not have been discovered by the CBCDG Contract
Authority using reasonable diligence during the acceptance procedure for that
version, then Digimarc shall, at its own expense, within sixty (60) days after
receipt of written notice of a Problem Report from the CBCDG Project Director or
such other period as the CBCDG Project Director may agree, rectify the failure
and at the direction of the CBCDG Project Director provide [**] to all Persons
to which Digimarc had previously provided such a [**].

 

5. RESPONSIBILITIES OF THE CBCDG

 

5.1 The CBCDG Project Director shall ensure that the CBCDG performs all tasks
assigned to it in a Statement of Work by the dates set out therein (herein
referred to as the CBCDG Tasks) provided that Digimarc has provided the CBCDG
Project Director with reasonable notice that there is a Digimarc action that is
dependent on that CBCDG Task.

 

5.2 Unless otherwise expressly set out in this Agreement, the CBCDG Contract
Authority or the CBCDG Project Director shall respond in writing within ten
(10) Business Days to every written request for consent required by this
Agreement received from Digimarc.

 

5.3

If there is a delay in complying with any of the obligations under clauses 5.1
or 5.2 for any reason not attributable to Digimarc, and such delay will cause a
delay in the completion and delivery by Digimarc of any Services, then Digimarc
shall reasonably promptly advise the CBCDG Project Director of the impact of the
delay. The time for completion of the Services and all subsequent Services
dependent thereon, shall then be extended automatically by one day for each day
of delay or such other period as may be agreed in writing between the respective
Contract Authorities. If Digimarc suffers

 

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increased costs by reason of such delay, other than a delay due to a force
majeure event (as defined in clause 16.1), such costs reasonably and necessarily
incurred by Digimarc shall be borne by the CBCDG Contract Authority. Digimarc
shall make every reasonable effort to reassign staff and otherwise mitigate the
increased costs associated with such a delay. If the delay is due to a force
majeure event, such costs shall be borne equally by the CBCDG Contract Authority
and Digimarc. If there are any additional costs to be borne by the CBCDG
Contract Authority otherwise than as agreed under clause 6 of this Agreement,
Digimarc shall reasonably promptly notify the CBCDG Contract Authority of such
and the CBCDG Contract Authority shall either approve such costs and/or request
a change to the Services under clause 7 of this Agreement. Such change request
shall ask Digimarc to describe the effect the costs and delay under this clause
5.3 will have on the applicable Statements of Work. If after Digimarc describes
the effect the costs and delay under this clause 5.3 will have on the applicable
Statements of Work, the CBCDG Contract Authority requests such a change, the
Statements of Work shall be amended so that Digimarc remains within the
previously approved SOW Budget. This clause 5.3 sets forth Digimarc’s only
remedy for a delay by the CBCDG in complying with any such obligation.

 

6. PRICE AND PAYMENT

 

6.1 The BIS designates the CBCDG Contract Authority as its agent to make all
payments owed by the BIS under or in connection with this Agreement. Digimarc
shall notify the BIS if any payment is not received within thirty (30) days of
when such payment is due.

 

6.2 Subject to the limits set out in this Agreement and unless otherwise
expressly set out herein, the CBCDG Contract Authority shall reimburse Digimarc
for all the Allowable Costs reasonably and properly incurred by Digimarc during
each calendar month to perform the Services. Digimarc shall send its invoice to
the CBCDG Contract Authority monthly in arrears for such Allowable Costs. Each
invoice shall specify the Expenses (as defined in Schedule F) incurred and the
time spent by the staff and sub-contractors of Digimarc in performing the
Services and shall give a breakdown of the Allowable Costs.

 

6.3 The CBCDG Contract Authority shall pay Digimarc each amount which is owed
Digimarc under this Agreement no later than thirty (30) days after the later of
the payment due date and the date on which the CBCDG Contract Authority receives
a detailed and correct invoice for the amount.

 

6.4

For a period of five (5) years following their creation, Digimarc shall maintain
proper, up-to-date, accurate and complete books, records and other documentation
substantiating

 

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the Allowable Costs invoiced under this Agreement including time sheets showing
the hours spent on each task which forms part of the Services and receipts for
all Expenses. Digimarc shall produce such books, records and documentation to
the CBCDG Project Office or its representatives for inspection and copying at
Digimarc’s premises (with the right to take such copies from Digimarc’s premises
as long as Digimarc is notified in writing what copies are removed from
Digimarc’s premises and the copies are handled by the CBCDG Project Office or
its representative in accordance with the confidentiality obligations under
clause 12) at all reasonable times on request by the CBCDG Project Director.

 

6.5 Except as otherwise expressly provided in this Agreement, the CBCDG Contract
Authority shall pay Digimarc all sales, use, goods and services or other similar
taxes levied by any government in the [**] which Digimarc is obliged to collect
and remit to such government(s) in connection with any amount paid under this
Agreement.

 

6.6 Digimarc is responsible for, and shall indemnify the BIS against, and hold
the BIS harmless from, the payment of all taxes levied by any government on or
in respect of Digimarc’s income and any amounts required by law to be paid in
respect of social benefits for Digimarc’s employees relating to or arising out
of the performance of the Services by Digimarc. If required by law, the BIS
shall deduct all such taxes and amounts from the amounts otherwise payable to
Digimarc and remit them to the appropriate authorities.

 

6.7 The BIS may set off against any amount which the BIS owes Digimarc under or
in connection with this Agreement any amount which Digimarc owes the BIS under
or in connection with this Agreement including damages for breach.

 

6.8

Any equipment or software [**] purchased for over [**] as an Allowable Cost
shall be owned by the BIS or another entity designated by the CBCDG Contract
Authority and shall be held in trust by Digimarc. Digimarc shall ensure that the
BIS or the designated entity is identified on such [**] and [**] as the owner.
Unless such [**] or [**] needs to be used in a manner that it was not designed
for and the CBCDG Contract Authority is made aware of such need, Digimarc shall,
at its own risk, use such [**] or [**] in a reasonably careful and proper manner
and in accordance with all operating instructions. In any event such [**] and
[**] shall be used by Digimarc solely for the provision of the Services. Upon
termination of this Agreement and at the request of the CBCDG’s Project
Director, Digimarc shall promptly deliver such [**] and [**] to the CBCDG
Project Office at the CBCDG’s expense. Such [**] and [**] shall be returned in
the same condition as originally received by Digimarc, reasonable wear and tear
excepted.

 

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If, however, the [**] or [**] needs to be used in a manner that it was not
designed for and the CBCDG Project Director is made aware of such need, then
such [**] and [**] shall be returned “as is.” The CBCDG Contract Authority shall
reimburse Digimarc for any unrecovered costs of such [**] or [**] (i.e. costs
not recovered through depreciation charges), subject to receipt of a correct and
properly due invoice.

 

6.9 DLA Labour Rates as set out and adjusted in accordance with Schedule F shall
be no greater than the then-current rates charged to Digimarc’s most favored
customers, [**].

 

6.10 If an approved Plan Budget for any calendar year is at least [**]), but
does not amount to at least [**]),

 

  (a) Digimarc can start a review of the DLA Labour Rates for all DLA labour
positions set out in Schedule F according to the agreed upon Pricing Formula.
The review will be completed within three months of the day Digimarc gives the
CBCDG notice that it is initiating a review under Schedule F. Any adjustment to
the DLA Labour Rates under this review will be effective on the January 1 of the
year that the lower Plan Budget would be effective. The DLA Labour Rates for
that same January 1 date shall also be adjusted in accordance with the
indexation formula of clause 7 of Schedule F; and

 

  (b) The CBCDG Contract Authority shall pay Digimarc all of its actual and
reasonable costs incurred in connection with the reduced Plan Budget including:

 

  (i) third party contract termination costs;

  (ii) employee re-deployment or termination costs including severance,
outplacement, benefits, acceleration of stock compensation, employer paid
payroll taxes; and

  (iii) accounting, legal and travel costs associated with the reduced Plan
Budget and related negotiations.

Digimarc shall use commercially reasonable efforts to mitigate all such costs.

 

7. CHANGE MANAGEMENT

 

7.1 The CBCDG Project Director or Digimarc may request a change to the
Statements of Work from time to time by submitting a request in writing to the
other party’s Project Director. Any such request shall indicate the nature of
the new work to be performed in a form sufficient for Digimarc to investigate
the effect of the change.

 

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7.2 On making such a change request or within ten (10) Business Days after
receiving a change request from the CBCDG Project Director, Digimarc shall
inform the CBCDG Project Director of the amount, if any, which Digimarc intends
to invoice to investigate the effect the change will have on the applicable
Statements of Work and the Allowable Costs for the applicable Statements of
Work.

 

7.3 Within ten (10) Business Days after receiving the written authorization of
the CBCDG Project Director to conduct the investigation of a change, or such
longer period as may be authorized by the CBCDG Project Director, Digimarc shall
report to the CBCDG Project Director, in writing, on the results of the
investigation.

