Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made effective as of October 29,
2008 (the “Effective Date”) at Beaverton, Oregon between DIGIMARC CORPORATION, a
Delaware corporation (“Digimarc”) with offices at 9405 SW Gemini Drive,
Beaverton, Oregon 97008, and BRUCE DAVIS (“Executive”).

 

WITNESSETH:

 

WHEREAS, Executive has been Chairman of the Board and Chief Executive Officer of
Digimarc Corporation, a Delaware corporation (“Old Digimarc”);

 

WHEREAS, Digimarc has been formed to continue the digital watermarking business
of Old Digimarc and the shares of Digimarc have been distributed to the
stockholders of Old Digimarc;

 

WHEREAS, Executive has agreed to serve as Chief Executive Officer of Digimarc;
and

 

WHEREAS, Digimarc and Executive wish to memorialize the terms of Executive’s
employment in a written agreement.

 

NOW, THEREFORE, in consideration of the foregoing and in consideration of the
mutual promises and agreements contained herein, the parties hereto agree as
follows:

 

1.             DEFINITIONS.

 

For purposes of this Agreement, the following terms shall have the following
meanings:

 

a.             “Affiliate” shall mean any person or entity that directly or
indirectly controls, is controlled by, or is under common control with Digimarc.

 

b.             “Change of Control” shall mean: (i) any Person (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), other than a broker, bank, or trust company holding common stock of
Digimarc for the account of customers who are not members of a “group” (within
the meaning of Section 13(d) of the Exchange Act), becoming the record or
beneficial owner of 50% or more of any class of Digimarc’s voting equity
securities, as disclosed by Digimarc’s stock records or in any other way,
including, without limitation, any filing with the Securities and Exchange
Commission or otherwise; (ii) the purchase of 50% or more of any class of
Digimarc’s voting equity securities pursuant to any tender offer or exchange
offer for shares of Digimarc’s stock, other than one made by Digimarc; (iii) any
merger, consolidation, reorganization or other transaction providing for the
conversion or exchange of more than fifty percent (50%) of the outstanding
shares of Digimarc’s stock into securities of a third party, or cash, or

 

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property, or a combination of any of the foregoing; or (iv) the sale of
substantially all of the assets of Digimarc.

 

c.             “Code” shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations promulgated thereunder.

 

d.             “Section 280G” shall mean Code Section 280G and the Treasury
regulations promulgated thereunder or any similar or successor provision.

 

2.             PERIOD OF EMPLOYMENT.

 

Digimarc agrees to employ Executive, and Executive agrees to be so employed, on
the terms and conditions set forth herein for the period beginning on the
Effective Date and ending on the third anniversary of the Effective Date, or on
the termination date if earlier terminated as set forth herein (“Term”).

 

3.             DUTIES AND RESPONSIBILITIES.

 

a.             Position.  Executive will serve as Chief Executive Officer of
Digimarc in conformity with general management policies, guidelines and
directions issued by the Board of Directors of Digimarc (the “Board”), and shall
perform all services appropriate to that position as designated from time to
time by the Board.  Executive will report directly to the Board, and will have
general charge and supervision of those functions and such other
responsibilities as are customary for his position.  As long as Executive serves
as Chief Executive Officer, it is the intention of Digimarc that he will
continue to be nominated to serve on the Board.  It is the current intention of
the Board that Executive, if serving on the Board, will also serve as Chairman
of Board; provided, however, that the foregoing statement of intent shall in no
way derogate from the Board’s right and power to act as it deems appropriate in
the future.

 

b.             Duties.  Executive will work exclusively for Digimarc on a
full-time basis, devoting all of his time and attention during normal business
hours to Digimarc’s business.  Executive will perform his duties and
responsibilities hereunder diligently, faithfully and loyally in order to
facilitate the proper, efficient and successful operation of Digimarc’s
business.

 

c.             Other Activity.  Except upon the prior approval of the Board,
Executive (during the Term) shall not (i) accept any other employment; or
(ii) engage, directly or indirectly, in any other business, commercial, or
professional activity (whether or not pursued for pecuniary advantage) that is
or may be competitive with Digimarc, that might create a conflict of interest
with Digimarc, or that otherwise might interfere with the business of Digimarc
or any Affiliate or the performance of Executive’s duties and obligations to
Digimarc.  So that Digimarc may be aware of the extent of any other demands upon
Executive’s time and attention, Executive shall disclose in confidence to
Digimarc the

 

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nature and scope of any other business activity in which he is or becomes
engaged during the Term.