 

7.4 Within ten (10) Business Days after the CBCDG Project Director receives the
report and, if the change will not increase the approved SOW Budget for a given
year as set out in the approved Statements of Work, then the CBCDG Project
Director shall notify Digimarc whether or not the change is authorized. If the
change will increase the approved SOW Budget for a given year as set out in the
approved Statements of Work, then the CBCDG Contract Authority must notify
Digimarc whether or not the change is authorized.

 

7.5 The Statements of Work shall be updated quarterly to reflect all authorized
changes to properly state the new obligations of Digimarc. If both parties agree
that an update to the Statement of Work is not required for any given quarter,
none shall be provided.

 

7.6 Digimarc shall not implement any change to the Services until the change is
authorized in writing by the CBCDG Project Director or the CBCDG Contract
Authority, as set out in clause 7.4. Digimarc shall implement any change
directed and authorized pursuant to clause 7.4 provided:

 

  (a) the change is technically feasible and is within the capabilities of
Digimarc;

 

  (b) the costs associated with such change identified by Digimarc in its
investigative report and approved under clause 7.4 as part of the approval of
the change are borne by the CBCDG Contract Authority; and

 

  (c) Digimarc is given commensurate relief in the manner and to the extent as
specified in the authorized change from prior commitments under the Statements
of Work.

 

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7.7 Pending receipt of a written authorization from the CBCDG Project Director
or the CBCDG Contract Authority, Digimarc shall proceed with the Services in
accordance with the approved Statements of Work.

 

8. INTELLECTUAL PROPERTY MATTERS

 

8.1 The BIS grants to Digimarc a [**] such BIS Technology which is incorporated
into the CDS or needed by Digimarc in order to comply with its obligations under
this Agreement and to sublicense the same in any license agreement entered into
by Digimarc as directed or permitted by the CBCDG Contract Authority under this
Agreement and for no other purpose.

 

8.2 The BIS and Digimarc agree to renew and extend the [**] to the BIS as set
out at clauses 8.4-8.11 of the 2009 Agreement, in the manner set out in this
clause 8. Accordingly, Digimarc hereby renews and extends the [**] to the BIS of
the [**] the Digimarc Technology and the Project Technology, and all
Improvements thereto, and [**] of the Digimarc Technology and the Project
Technology and such Improvements to other Persons, for the purposes of:

 

  (a) [**], the [**] and any such component thereof, and making the [**] and any
component available to others; and

 

  (b) [**];

[**].

The [**] to the BIS and renewed and extended by this clause 8.2 applies to
Digimarc Technology and the Project Technology and all Improvements existing on
or before the effective date of this Agreement and created on an on-going basis
under any subsequent Statements of Work approved under this Agreement. [**]

[**], including [**]. For greater certainty, the uses permitted by the license
are limited to [**].

The [**] to the BIS does not permit any other uses, [**].

 

8.3 The [**] to the BIS and described in clause 8.2 has effect in respect of
each specific item of Digimarc Technology, Project Technology or Improvements
created as set out in clause 8.2 on the earliest of:

 

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  (a) the date on which the CBCDG Contract Authority pays Digimarc all sums
properly due to Digimarc under this Agreement for the development of that
specific item;

 

  (b) sixty (60) days following the effective date of termination of this
Agreement in accordance with the provisions of clause 15.2(a), (b), (d) or
(e) unless Digimarc demonstrates within such sixty (60) day period that,
notwithstanding the occurrence of the events giving rise to the termination,
Digimarc is willing and able to comply with its obligations under the Agreement;
or

 

  (c) the effective date of termination of this Agreement in accordance with the
provisions of clauses 15.2(c), 15.2(f), 15.2(g), 15.3, 15.5 or 15.9.

 

8.4 Nothing in this Agreement shall be construed to grant or create any broader
license rights than those expressly granted by this Agreement.

 

8.5 From time to time during the Term, on no less than thirty (30) Business Days
prior written notice by the CBCDG Project Director, Digimarc shall, at
Digimarc’s premises, present representatives of the Escrow Agent with all the
Escrowed Materials, in any form, in Digimarc’s possession or control. The
representatives may identify any or all of such material and Digimarc shall
arrange, at the expense of the BIS, for a complete, accurate and up-to-date copy
of the selected material to be made and sent to the Escrow Agent within five
(5) Business Days of the selection being made for deposit. All work to prepare
and deliver the Escrow Materials to the Escrow Agent will be Allowable Costs.

 

8.6 The CBCDG Contract Authority shall inform Digimarc within thirty (30) days
after the end of each calendar quarter during the Term of all improvements
relating to (i) [**]; (ii) [**]; (iii) [**]; and (iv) any other part of the CDS,
[**] the CBCDG [**], or caused or permitted to be made, as a result of access to
and use of the Escrowed Materials or the Digimarc Confidential Information. The
CBCDG Contract Authority shall provide to Digimarc within a reasonable period of
time following request, the information for those improvements requested by
Digimarc in writing.

 

8.7 The BIS hereby grants to Digimarc a royalty-free, non-exclusive,
non-transferable, worldwide license to use and license the improvements
described in clause 8.6 and in any patents thereon owned or otherwise licensable
by the BIS.

 

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8.8 For greater certainty, the obligations set out in clauses 8.6 and 8.7 shall
not apply to any improvement which the CBCDG Contract Authority can demonstrate
would have been made irrespective of access to the Escrowed Materials or
Digimarc Confidential Information.

 

8.9 The CBCDG Contract Authority shall take all reasonable steps to ensure that
Persons to whom it allows access to the Escrowed Materials will be contractually
bound in accordance with terms substantially like those set forth in clauses
8.6, 8.7 and 8.8, granting rights in favour of Digimarc.

 

8.10 On the date on which the grant of the license to the BIS (as set out in
clause 8.2) takes effect in respect of a specific item of Digimarc Technology,
Project Technology or Improvements, the CBCDG [**], copy and use the Escrowed
Materials relating to such item.

 

9. INTELLECTUAL PROPERTY INDEMNIFICATION

 

9.1 (a)

The BIS shall provide Digimarc with prompt written notice of any claim, demand
or action against the BIS based on an allegation that the CDS, the Digimarc
Technology or the Project Technology or any Improvements thereto or any part
thereof, infringes any Intellectual Property Right of any Person (referred to
below as a “Claim”).

 

  (b) Upon such notice, Digimarc shall at its own expense resolve any Claim,
including settlements or litigation proceedings, and pay all costs associated
with the resolution of such Claim.

 

  (c) Any counsel hired to assist in the resolution of such Claim shall be
selected by mutual agreement between the BIS and Digimarc.

 

  (d) Digimarc shall consult and work in cooperation with the BIS in connection
with the resolution of any Claim, taking into account the BIS’ special status as
an international organization.

 

  (e) The BIS shall comply with all reasonable requests for assistance from
Digimarc in connection with the settlement or defense of any Claim.

 

9.2 Notwithstanding any other provision of this Agreement to the contrary but
subject to these clauses 9.1-9.3 (including the notice in clause 9.1(a)),
Digimarc shall indemnify the BIS against and save the BIS harmless from all
loss, costs, liabilities including, for greater certainty an award of damages,
and expenses and reasonable legal fees, arising from each Claim. The obligation
set out in these clauses 9.1-9.3 shall not apply in respect of any settlement
made by the BIS without the consent of Digimarc.

 

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9.3 If the CDS, the Digimarc Technology or the Project Technology, or any
Improvement thereto or part thereof is held to infringe, or if Digimarc believes
that it is likely to be held to infringe, any of the Intellectual Property
Rights described in clause 9.1, Digimarc shall, in addition to its other
obligations set out above, at its own expense either:

 

  (a) procure for the BIS the right to continue using the allegedly infringing
materials; or

  (b) replace or modify the materials to the reasonable satisfaction of the BIS
so that the materials are no longer infringing but remain functionally
equivalent.

Failing either of which result the BIS may, at its option, terminate this
Agreement without prejudice to the BIS’ other rights and remedies available in
law, at equity or otherwise.

 

9.4 Digimarc shall provide the BIS with prompt written notice of any claim,
demand or action against Digimarc based on an allegation that the BIS Technology
or any part thereof, infringes any Intellectual Property Right of any person
(referred to below as a “BIS Technology Claim”). Digimarc shall comply with all
reasonable requests for assistance from the BIS in connection with the
settlement or defense of any BIS Technology Claim.

 

9.5 Notwithstanding any other provision of this Agreement to the contrary, the
BIS shall indemnify Digimarc against and save Digimarc harmless from all loss,
costs, liabilities including, for greater certainty an award of damages, and
expenses and reasonable legal fees, arising from each BIS Technology Claim. The
obligation set out in this clause 9.5 shall not apply in respect of any
settlement made by Digimarc without the consent of the BIS.

 

9.6 If the BIS Technology or any part thereof is held to infringe, or if the BIS
believes that it is likely to be held to infringe, any of the Intellectual
Property Rights described in clause 9.4, the BIS may, in addition to its other
obligations set out above, at its own expense either:

 

  (a) procure for Digimarc the right to continue using the allegedly infringing
materials; or

 

  (b) replace or modify the materials to the reasonable satisfaction of Digimarc
so that the materials are no longer infringing but remain functionally
equivalent.

 

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9.7 Digimarc hereby undertakes to assume and be responsible for the provision of
intellectual property (IP) infringement indemnification in respect of any
infringement or alleged infringement of any third party IP rights of any kind
(“IP Indemnification”) arising in respect of [**] that Digimarc [**] after
10 January [**] (“[**]”). [**]: (a) Digimarc has the right to direct the defense
of any infringement and indemnity claim; (b) the [**] shall take such actions as
are reasonably requested by Digimarc in connection with managing, defending, and
settling any claim or demand, including mitigation of damages; (c) to facilitate
mitigation or avoid infringement, Digimarc can supply, at its own cost, to the
[**] with the CBCDG Contract Authority’s prior approval which shall not be
unreasonably withheld; and (d) if the [**] the CBCDG Contract Authority [**] as
of the date of the notice.

 

9.8 Unless otherwise agreed between Digimarc and the CBCDG Project Director,
[**]. Digimarc and the CBCDG Project Director shall mutually agree on a [**],
such agreement not to be unreasonably withheld.

 

9.9 Subject to clause 9.12(c), the [**]. [**], Digimarc shall provide
indemnification [**] in accordance with its obligations under this Agreement,
[**] provided that the IP Indemnification is not terminated or that the
Agreement is not terminated or otherwise expires.

 

9.10 In addition to any other BIS [**] obligations in this Agreement and in
consideration of Digimarc’s continuing compliance at all times with its
obligations under clauses 9.7-9.12, the CBCDG Contract Authority shall [**]
Digimarc for the IP Indemnification an[**]. [**].

 

9.11 [**] is not included under the provisions of clauses 9.7-9.12.

 

9.12 (a)

The BIS has the option, at its sole discretion, to terminate the IP
Indemnification obligations of Digimarc under clauses 9.7-9.12:

 

  (i) at the end of a calendar year and discontinue the [**] under clause 9.10
as of the end of that same calendar year with written notice by 15 November of
that same calendar year; or

 

  (ii) immediately on written notice if this Agreement is terminated pursuant to
clauses 15.2, 15.3 or 15.5.

 

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  (b) Digimarc has the option to terminate the indemnification obligations of
Digimarc under clauses 9.7-9.12 if [**] under clause 9.10 and [**] is not made
within thirty (30) days of receipt of an IP Indemnification termination notice
from Digimarc.

 

  (c) Upon termination of this IP Indemnification under clauses 9.12(a) or
9.12(b) or termination of the Agreement for any reason, Digimarc shall [**] from
and the CBCDG Contract Authority shall arrange for [**] except that if a [**]
before such termination and Digimarc [**] within thirty (30) days of such
termination, Digimarc shall [**], in accordance with clauses 9.7-9.12, [**].

 

10. REPRESENTATIONS AND WARRANTIES OF DIGIMARC

 

10.1 Digimarc represents, warrants and undertakes to the BIS that from and after
the Effective Date:

 

  (a) the Services shall be of professional quality conforming to generally
accepted [**] practices and shall be performed at all times in a timely and cost
effective manner and, for greater certainty Digimarc shall employ the standard
of care in performing the work that would be expected of an [**] of the same or
similar type as the [**] which comprises the CDS Technology and in the case of
other Services, in a manner that would be expected of a competent and
experienced provider of the same or similar type of Services;

 

  (b) Digimarc shall ensure that its personnel are appropriately qualified,
skilled, trained and experienced to undertake the Services and tasks assigned to
them, and that each of its personnel shall possess the qualifications and
experience which Digimarc has represented them to possess;

 

  (c) Digimarc is duly incorporated and organized and is validly subsisting
under the laws of the State of Oregon, U.S.A. or some other state in the United
States with full corporate power and authority to enter into this Agreement;

 

  (d) to the best of its knowledge, neither this Agreement nor the Services will
contravene, breach, or result in any default under any agreement, permit,
by-law, or law or regulation to which Digimarc is subject or by which it is
bound including, for greater certainty, any laws or regulations in effect in the
United States governing export;

 

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  (e) this Agreement when executed and delivered by Digimarc shall constitute a
valid and binding agreement with Digimarc enforceable against Digimarc according
to its terms;

 

  (f) Digimarc owns all rights in and to, or is properly licensed in respect of,
the Digimarc Technology and the Project Technology;

 

  (g) Digimarc shall at all material times have the right to grant the licenses
to the Digimarc Technology, the Project Technology and the Improvements thereon
as required by this Agreement; and

 

  (h) for greater certainty, with the exception of the [**], neither the Project
Technology, the Digimarc Technology or Improvements thereon infringe any
Intellectual Property Right of any Person.

 

10.2 Digimarc represents, warrants and undertakes to the BIS that:

 

  (a) incorporated as part of its [**] practices and procedures are those
measures and security procedures commercially and reasonably available on the
date for delivery of a component of the CDS [**] in the CDS that could interfere
with the use of the CDS or corrupt, interfere with or damage any data;

 

  (b) the CDS shall contain no lock, clock, timer, counter, copy protection
feature, replication device or intentional defects (including “viruses” or
“worms” as such terms are commonly used in the computer industry), CPU serial
number reference, or other device which might:

 

  (i) lock, disable or erase the CDS or any data which is loaded on the CDS so
as to prevent full use of the CDS by authorized Persons; or

  (ii) require action or intervention by Digimarc or any other Person to allow
properly trained and authorized Persons to use the CDS;

 

  (c)

the source code for the CDS, including that deposited with the Escrow Agent,
shall, without reference to Digimarc or any of its employees or authorized
subcontractors, be understandable and usable by expert personnel familiar with
the programming languages, and scientific and processing techniques, used
therein, and shall not involve any programming components that such personnel
could not reasonably be expected to understand, and if necessary such source

 

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code shall contain sufficient commentary to enable such personnel to understand
and use such components; and

 

  (d) the Escrowed Materials deposited with the Escrow Agent under this
Agreement shall contain all information in human readable form and on suitable
media to enable an expert technical consultant, familiar with the scientific and
processing techniques used therein, to understand and use the same without
reference to Digimarc or any of its employees and authorised subcontractors.

 

10.3 Digimarc represents, warrants and undertakes to the BIS that:

 

  (a) [**] accepted by the CBCDG Contract Authority shall meet the
Specifications for that version from the date that it is accepted by the CBCDG
Contract Authority until the earlier of the date on which the next version is
accepted by the CBCDG Contract Authority and the last day of the Term; and

 

  (b) until the last day of the Term, every [**] provided by Digimarc to any
Person for incorporation into any Device shall be capable of meeting the
performance criteria which formed part of the Specifications for the version of
the [**] last accepted by the CBCDG under this Agreement at the time such
detector was so provided.

 

10.4 [**] shall not be counted in the determination under clause 10.3 as to
whether or not an [**] meets the Specifications.

 

11. REPRESENTATIONS AND WARRANTIES OF THE BIS

 

11.1 The BIS represents and warrants to Digimarc that:

 

  (a) the BIS has full power and authority to enter into this Agreement;

 

  (b) this Agreement when executed and delivered by the BIS shall constitute a
valid, binding and enforceable obligation of the BIS; and

 

  (c) the BIS will at all material times have the right to grant the licenses
required by this Agreement to the BIS Technology.

 

12. CONFIDENTIALITY

 

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12.1 Except as otherwise expressly permitted by this Agreement, a Recipient
shall not use, reproduce or disclose the Confidential Information of the
Discloser for any purpose other than as reasonably necessary to comply with its
obligations under this Agreement or to exercise any rights or licenses granted
to it under or pursuant to this Agreement.

 

12.2 The Recipient shall protect the Confidential Information of the Discloser
from disclosure by using the same degree of care, which shall be no less than a
reasonable degree of care, as the Recipient uses to protect its own confidential
information.

 

12.3 On written request from the Discloser, the Recipient shall return, or
certify the destruction of, all originals and copies of the Discloser’s
Confidential Information in the Recipient’s possession or control which the
Recipient does not need to retain in order to perform any obligations imposed,
or exercise any rights acquired, by this Agreement.