 

4.             COMPENSATION AND BENEFITS.

 

As compensation for Executive’s services, Executive will receive a cash salary
and bonus and participate in stock-based compensation plans, subject to the
terms and conditions set forth in this Agreement.

 

a.             Salary.  Executive will be paid a salary of $410,000 per year
commencing on the Effective Date through December 31, 2008, a salary of $450,000
per year commencing on January 1, 2009 through December 31, 2009, a salary of
not less than $470,000 per year commencing on January 1, 2010 through
December 31, 2010, and a salary of not less than $495,000 per year commencing on
January 1, 2011 through the end of the Term.  All salary shall be payable in
such installments as are consistent with Digimarc’s general payroll practices as
they may be amended, by Digimarc in its sole discretion, during the Term.
Digimarc will review Executive’s salary prior to the end of each anniversary of
the Effective Date during the Term in light of (i) Executive’s performance and
data from a mutually agreeable compensation consultant regarding compensation of
similarly situated executives and (ii) the performance of Digimarc on a
standalone basis and relative to its competitors and its position in its
markets.  All compensation and comparable payments to be paid to Executive under
this Agreement shall be less withholdings required by law.

 

b.             Performance Bonus.  Executive shall be eligible for a performance
bonus, in an amount not exceeding $135,000, with respect to the period beginning
on August 1, 2008 and ending on December 31, 2008, based on the Board’s
assessment of Executive’s performance against mutually agreed upon objectives. 
Executive must be employed with Digimarc on December 31, 2008 in order to
receive any bonus.  Executive will not participate in Digimarc’s executive bonus
programs during the remainder of the Term.

 

c.             Stock options.  Digimarc will make an initial grant of 564,000
stock options to Executive on the date that the Compensation Committee of the
Board first grants options to any Digimarc employees (“Initial Grant”). 
Digimarc will consider granting additional stock options to Executive consistent
with general market practices for similarly situated executives as determined by
periodic market surveys and analyses performed by a mutually agreeable
compensation consultant.  All such options shall be subject to the terms and
conditions of Digimarc’s Incentive Plan.

 

d.             Flexible Time Off. Executive will be entitled to flexible time
off consistent with that generally provided to other executives of Digimarc.

 

e.             Life Insurance. Digimarc shall promptly reimburse Executive for
the premiums payable during the Term for a term life insurance policy, with
Executive as beneficiary, that will pay Executive’s estate a death benefit of
$900,000, provided Executive requests such reimbursement and provides Digimarc
with evidence reasonably satisfactory to

 

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Digimarc of the amount of such premiums and the fact that such premiums have
been paid.  Such request must be made and such evidence provided no later than
the January 31 immediately following the end of the calendar year in which
Executive pays such premium.  (In lieu of reimbursement, Digimarc may, in its
sole and absolute discretion, elect to pay such premiums directly to the
insurance company.)  Executive agrees to use his best efforts to apply for and
obtain such policy, including submitting to physical examinations and taking
such other actions as may be necessary to obtain such policy.

 

f.              Other Benefits. Except as specifically provided elsewhere in
this Agreement, Digimarc will provide Executive with the same health,
disability, retirement, death and other fringe benefits as are generally
provided to other executives of Digimarc.  The amount and extent of benefits to
which Executive is entitled shall be governed by the specific benefit plan, as
it may be amended from time to time.  Digimarc reserves the ability, in its sole
discretion, to adjust Executive’s benefits under this Agreement provided that
such adjustments generally apply to all executive officers.

 

5.             TERMINATION.

 

a.             Executive’s employment will terminate automatically upon
Executive’s death.

 

b.             Executive’s employment will terminate automatically on the last
day of the calendar month in which Digimarc determines that Executive is
permanently disabled.  For purposes of this Agreement, “permanent disability”
shall be defined as disability due to illness, accident or otherwise that
renders Executive unable to perform his regular duties for a period of more than
three (3) months.

 

c.             Digimarc may terminate Executive’s employment under this
Agreement at any time (i) immediately for Cause, or (ii) without cause upon
thirty (30) days written notice to Executive.  “Cause” means (i) any act of
personal dishonesty by Executive in connection with his responsibilities as an
officer or employee of Digimarc, (ii) Executive’s conviction of a felony,
(iii) any act by Executive which constitutes gross negligence or willful
misconduct, (iv) any material violation by Executive of his employment duties
provided that if such violation is curable, it has not been cured within (30)
days after delivery to Executive of a written demand for cure, or (v) any act
that would constitute a material violation of Digimarc’s code of conduct or code
of ethics or a material violation of any restrictive covenants contained in this
Agreement or any other agreement between Digimarc and Executive or any Digimarc
plan or program.  Notwithstanding the foregoing, Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
a majority of the independent members of the Board (i.e., excluding Executive).