 

12.4 A Recipient may, on a need to know basis, and only for the purposes
described in clause 12.1, give the Discloser’s Confidential Information to the
Recipient’s employees, authorized subcontractors or representatives provided
that such employee, subcontractor or representative shall have entered into a
non-disclosure agreement in respect of such Confidential Information in favor of
the Discloser on terms requiring at least five years of confidentiality from the
date of disclosure of such Confidential Information but that are in all other
respects materially similar to the provisions of this clause 12. For greater
certainty, the BIS’ representatives shall include the CBCDG Contract Authority,
the CBCDG Project Director and all representatives of members of the CBCDG.

 

12.5 The obligations set out in this clause 12 shall not apply to any
Confidential Information that:

 

  (a) is or becomes publicly available other than through the fault of the
Recipient;

 

  (b) was known to the Recipient prior to disclosure as shown by documentation
sufficient to establish such knowledge;

 

  (c) was or is lawfully disclosed to the Recipient by a third party who did not
breach any obligation of confidence by such disclosure and who made the
disclosure without restriction on further disclosure all of which is shown by
documentation sufficient to establish the same; or

 

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  (d) is required by law to be disclosed provided, however, that the Recipient
shall first give written notice to the Discloser before the disclosure so that
the Discloser may seek an appropriate protective order.

The fact that Confidential Information, or any part thereof, can be linked
together by a search of publications and other information, followed by a
selection of a series of such items of knowledge from unconnected sources, and
fitting together those items of knowledge so as to duplicate or recreate any
item of Confidential Information, shall not be deemed to cause the Confidential
Information, or any part thereof, to be included within exceptions (a), (b) or
(c), above.

 

12.6 If either party is required by applicable law or regulation, by legal
process or by the U.S. Securities and Exchange Commission or listing
requirements of any exchange or quotation system on which securities of any
party may be listed or quoted, to disclose the terms of this Agreement (such
disclosure being referred to herein as “Legally Required Disclosure”), such
party shall provide the other party with prompt notice of such requirement so
that the other party may seek an appropriate protective order or remedy. In the
event the other party fails to obtain an order or remedy that would permit the
requested party not to disclose the required terms, the disclosure shall be
permitted, but the disclosing party shall use all reasonable efforts to have the
disclosure treated confidentially by the recipient.

 

12.7 Nothing in this Agreement shall be construed to require the BIS or any
representative of the BIS including, for greater certainty, the CBCDG Project
Director or the CBCDG Contract Authority, to disclose any information which is
confidential to a third party including for greater certainty a [**].

 

12.8 The BIS shall not reverse-engineer, disassemble, or decompile any [**]
forming part of the CDS, including the [**] (except to the extent that (i) any
such activity is reasonably necessary to permit the BIS to exercise its [**]
clause 8.2 of this Agreement or (ii) the BIS’ right to do so may not be
contractually restricted under applicable law), and shall contractually assure
that any other Person to whom the BIS provides [**] shall be similarly obliged.

 

12.9 For greater certainty the obligations imposed by this clause 12 shall apply
to the Escrowed Material.

 

12.10

General attributes of the CDS may be disclosed in connection with promotion of
the CDS to the [**] and [**], and to customers or prospects in related markets;
information

 

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relating to the CDS Technology may be disclosed to [**], [**] subject to a
nondisclosure agreement on terms requiring at least [**] years of
confidentiality from the date of disclosure of such Confidential Information,
but that are in all other respects materially similar to the provisions of this
clause 12, but in all such cases Digimarc may disclose information relating to
the [**] only to [**] but to no others. The existence and terms of this
Agreement may be disclosed to the parties’ professional advisors, to members of
the CBCDG, and to Digimarc’s shareholders, institutional and corporate
investors, and commercial and investment bankers, who have a reasonable need to
know such information subject to a non-disclosure agreement, or as required by
applicable law or regulations.

 

13. AUDIT AND INSPECTION

 

13.1 The CBCDG Contract Authority, or its duly authorised representatives, may
from time to time, without notice, at its own expense, conduct an audit or
inspection during normal business hours to verify Digimarc’s compliance with its
obligations under this Agreement. Digimarc shall facilitate such audit
activities by providing access to its premises, as well as any books, records,
and other information relating to this Agreement and the Services as may be
reasonably requested by the CBCDG Contract Authority. The CBCDG Contract
Authority shall promptly advise Digimarc in writing of the results of any audit.
If the CBCDG Contract Authority exercises this right more frequently than twice
in each calendar year, the CBCDG Contract Authority shall reimburse Digimarc’s
reasonable costs related thereto which costs are in addition to the Allowable
Costs otherwise contemplated by this Agreement except in the case where the
exercise of such right is reasonably required to follow-up on a non-compliance
detected during a previous audit or inspection.

 

13.2 If, as a result of any such audit, the CBCDG Contract Authority is of the
view that Digimarc has engaged in or is about to engage in any act, or has
omitted to perform any act, which act or omission is not in compliance with
Digimarc’s obligations under this Agreement, the CBCDG Contract Authority may
issue to Digimarc a directive requiring Digimarc to refrain from engaging in
such act or to perform such act or acts as the CBCDG Contract Authority deems
necessary, acting reasonably, for Digimarc to comply with this Agreement and
Digimarc shall promptly comply with such directive at its own expense.

 

13.3

No act performed by the CBCDG Contract Authority or its duly authorised
representatives pursuant to the provisions of this clause 13 and no omission by
any of

 

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them to perform an act pursuant to the provisions of this clause 13 shall in any
way affect Digimarc’s obligation to comply with this Agreement.

 

14. DISPUTE RESOLUTION

 

14.1 Any Dispute, as defined in the Arbitration Agreement, shall be finally
settled by arbitration in accordance with the Arbitration Agreement.

 

14.2 Unless otherwise agreed between the parties or unless the subject matter of
the dispute resolution proceedings is a party’s right to terminate this
Agreement, the Services shall continue during the arbitration proceedings and
payments due to Digimarc shall not be withheld on account of such proceedings
unless that particular Service or payment is the subject matter of the
proceedings. Notwithstanding the foregoing, the CBCDG Contract Authority may at
its sole discretion instruct Digimarc to continue the performance of that
Service, and Digimarc shall act in accordance with those instructions, subject
to payment in accordance with this Agreement.

 

15. TERM AND TERMINATION

 

15.1 This Agreement shall take effect on the Effective Date and shall remain in
force throughout the Term unless sooner terminated as provided herein. This
Agreement may be extended for five additional years upon mutual agreement.

 

15.2 The BIS may in its sole discretion terminate this Agreement effective
immediately on notice to Digimarc if:

 

  (a) Digimarc makes a general assignment or any other arrangement for the
benefit of its creditors;

 

  (b) a proposal or arrangement under applicable bankruptcy or insolvency
legislation, or a petition is filed by or against Digimarc under applicable
bankruptcy or insolvency legislation and is not discontinued within thirty
(30) days;

 

  (c) Digimarc is declared or adjudicated bankrupt or goes into liquidation;

 

  (d) a liquidator, trustee in bankruptcy, custodian, receiver, administrator,
administrative - receiver, manager, or any other officer with similar power is
appointed over all or any part of the assets and undertaking of Digimarc;

 

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  (e) Digimarc commits an act of bankruptcy, institutes proceedings to be
adjudged bankrupt or insolvent, consents to the initiation of such appointment
or proceedings or admits in writing inability to pay debts generally as they
become due;

 

  (f) Digimarc assigns this Agreement without the BIS` consent in breach of
clause 18.7; or

 

  (g) Digimarc ceases or threatens to cease business.

 

15.3 Either party may terminate this Agreement effective immediately on notice
to the other party if:

 

  (a) the other party fails, or is unable or refuses to perform any of its
obligations under this Agreement (hereinafter referred to as a “Breach”) and
fails to remedy such Breach within sixty (60) days after receiving written
notice of such Breach from the other party; or

 

  (b) an event of force majeure (as defined in clause 16) has continued for a
period longer than sixty (60) continuous days or such longer period as the
parties may agree and no satisfactory alternative arrangements have been agreed
to continue the Services.

 

15.4 Notwithstanding the foregoing, the BIS has no right to terminate this
Agreement for Breach under clause 15.3 if the Breach consists of a failure by
Digimarc to perform a particular task the performance of which proves to be
technically infeasible provided that the CBCDG Project Director has agreed with
the Digimarc Project Director in writing before the task is commenced that the
task may be technically infeasible.

 

15.5 The BIS may terminate the Agreement for convenience without cause. Such
termination shall be effective no earlier than six months from the date on which
the BIS gives written notice of such termination to Digimarc.

 

15.6 In the event of a termination for convenience under this clause 15,
Digimarc shall be paid all of its actual and reasonable termination costs
including:

 

  (a) third party contract termination costs;

  (b) employee re-deployment or termination costs including severance,
outplacement, benefits, acceleration of stock compensation and employer paid
payroll taxes;

 

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  (c) stay bonuses approved by the CBCDG Contract Authority to retain key
employees through contract termination date;

  (d) undepreciated capital costs of assets purchased exclusively for the
project, plus [**]; and

  (e) accounting, legal and travel costs associated with termination and
termination negotiations (all collectively “Termination Costs”).

Digimarc shall use commercially reasonable efforts to mitigate all Termination
Costs.

 

  15.7 Actual and reasonable Termination Costs shall be capped [**].

 

15.8 Under a termination for convenience under clause 15, Digimarc shall also be
paid an amount equal to [**].

 

15.9 If an approved Plan Budget for any calendar year does not amount to at
least [**], Digimarc has the option to consider this a termination for
convenience. If Digimarc exercises this option, Digimarc shall be paid the
amounts in clauses 15.6-15.8. Within [**] months of the approval of a Plan
Budget below [**], Digimarc can exercise the option with notice. If Digimarc
exercises this option, the agreement will terminate [**] months after notice
from Digimarc.

 

15.10 On termination of this Agreement for any reason, the TAP shall be
implemented and Digimarc shall be reimbursed for all Services performed through
the date of termination and for any transition services provided under the TAP.

 

15.11 On termination of this Agreement for any reason, the [**] by Digimarc
under clauses 2.2, 2.3 and 2.8 shall continue, but the CBCDG Contract Authority
shall make arrangements to assume all of: (a) Digimarc’s obligations of support
and other Digimarc resource allocation; and (b) Digimarc’s obligations arising
from or related to any third party threat or claim for IP infringement brought
against any such licensees, subject to clause 9.12(c).

 

15.12 On termination of this Agreement for any reason, Digimarc shall within
fifteen (15) Business Days deliver to the Escrow Agent all work in progress done
up to the effective date of termination which has not previously been deposited
with the Escrow Agent and issue to the CBCDG Contract Authority a certificate
signed by an authorized representative of Digimarc that it has fully complied
with this obligation. Digimarc shall be entitled to charge for its reasonable
costs in providing such assistance calculated in accordance with the Allowable
Costs.

 

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16. FORCE MAJEURE

 

16.1 If the performance by any of the BIS, Digimarc, the CBCDG, the CBCDG
Contract Authority, the CBCDG Project Director or the CBCDG Project Office (the
“Obstructed Party) of any of its obligations under this Agreement is prevented
or delayed by any circumstance of force majeure, which shall mean fire, flood,
earthquakes, war, riots, or insurrection, the Obstructed Party shall immediately
provide notice under clause 17.

 

16.2 The time period within which the Obstructed Party is obliged to perform its
obligations shall be delayed during the period such circumstance exists. During
the period of delay the Obstructed Party shall use commercially reasonable
efforts to make alternate arrangements satisfactory to the other Persons
mentioned in clause 16.1 to avoid delay or resume performance.

 

17. NOTICES

 

17.1 All notices under this Agreement shall be delivered by fax, or recognized
international courier service. The notice shall be deemed effective as of the
date of delivery to the address of the party specified below as evidenced by a
delivery receipt or the addressee’s registry of incoming correspondence. Unless
otherwise expressly set out in this Agreement, all notices to a party shall be
sent to the party’s authorized representative identified below and all notices
from a party shall be sent by the party’s authorized representative identified
below.

 

17.2 Any notice to Digimarc shall be sent to, and any notice from Digimarc shall
be sent by:

Mr. Robert Chamness

Executive Vice President and

Chief Legal Officer and Secretary

Digimarc Corporation

9405 SW Gemini Drive

Beaverton, Oregon 97008 USA

FAX:   (503) 469-4777

With a copy to:    Mr. George Rieck

Vice President, Government Programs and

Digimarc Project Director

Digimarc Corporation

9405 SW Gemini Drive

Beaverton, Oregon 97008 USA

 

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FAX:   (503) 469-4777

 

17.3 Any notice to the BIS shall be sent to, and any notice from the BIS shall
be sent by:

Bank for International Settlements

[**]

Centralbahnplatz 2

CH-4002 Basel, Switzerland

[**]

With a copy to:     [**]

Any notice to the CBCDG shall be sent to, and any notice from the CBCDG shall be
sent by:

[**]

With a copy to:    Bank for International Settlements

[**]

Centralbahnplatz 2

CH-4002 Basel, Switzerland

[**]

 

17.4 A party may change its addressee(s) or address(es) for notice by notice to
the other party in accordance with the provisions of this clause 17.

 

18. MISCELLANEOUS PROVISIONS

 

18.1 Remedies Cumulative - Except as otherwise expressly set out in this
Agreement:

 

  (a) each and every right, power and remedy of a party shall be considered to
be cumulative with and in addition to any other right, power and remedy which
such party may have at law or in equity in the event of breach of any of the
terms of this Agreement;

 

  (b) the exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party; and

 

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  (c) a party terminating this Agreement in accordance with the provisions of
this Agreement shall have no liability or obligation to the other as a result of
or with respect to the termination.

 

18.2 Severability.   If any part of this Agreement is held by an arbitral
tribunal appointed pursuant to the Arbitration Agreement or by any other
competent authority to be void or unenforceable, the parties agree that such
determination shall not result in the nullity or unenforceability of the
remaining parts of this Agreement, which shall continue in force to the fullest
extent permitted by law. The parties further agree to replace such void or
unenforceable part of this Agreement with a valid and enforceable provision that
will achieve, to the extent legally permissible, the economic, business and
other purposes of the void or unenforceable part.

 

18.3 Counterparts.   This Agreement may be executed in separate counterparts,
and by facsimile, each of which shall be deemed an original, and when executed,
separately or together, will constitute a single original instrument, effective
in the same manner as if the parties had executed one and the same instrument.

 

18.4 Entire Agreement.   This Agreement is intended by the parties to be the
final expression of their agreement and constitutes and embodies the entire
agreement and understanding between the parties hereto and constitutes a
complete and exclusive statement of the terms and conditions thereof, and shall
supersede any and all prior correspondence, conversations, negotiations,
agreements or understandings between the parties relating to the same subject
matter from the Effective Date. Nothing in this clause 18.4 shall operate so as
to limit or exclude any liability for fraud or fraudulent misrepresentation.

 

18.5 Amendments.   No change in, modification of or addition to the terms and
conditions contained herein shall be valid as between the parties unless set
forth in a writing that is signed by an authorized representative of each party
and which specifically states that it constitutes an amendment to this
Agreement.

 

18.6 Waiver.   No waiver of any term, provision, or condition of this Agreement
shall be effective unless in a written document signed by the waiving party and
no such waiver in any one or more instances, will be deemed to be, or be
construed as, a further or continuing waiver of that term, provision or
condition or any other term, provision or condition of this Agreement.

 

18.7

Assignment and Successors.   This Agreement may not be assigned, novated or
otherwise transferred by Digimarc without the prior written consent of the BIS,
which consent shall

 

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not be unreasonably withheld. For the purpose of this Agreement, an assignment
includes a change in the voting control of Digimarc or the sale or other
disposal of substantially all of Digimarc’s assets. This Agreement and all of
its terms, conditions and covenants are intended to be fully effective and
binding, to the extent permitted by law, on the successors and permitted assigns
of the parties hereto.

 

18.8 Captions.   Captions are provided in this Agreement for convenience only
and they form no part, and are not to serve as a basis for interpretation or
construction, of this Agreement, nor as evidence of the intention of the
parties.

 

18.9 Disclaimer of Agency.   Nothing contained in this Agreement is intended or
shall be interpreted so as to constitute the parties to this Agreement as
partners or joint venturers or as agents of each other. Neither party shall have
any express or implied right or authority to assume or create any obligations on
behalf of or in the name of any other party or to bind any other party in any
contract, agreement or undertaking with any third party. No employee of a party
shall be deemed or considered to be an employee of the other party or of both
parties.

 

18.10 The parties agree that from time-to-time it will be beneficial to both
parties to issue press releases and other public announcements concerning
benefits arising from the [**] of the CDS. Each party agrees to submit such
releases or announcements for prior approval by the other party if the name of
the other party is mentioned, which approval may be withheld by the other party
in its sole discretion. Any Digimarc press releases and public announcements
that mention the CDS or the CBCDG must be pre-approved by the CBCDG Project
Director.

 

18.11 Effectiveness.   This Agreement shall be effective only after it is signed
by both of the parties.

 

18.12 Ambiguities.   Each party and its counsel have participated fully in the
review and revision of this Agreement. Any rule or construction to the effect
that ambiguities are to be resolved against the drafting party shall not apply
in interpreting this Agreement.

 

18.13 Survival.   All clauses of this Agreement which expressly or by
implication are intended to survive the termination of this Agreement shall do
so and, for greater certainty and notwithstanding any provision in this
Agreement to the contrary, the provisions set out in clauses 1.3, 2.14, 6.1-6.8,
8, 9.1-9.6, 9.10, 9.12(c) and 10-18 of this Agreement shall survive termination
of this Agreement by either party for any reason.