 

d.             Executive may terminate his employment under this Agreement for
“Good Reason” (as defined below) at any time upon thirty-one (31) days prior
written notice to

 

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Digimarc.  “Good Reason” means any of the following events, if done without
Executive’s prior written consent:  (i) a material reduction in Executive’s
authority, duties or responsibilities; (ii) a material reduction in Executive’s
salary or bonus target other than as specifically set forth in this Agreement or
(iii) relocation of Executive’s geographic work location to a location that is
more than 50 miles from the Executive’s geographic work location on the
Effective Date, except for required travel in furtherance of Digimarc’s business
to the extent consistent with Executive’s duties.  Notwithstanding any provision
in this Agreement to the contrary, termination of employment by Executive will
not be for Good Reason unless (i) Executive notifies Digimarc in writing of the
existence of the condition which Executive believes constitutes Good Reason
within ninety (90) days of the Executive having actual knowledge of the initial
existence of such condition (which notice specifically identifies such
condition), (ii) Digimarc fails to remedy such condition within thirty (30) days
after the date on which it receives such notice (the “Remedial Period”), and
(iii) Executive actually terminates employment within sixty (60) days after the
expiration of the Remedial Period and before Digimarc remedies such condition. 
If Executive terminates employment before the expiration of the Remedial Period
or after Digimarc remedies the condition (even if after the end of the Remedial
Period), then Executive’s termination will not be considered to be for Good
Reason.

 

e.             Executive may otherwise voluntarily terminate his employment at
any time upon thirty (30) days prior written notice to Digimarc.

 

6.             EFFECTS OF TERMINATION.

 

a.             If Executive’s employment is terminated by reason of Executive’s
death or permanent disability under either Section 5(a) or Section 5(b), all
Digimarc obligations under this Agreement will end except that (i) Executive’s
unvested stock options and restricted stock that would have vested if
Executive’s employment with Digimarc had continued for an additional twenty-four
(24) months following the termination date will immediately vest and become
exercisable, (ii) Executive’s right to exercise vested stock options will expire
on the earliest of (A) the second anniversary of the date of death or
termination due to disability, (B) the latest date the particular option could
have expired by its original terms under any circumstances, or (C) the tenth
anniversary of the original date of grant of the particular option; and (iii) if
Executive’s employment is terminated by reason of Executive’s death and
Executive has been unable to obtain the life insurance policy on Executive’s
life as set forth in Section 4(e), Executive will receive salary continuation
payments (at the salary rate in effect on the termination date) according to
Digimarc’s standard payroll schedule for the six (6) month period beginning
immediately after Executive’s termination date (and, for purposes of Code
Section 409A, each such installment shall be treated as a separate payment).

 

b.             If Digimarc terminates Executive for Cause or Executive
voluntarily terminates his employment (except for a termination for Good Reason
under Section 5(d)), all Digimarc obligations under this Agreement will end
except for payment of any

 

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Compensation payable under Section 4 for services performed prior to termination
and reimbursement of properly authorized business expenses incurred by Executive
prior to termination.

 

c.             If Digimarc terminates Executive without Cause under
Section 5(c) or Executive terminates his employment for Good Reason under
Section 5(d), in both cases other than following a Change of Control, all
Digimarc obligations under this Agreement will end, except that (i) Executive’s
unvested stock options and restricted stock that would have vested if
Executive’s employment with Digimarc had continued for an additional twenty-four
(24) months following the termination date will immediately vest and become
exercisable, (ii) Digimarc will continue to pay salary to Executive for two
years from the date of termination (at the salary rate in effect on the
termination date) according to Digimarc’s standard payroll schedule, and
(iii) if Executive and Executive’s spouse and dependent children are eligible
for and timely (and properly) elect COBRA continuation coverage under Digimarc’s
group health plan(s) pursuant to COBRA, Digimarc will pay the premium for such
coverage for a period of twenty-four (24) months following Executive’s
termination date or until Executive is no longer entitled to COBRA continuation
coverage under Digimarc’s group health plan(s), whichever period is shorter;
provided, however, that Executive shall not be entitled to any of the benefits
described in this Section 6(c) if he breaches Sections 8 or 9 of this
Agreement.  The compensation described in Section 6(c)(ii) will be paid
according to Digimarc’s standard payroll schedule from the date of termination,
as if Executive had not been terminated, and, for purposes of Code Section 409A,
each such installment shall be treated as a separate payment.  Executive’s right
to exercise vested stock options will expire on the earliest of (A) the first
anniversary of the termination date, (B) the latest date the particular option
could have expired by its original terms under any circumstances, or (C) the
tenth anniversary of the original date of grant of the particular option.  Other
than as set forth in this Section 6(c), Digimarc shall have no other obligations
to Executive under this Agreement.