 

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18.14 No third party Person shall have any right to enforce any provision of
this Agreement under the Contracts (Rights of Third Parties) Act 1999.

 

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the Effective Date.

 

 

BANK FOR INTERNATIONAL SETTLEMENTS       DIGIMARC CORPORATION /s/
[**]                                               /s/ Robert
Chamness                                   Signature       Signature Name: [**]
      Name: Robert Chamness Title:   [**]      

Title: Executive Vice President, Chief Legal

Officer and Secretary

Date:     6 December 2012      

Date:   December 6, 2012

 

/s/ [**]                                                    Signature Name: [**]
Title: [**] Date:   6 December 2012

 

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SCHEDULE A

SYSTEM DESCRIPTION

 

1.0 GENERAL DESCRIPTION OF THE COUNTERFEIT DETERRENCE SYSTEM (“CDS”)

The CDS is a system for the deterrence of the unauthorized digital reproduction
of bank notes by the use of personal computer-based equipment. [**]

The capitalized terms in this Schedule A have the meanings provided in the
Renewed and Extended Counterfeit Deterrence System Development and License
Agreement and are not elaborated herein.

 

2.0 FUNCTIONAL DESCRIPTION OF THE CDS

The CDS is comprised of the following three subsystems:

 

  1. [**]

 

  2. [**]

 

  3. [**]

The functions of the various subsystems and components described below may be
changed by the [**].

 

2.1 [**]

 

  2.1.1   [**]

 

  1.   [**]

 

  2.   [**]

 

  3.   [**]

 

  4.   [**]

 

  2.1.2   [**]

 

  1.   [**]

 

  2.   [**]

 

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  3. [**]

 

2.2 [**]

 

  1. [**]

 

  2. [**]

 

  3. [**]

 

  4. [**]

 

  (a) [**]

  (b) [**]

  (c) [**]

 

  5. [**]

 

  6. [**]

 

  7. [**]

 

  8. [**]

 

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SCHEDULE B

DIGIMARC TECHNOLOGY

The Digimarc Technology includes techniques and system applications for [**].

This technology is partially described in the following issued representative
U.S. and International patents:

 

   US 5,768,426 US 5,636,292 C1    US 5,809,160 US 5,710,834    US 5,832,119 C1
US 5,721,788    US 5,850,481 C1 US 5,745,604    [**] US 5,748,763   

 

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SCHEDULE C

PROJECT TECHNOLOGY

The Project Technology includes:

 

1. The modification of techniques for using the Digimarc Technology and the BIS
Technology in the [**].

 

2. The effects and behaviors of [**] when used in [**].

 

3. The effects of various types [**].

 

4. Improvements to Digimarc’s testing and certification processes used in
testing and certifying [**].

 

5. The improvement of [**].

 

6. The use of [**].

 

7. Examples of Project Technology include:

 

LOGO [g444156g60k96.jpg]

 

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LOGO [g444156g39n13.jpg]

 

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LOGO [g444156g99c17.jpg]

 

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[**]

 

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SCHEDULE D

SECURITY REQUIREMENTS

 

1. Digimarc shall implement the security measures normally followed by a [**]
and distributor comparable to Digimarc in number of employees and revenue
engaged in the development and distribution of [**] and maintain such security
measures in effect at all times throughout the Term. The security measures will
include:

 

  1.1. Electronic security for protection of the network and protection of the
CDS [**] products that are under development.

 

  (a) Network protection which will ensure that unauthorized users will not get
access to [**]. This protection will include:

 

      i. erecting barriers to prevent hackers, whether inside or outside the
Digimarc facility, from accessing the secure network; and

 

      ii. the customizing of developmental and operational procedures for the
software development team that maximizes security while not impeding the team’s
ability to work efficiently and effectively.

 

  1.2         Physical security, including the following:

 

  (a) the Digimarc facility at which the Services will be performed will be
secure from unauthorized visitors;

 

  (b) the development laboratory and the computer network employed in the
Services shall be secure;

 

  (c) all personnel authorized to have access to sensitive CDS information, data
and designs including the employees of authorized subcontractors will be
properly screened; and

 

  (d) production and handling of interim and final versions of the Deliverables
will be carefully controlled, monitored and audited.

 

2. [**]

 

3. The CBCDG can conduct an audit, at its own expense, of the security measures
with ten (10) Business Days’ notice.

 

4. Following any such audit, the CBCDG Project Director shall submit an audit
report to Digimarc which will prescribe the actions which Digimarc must take, if
any, to improve the security measures to be followed by Digimarc to make such
measures consistent with item 1 of this Schedule D and the dates by which
Digimarc shall take them.

 

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SCHEDULE E TRAINING

 

1.0 As part of the Services, Digimarc shall develop a program of training
acceptable to the CBCDG Project Director in the [**].

 

2.0 Digimarc shall deliver Training as follows:

 

  2.1 Digimarc shall provide the Training for multiple people simultaneously.
The exact number of trainees is to be agreed upon by both parties prior to
Training. The trainees will be experienced in digital design operation.

 

  2.2 Digimarc shall conduct the Training at the facilities of the [**] or at
the request of the [**] at Digimarc’s facilities or at some other place agreed
between Digimarc and the [**].

 

  2.3 Digimarc shall give the [**] reasonable notice concerning the equipment
which Digimarc will require in order to conduct the Training. The [**] shall
provide all such equipment at its own expense. If the parties are unable to
agree on the equipment to be provided either party may refer the matter for
decision to the CBCDG Contract Authority.

 

  2.4 Digimarc shall conduct the Training using a [**] or other training designs
as provided by Digimarc.

 

  2.5 Digimarc shall provide a training manual in English to every trainee. Any
translation or interpretation which the trainees may require will be provided by
the [**] at its own expense.

 

  2.6 Digimarc shall conduct the training in English. Any translation or
interpretation which the trainees may require will be provided by the [**] at
its own expense.

 

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SCHEDULE F

ALLOWABLE COSTS

 

 

1. For the purposes of this Schedule F:

[**]

[**]

[**]

[**]

[**]

 

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]   

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

 

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[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]

  

[**]

[**]      

[**]

      [**]   

[**]                        [**] [**]   

1.        [**]

[**]    [**] [**]    [**] [**]    [**] [**]    [**] [**]   

1.        [**]

[**]    [**] [**]    [**] [**]   

1.        [**]

 

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SCHEDULE G

ARBITRATION AGREEMENT

This is an Agreement by and among the Parties to the Agreements listed in
Schedule A to submit for final and binding resolution by international
arbitration all Disputes (as defined below) arising out of or otherwise
connected to a project relating to the development and potential licensing,
marketing and servicing of a Counterfeit Deterrence System (as defined in the
Renewed and Extended Development and License Agreement identified below) and the
services of Digimarc (as defined below) in relation to the project.

WHEREAS, Digimarc Corporation, a corporation existing under the laws of the
State of Oregon, USA, has developed and is developing, in conjunction with a
group of central banks known as the Central Bank Counterfeit Deterrence Group
(the “CBCDG”) technology [**] (the “Counterfeit Deterrence System” or “CDS” as
defined in the Development and License Agreement identified below);

WHEREAS, the CBCDG has asked the Bank for International Settlements, an
international organisation created as a result of the Hague Agreements of
January 1930 (the “BIS”), to provide it with limited assistance in connection
with the development and potential subsequent licensing of the CDS as set out in
a Renewed and Extended Development and License Agreement (the “DLA”) effective
from 1 January 2013;

WHEREAS, in the course of performance of the DLA, Digimarc may be directed to
issue licenses to certain [**] in accordance with standard forms of license
agreement which are approved by the CBCDG;

WHEREAS, [**], pursuant to an [**], as amended from time to time, (the “[**]”),
agreed to compensate and to indemnify and hold harmless the [**] in respect of
any liability in connection with the project;

WHEREAS, given the international nature of the Agreements (as defined below),
all the Parties (as defined below) to the Agreements are desirous to avoid
recourse to national courts and the potential expense and delay of prosecuting
connected Claims (as defined below) in more than one proceeding and also to
exclude the risk of having to apply contradictory or inconsistent fact-findings,
conclusions, judgments or awards for any Dispute (as defined below) which may
arise between or among the Arbitrating Parties (as defined below) and instead
wish to resort to international arbitration as the exclusive means of resolving
in a final, binding and consistent manner all Disputes arising in

 

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connection with the Agreements for the CDS and of establishing through this
Arbitration Agreement a mechanism to these ends.

The Parties agree as follows:

 

1. The meaning of the following terms in this Arbitration Agreement shall be as
set out below:

 

  a) “Agreements” shall mean the agreements, contracts, schedules or other
arrangements in connection with the development or licensing or marketing or
servicing of the CDS listed in Schedule A, as amended from time to time.

 

  b) “Appointing Authority” shall mean the [**].

 

  c) “Arbitrating Party” or “Arbitrating Parties” shall mean (i) any and all
Parties which have become involved in any arbitration under this Arbitration
Agreement as Claimants or Respondents or (ii) any and all Parties which have
been otherwise joined to any arbitration under this Arbitration Agreement or
(iii) the BIS, Digimarc, any [**] or any [**] in the aforementioned
circumstances or when it or they has or have exercised their right of
Intervention in any arbitration under this Arbitration Agreement.

 

  d) “[**]” shall mean any [**] which is represented on the CBCDG from time to
time.

 

  e) “CBCDG Project Office” shall mean the project office established by the
CBCDG, or its staff as the case may be, and that is responsible for the
oversight of the overall relationship among the BIS, the [**] and Digimarc and
for the key day to day project management.

 

  f) “Claim” shall include without limitation any claim or counterclaim or
crossclaim made by an Arbitrating Party.

 

  g) “Claimant” or “Claimants” shall mean any Party which, either separately or
together with any other Party or Parties, initiates arbitration under this
Arbitration Agreement.

 

  h) “Dispute” shall mean any dispute, difference, controversy or claim between
or among the parties arising out of or relating to or in connection with this
Arbitration Agreement or any of the Agreements listed in Schedule A, including
their signature, validity, interpretation, performance, amendment, breach,
termination and post-termination obligations.

 

  i)

“Intervention” shall mean the right of any of the BIS, Digimarc, any [**] or any
[**] under Articles 8(e)-(h) to intervene into a particular arbitration as an
Arbitrating Party even when it is not a Claimant or Respondent and has not been
joined into any

 

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arbitration by an Arbitrating Party.

 

  j) “[**]” shall mean an entity responsible for the [**] that is licensed by
Digimarc to use the CDS.

 

  k) “Notice of Arbitration” shall mean the document given when initiating
recourse to arbitration or to join any Party as Arbitrating Party as well as to
initiate recourse in arbitration against any Party which is already an
Arbitrating Party.

 

  l) “Party” or “Parties” shall mean any person, company or organization that is
party to one of the Agreements listed in Schedule A and that has agreed in
writing to be bound by the terms of this Arbitration Agreement.

 

  m) “Respondent” or “Respondents” shall mean any Party which, either separately
or together with any other Party, is named as a Respondent in arbitration by any
Claimant or Claimants.

 

  n) In interpreting this Arbitration Agreement, singular shall be read for
plural where appropriate to reflect the multi-party nature of any arbitration.

 

2. Any Dispute shall be finally settled by arbitration under the [**] as in
force at the date of commencement of this Arbitration Agreement except as the
[**] Rules are modified in the body and Schedule B of this Arbitration Agreement
and to the exclusion of any provisions of the [**] Rules as are inconsistent
with the express provisions of this Arbitration Agreement or with the
multi-party nature of an arbitration under this Arbitration Agreement.

 

3. The language used in any arbitration shall be English. All documents
submitted into any arbitration shall be in English or submitted with a complete
English translation. Oral evidence may be submitted in a language other than
English provided that the Arbitrating Party submitting the oral evidence makes
provision for its simultaneous interpretation into English. The cost of any
translation or interpretation into English shall be borne entirely by the
Arbitrating Party on whose behalf the non-English document or oral evidence is
submitted and shall not be included among the “costs of arbitration” apportioned
pursuant to Article 40 of the [**] Rules.

 

4. The place of Arbitration shall be [**].

 

5. Arbitration pursuant to this Arbitration Agreement shall be the sole and
exclusive means for resolving any Dispute.

 

6. No entity shall become a Party unless that entity has agreed in writing to be
bound by the terms of this Arbitration Agreement.

 

7.

Each Party to this Arbitration Agreement hereby expressly accepts the addition
of new

 

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parties to this Agreement.

 

8.

 

  a) Any Claimant or Claimants shall initiate recourse to arbitration by giving
to each Respondent a Notice of Arbitration and statement of claim which specify,
inter alia, the Agreement or Agreements involved in the Dispute. Any Claimant or
Claimants shall also at the same time send a copy of the same Notice of
Arbitration and statement of claim to all other Arbitrating Parties, the BIS,
the CBCDG Project Office and the [**]. Arbitration shall be deemed to commence
upon receipt of the Notice of Arbitration and statement of claim by the [**].

 

  b) Within thirty (30) days of the date on which each Respondent received the
Notice of Arbitration, a Respondent may give a third party Notice of Arbitration
in order to join into the arbitration any Party or Parties as an Arbitrating
Party or Arbitrating Parties. The Respondent shall also at the same time send a
copy of any third party Notice of Arbitration to all other Arbitrating Parties,
the BIS, the CBCDG Project Office and the [**].

 

  c) Any third party joined as an Arbitrating Party may, within thirty (30) days
of receipt of any third party Notice of Arbitration, give fourth party Notices
of Arbitration in order to join any Party or Parties as an Arbitrating Party or
Arbitrating Parties. The third party shall also at the same time send a copy of
any fourth party Notice of Arbitration to all other Arbitrating Parties, the
BIS, the CBCDG Project Office and the [**].

 

  d) Other Parties may be joined as further additional Arbitrating Parties by
any Arbitrating Party or Arbitrating Parties until such time as thirty (30) days
have elapsed without a new Arbitrating Party being joined into the arbitration.

 

  e) The BIS, whether or not joined as a Respondent or as a further additional
Arbitrating Party, shall have the right to intervene in any arbitration by
giving a Notice of Arbitration to each of the Arbitrating Parties within thirty
(30) days after receipt of the copy of a Notice of Arbitration from the last
Arbitrating Party to be joined or from the last Party to request permission to
intervene under Article 8(f). The BIS shall also at the same time send a copy of
the Notice of Arbitration to the CBCDG Project Office, the [**] and to all other
Arbitrating Parties.

 

  f) Digimarc, any [**], whether or not joined as a Respondent or as a further
additional Arbitrating Party, shall have the right to ask the arbitrator for
permission to intervene in any arbitration by giving a Notice of Arbitration to
each of the Arbitrating Parties within thirty (30) days after receipt of the
copy of a Notice of Arbitration from the last Arbitrating Party to be joined or
from the BIS. The Party requesting to intervene shall also at the same time send
a copy of the Notice of Arbitration to the BIS, the CBCDG Project Office, the
[**] and to all other Arbitrating Parties.

 

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  g) The CBCDG Project Office shall, upon receipt of any Notice of Arbitration
under this Article 8 of this Arbitration Agreement, send a copy of such Notice
of Arbitration to all Parties.

 

  h) The arbitral tribunal, once constituted and after affording the Arbitrating
Parties a reasonable period of time in which to comment, shall have the
authority to require by an order that any Party or Parties which is not or are
not an Arbitrating Party or Arbitrating Parties (including Digimarc, any [**]
requesting intervention under Article 8(f)) shall nonetheless be joined into the
arbitration as an Arbitrating Party or Arbitrating Parties should the arbitral
tribunal determine that: (a) the absence of said Party or Parties from the
pending arbitration would prevent the according of complete relief in regard to
the Claims of the Arbitrating Parties; or (b) that the Party or Parties has or
have a real and significant interest in the Agreement or Agreements out of or in
connection with which the Disputes involved in the pending arbitration have
arisen and that the absence of said Party or Parties would significantly impede
its or their ability to protect that interest. Any such order issued by the
arbitral tribunal shall be final and binding upon the Parties that are the
subject of that order and such Parties will be considered Arbitrating Parties to
that Claim or Dispute.

 

  i) Any Arbitrating Party may join into a pending arbitration any Dispute which
presents issues of law or fact common with those in the Dispute or Disputes
already in the pending arbitration by issuing, within 30 days of its receipt of
a Notice of Arbitration, a Notice of Arbitration and a statement of claim which
specify, inter alia, the Agreement or Agreements involved in the Dispute and set
out the issues of law or fact it alleges are common with those in the Dispute or
those Disputes already in the pending arbitration.

 

  j) The arbitral tribunal shall determine by an order, which shall be final and
binding upon the Arbitrating Parties, any issue raised by an Arbitrating Party
as to whether or not a Dispute joined into any pending arbitration did, in fact,
at the time it was joined into the arbitration, present issues of law or fact
common with those presented in other Disputes in the pending arbitration. Any
Dispute which is found not to have presented common issues of law or fact shall
be dismissed without prejudice from the pending arbitration.

 

  k) Joinder of any Party or Parties or of any Dispute or Disputes to any
arbitration pursuant to this Arbitration Agreement shall be permitted only when
made in accordance with the provisions of this Arbitration Agreement, including
the strict time limits and no joinder or Intervention other than those provided
for shall be permitted.