 

d.             If within eighteen (18) months after a Change of Control,
Digimarc terminates Executive without Cause under Section 5(c), or Executive
terminates his employment for Good Reason under Section 5(d), then, all Digimarc
obligations under this Agreement will end, except that (i) Executive’s unvested
stock options and restricted stock will immediately and fully vest and become
exercisable, (ii) Digimarc will continue to pay salary and bonus to Executive
for two years from the date of termination (at the salary rate and target bonus
rate in effect on the termination date) according to Digimarc’s standard payroll
schedule, and (iii) if Executive and Executive’s spouse and dependent children
are eligible for and timely (and properly) elect COBRA continuation coverage
under Digimarc’s group health plan(s) pursuant to COBRA, Digimarc will pay the
premium for such coverage for a period of twenty-four (24) months following
Executive’s termination date or until Executive is no longer entitled to COBRA
continuation coverage under Digimarc’s group health plan(s), whichever period is
shorter; provided, however, that Executive shall not be entitled to any of the
benefits described in this Section 6(d) if  he breaches Sections 8 or 9 of this
Agreement.  The compensation described in

 

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Section 6(d)(ii) will be paid according to Digimarc’s standard payroll schedule
from the date of termination, as if Executive had not been terminated, and, for
purposes of Code Section 409A, each such installment shall be treated as a
separate payment.  Executive’s right to exercise vested stock options will
expire on the earliest of (A) the first anniversary of the termination date,
(B) the latest date the particular option could have expired by its original
terms under any circumstances, or (C) the tenth anniversary of the original date
of grant of the particular option.  Other than as set forth in this
Section 6(d), Digimarc shall have no other obligations to Executive under this
Agreement.  Solely for purposes of this Section 6(d), the Term shall be deemed
to be extended to the date that is eighteen (18) months after a Change of
Control that occurs within the original Term.

 

e.             Digimarc makes no representations or warranties to Executive with
respect to any tax, economic or legal consequences of this Agreement or any
payments or other benefits provided hereunder, including without limitation
under Code Section 409A, and no provision of the Agreement shall be interpreted
or construed to transfer any liability for failure to comply with Code
Section 409A from Executive or any other individual to Digimarc or any of its
affiliates.  Executive, by executing this Agreement, shall be deemed to have
waived any claim against Digimarc and its affiliates with respect to any such
tax, economic or legal consequences.  However, the parties intend that this
Agreement and the payments and other benefits provided hereunder be exempt from
the requirements of Code Section 409A to the maximum extent possible, whether
pursuant to the short-term deferral exception described in Treasury Regulation
Section 1.409A-1(b)(4), the involuntary separation pay plan exception described
in Treasury Regulation Section 1.409A-1(b)(9)(iii), or otherwise.  To the extent
Code Section 409A is applicable to this Agreement (and such payments and
benefits), the parties intend that this Agreement (and such payments and
benefits) comply with the deferral, payout and other limitations and
restrictions imposed under Code Section 409A.  Notwithstanding any provision of
this Agreement to the contrary, this Agreement shall be interpreted, operated
and administered in a manner consistent with such intentions.  Without limiting
the generality of the foregoing, and notwithstanding any provision of this
Agreement to the contrary, with respect to any payments and benefits under this
Agreement to which Code Section 409A applies, all references in this Agreement
to the termination of Executive’s employment are intended to mean Executive’s
“separation from service,” within the meaning of Code Section 409A(a)(2)(A)(i). 
In addition, if Executive is a “specified employee,” within the meaning of Code
Section 409A(a)(2)(B)(i), at the time of his “separation from service,” within
the meaning of Code Section 409A(a)(2)(A)(i), then to the extent necessary to
avoid subjecting Executive to the imposition of any additional tax under Code
Section 409A, amounts that would otherwise be payable under this Agreement
during the six-month period immediately following Executive’s “separation from
service,” shall not be paid to Executive during such period, but shall instead
be accumulated and paid to Executive (or, in the event of Executive’s death,
Executive’s estate) in a lump sum on the first business day following the date
that is six months after Executive’s separation from service.  Moreover, the
parties intend that this Agreement be deemed to be amended to the extent
necessary to comply with the requirements of Code Section 409A and to avoid or
mitigate the imposition of additional taxes under Code

 

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Section 409A, while preserving to the maximum extent possible the essential
economics of Executive’s rights under the Agreement.