 

  l) Any multi-party arbitration arising as a result of there being more than
two Arbitrating Parties will be conducted as a single arbitration involving all
Arbitrating Parties.

 

  m)

Any Arbitrating Party giving any Notice of Arbitration or sending any copy of a

 

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Notice of Arbitration shall send to each recipient according to the provisions
set out above a full copy of the document by international courier or other
appropriate means of ensuring rapid and certain delivery and, when required to
send documents to several recipients, the Arbitrating Party shall send all
documents on the same day.

 

  n) Any advances deemed necessary to cover the costs of any arbitration shall
be made in equal shares by all Arbitrating Parties, provided that multiple
Claimants or multiple Respondents shall be deemed to constitute one Arbitrating
Party for purposes of this subparagraph only, and provided further that should
any Arbitrating Party fail to advance its share (a “Defaulting Arbitrating
Party”), it shall be the responsibility of the Arbitrating Party which gave the
Notice of Arbitration against the Defaulting Arbitrating Party or Defaulting
Arbitrating Parties to advance the share due from the Defaulting Arbitrating
Party or Defaulting Arbitrating Parties. Any Claim brought by a Defaulting
Arbitrating Party shall be dismissed without prejudice. However, the recipient
of any Notice of Arbitration given by a Defaulting Arbitrating Party shall
continue to be an Arbitrating Party if it has itself given any Notice of
Arbitration, unless it withdraws any such Notice of Arbitration. Should any
Defaulting Arbitrating Party commence arbitration in order to reassert any Claim
which has been dismissed pursuant to this subparagraph, that Claim shall be
consolidated with the pending arbitration from which it was dismissed and the
Defaulting Arbitrating Party shall not be permitted to proceed with that Claim
until it has advanced its share of the costs of the pending arbitration.

 

9. If any Dispute arises whilst an arbitration is pending in accordance with the
provisions of this Arbitration Agreement, but one or more of the Arbitrating
Parties to that Dispute cannot be joined to the pending arbitration in
accordance with the provisions of Article 8 of this Arbitration Agreement, the
Dispute and the Arbitrating Parties thereto shall nonetheless be joined into the
pending arbitration at the request of a Party which is an Arbitrating Party in
both the pending arbitration and the Dispute which has arisen so that the
Disputes may be resolved in the same arbitration, provided the arbitral tribunal
decides that the later Dispute presents issues of law or fact common with those
in the pending arbitration and that joinder under these circumstances would not
result in undue delay for the pending arbitration.

 

10.

Each Party agrees that neither an arbitral tribunal established pursuant to this
Arbitration Agreement nor the Parties shall be authorised to take or seek from
any arbitral tribunal or judicial authority any interim measure or any pre-award
relief against the BIS, any provision of the [**] Rules notwithstanding. Nothing
in this Arbitration Agreement shall operate or be regarded as a waiver,
renunciation or other modification of the [**] BIS [**], of whatever nature and
wherever situated, under international convention or under any applicable law.
Except as otherwise provided in this Article 10 with regard to the BIS, each
Party irrevocably agrees that, to the extent that it or any of its assets has or
hereafter may acquire any right of immunity, whether characterized as sovereign
immunity or otherwise, from any legal proceedings, whether in [**] or elsewhere,
to enforce or collect upon any obligation of that Party in connection with the
transaction contemplated under any Agreement, including, without limitation,
immunity from

 

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jurisdiction of any arbitral tribunal, immunity from service of process,
immunity from execution of judgment and immunity of any of its property from
attachment prior to the rendering of an arbitral award under this Arbitration
Agreement or entry of judgment, it hereby expressly and irrevocably waives all
such immunity.

 

11.

 

  a) Any Dispute, regardless of the number of Arbitrating Parties, shall be
submitted to an arbitral tribunal of three (3) arbitrators appointed by the
Appointing Authority.

 

  b) The arbitral tribunal shall be appointed by the Appointing Authority once
the time has terminated during which i) any Party is entitled to give a Notice
of Arbitration to join any other Party, ii) the BIS is entitled to intervene and
(iii) Digimarc, any [**] is entitled to request permission to intervene.

 

  c) The presiding arbitrator of the arbitral tribunal shall be a British
national and shall have been admitted to practice as a barrister or solicitor in
England and shall also have significant expertise in the resolution of disputes
in international commercial matters. All arbitrators shall have a full command
of the English language.

 

  d) The arbitrators appointed in accordance with this Arbitration Agreement
shall be remunerated in accordance with the provisions of the rules of the [**]
in effect at the time any arbitration is commenced.

 

12. Awards shall be final and binding as from the date the awards are made. The
Arbitrating Parties undertake to carry out all awards without delay and waive
their right to any form of appeal or recourse to a court of law or other
judicial authority, insofar as any such waiver may validly be made. All awards
may, if necessary, be enforced by any court having jurisdiction in the same
manner as the judgment of any such court.

 

13. Each Arbitrating Party explicitly agrees hereby that it shall recognise any
arbitral award rendered in arbitration under this Arbitration Agreement as final
and binding upon it unless a competent arbitral tribunal or a competent judicial
authority determines that said Arbitrating Party never received notice of the
pendency of the arbitration in which the award was rendered.

 

14. Any arbitral award rendered under this Arbitration Agreement shall be
accorded res judicata effect by any arbitral tribunal appointed under this
Arbitration Agreement in regard to those Arbitrating Parties which are bound by
an award pursuant to Article 13.

 

15. The obligations of the Parties to the Agreements shall not be altered or
suspended by reason of any arbitration being conducted during the life of any
Agreement.

 

16. Any Agreement in regard to which a Dispute has arisen shall be governed by
the applicable law as specified in that Agreement.

 

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17. This Arbitration Agreement shall bind and inure to the benefit of the
respective successors and permitted assigns of the Parties, subject to all
Parties respecting Articles 6 and 7 hereto.

 

18. This Arbitration Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.

 

19. Any provision of this Arbitration Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

20. This Arbitration Agreement shall enter into full force and effect on
1 January 2013 or such later date on which a Party agrees in writing to be bound
by the terms of this Arbitration Agreement and shall continue in full force and
effect indefinitely, unless it is terminated by mutual written consent of all of
the Parties.

 

21. This Arbitration Agreement shall be governed by and construed in all
respects in accordance with the laws of England, to the exclusion of its rules
of conflicts of law.

The Parties have caused this Arbitration Agreement to be executed in multiple
copies, with effect from 1 January 2013.

[Signatures]

 

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Schedule A to Arbitration Agreement

The following are considered to be Agreements:

1. Renewed and Extended Development and License Agreement

2. [**]

3. [**]

4. [**]

5. [**]

6. [**]

 

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Schedule B to Arbitration Agreement

In accordance with Article 1.1 of the [**] Rules, in addition to such other
modifications of the [**] Rules as are contained in this Arbitration Agreement,
the Parties to this Arbitration Agreement and to the Agreements modify the [**]
Rules as follows:

 

a) Notwithstanding Article 3.1 of the [**] Rules, a Notice of Arbitration may be
given by any Arbitrating Party to multiple parties so as to join said parties
into any pending arbitration and this Arbitration Agreement shall allow for
multi-party arbitration involving third parties, fourth parties and any further
additional parties.

 

b) Notwithstanding Article 3.2 of the [**] Rules, arbitral proceedings under
this Arbitration Agreement shall be deemed to commence on the date on which the
Claimant’s Notice of Arbitration is received by the [**].

 

c) Notwithstanding Article 3.3(g), Article 3.4(a) and Article 3.4(b) of the [**]
Rules, the Notice of Arbitration shall not contain a proposal as to the number
or appointment or the notification of the appointment of arbitrators (and, if
made, any such proposal shall be disregarded).

 

d) Notwithstanding Article 21.3 of the [**] Rules, any Arbitrating Party must
make any counter-claim or claim for the purpose of set-off in its statement of
defense and not at a later stage of the arbitral proceedings.

 

e) Notwithstanding Article 22 of the [**] Rules, the arbitral tribunal shall, in
considering whether it is appropriate to allow a party to amend or supplement a
written communication (given the interests of economy, efficiency and the desire
to avoid the risk of inconsistent awards), have particular regard to the
multi-party nature of any arbitration proceeding, the consequences in terms of
delay and the objective of resolving related Claims in a single arbitration
involving all relevant Parties.

 

f) Notwithstanding Article 25 of the [**] Rules, in considering whether an
extension of a time-limit for the communication of written statements is
justified, the arbitral tribunal shall have particular regard to the multi-party
nature of any arbitration proceeding and the consequences in terms of delay.

 

g) Notwithstanding Article 26 of the [**] Rules, no interim measures shall be
sought or applied against the BIS in connection with any Dispute by either an
arbitral tribunal established pursuant to this Arbitration Agreement or any
judicial authority.

 

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