 

f.              If the Term ends as a result of the expiration of the Term on
its scheduled end date without renewal, all Digimarc obligations under this
Agreement will end except for payment of any Compensation payable under
Section 4 for services performed prior to expiration and reimbursement of
properly authorized business expenses incurred by Executive prior to expiration;
provided, however, that if Executive’s employment is thereafter terminated
without Cause as defined in Section 5(c) or Executive terminates his employment
for Good Reason as defined in Section 5(d), in both cases other than following a
Change of Control (which is governed by Section 6(d)), all unvested stock
options in the Initial Grant will immediately vest and become exercisable.

 

g.             As a condition to receiving benefits under this Section 6,
Executive must sign a general waiver and release in the form provided by the
Digimarc within sixty (60) days of the termination date, which form shall be
substantially similar in coverage to the release contained in Section 10 hereof
and conditioned on Digimarc’s provision of such benefits.  Failure to return the
release within such sixty (60)-day period will result in the forfeiture of any
and all benefits hereunder.

 

7.             EXCISE TAXES.

 

a.             In the event that Executive becomes entitled to receive or
receives any payments, options, awards or benefits (including, without
limitation, the monetary value of any non-cash benefits and the accelerated
vesting of stock options) under this Agreement or under any other plan,
agreement or arrangement with Digimarc, any person whose actions result in any
change described in Code Section 280G(b)(2)(A)(i) (a “Section 280G Transaction”)
or any person affiliated with Digimarc or such person (collectively, the
“Payments”), that may separately or in the aggregate constitute “parachute
payments” within the meaning of Section 280G (collectively, the “Potential
Parachute Payments”) and it is determined that any of the Payments will be
subject to any excise tax pursuant to Code Section 4999 or any similar or
successor provision (the “Excise Tax”), Digimarc shall pay to Executive an
additional lump sum cash payment in an amount (the “Gross-Up Payment”) such that
the net amount retained by Executive from the Payments and the Gross Up Payment
shall be as if the Excise Tax did not apply to Executive.  The Gross-Up Payment,
if any, shall be made by Digimarc to Executive within thirty (30) calendar days
of the receipt of the written determination by the Tax Advisor pursuant to
Section 7(b); provided, however, that the Gross-Up Payment shall in all events
be paid by the end of the taxable year that immediately follows the taxable year
in which the related Excise Tax on a Payment is remitted to the relevant taxing
authorities.

 

b.             All calculations and determinations under this Section 7,
including application and interpretation of the Code and related regulatory,
administrative and judicial authorities, shall be made by an independent
accounting firm or independent tax counsel appointed by Digimarc (the “Tax
Advisor”).  All determinations made by the Tax Advisor

 

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under this Section 7 shall be conclusive and binding on both Digimarc and
Executive, and Digimarc shall cause the Tax Advisor to provide its
determinations and any supporting calculations with respect to Executive to
Digimarc and Executive.  Digimarc shall bear all fees and expenses charged by
the Tax Advisor in connection with its services.  For purposes of making the
calculations and determinations under this Section 7, after taking into account
the information provided by Digimarc and Executive, the Tax Advisor may make
reasonable, good faith assumptions and approximations concerning the application
of Code Sections 280G and 4999.  Digimarc and Executive shall furnish the Tax
Advisor with such information and documents as the Tax Advisor may reasonably
request to assist the Tax Advisor in making calculations and determinations
under this Section 7.

 

8.             TERMINATION OBLIGATIONS.

 

a.             Executive agrees that all property, including, without
limitation, all equipment, tangible Proprietary Information (as defined below),
documents, books, records, reports, notes, contracts, lists, computer disks (and
other computer-generated files and data), and copies thereof, created on any
medium and furnished to, obtained by, or prepared by Executive in the course of
or incident to his employment, belongs to Digimarc and shall be returned
promptly to Digimarc at the end of the Term.

 

b.             All benefits to which Executive is otherwise entitled shall cease
upon Executive’s termination, unless explicitly continued either under this
Agreement or under any specific written policy or benefit plan of Digimarc.

 

c.             Effective at the end of the Term, Executive shall be deemed to
have resigned from all offices and directorships then held with Digimarc or any
Affiliate.

 

d.             The representations and warranties contained in this Agreement
and Executive’s obligations under this Section 8 on Termination Obligations and
Section 9 on Proprietary Information shall survive the termination of this
Agreement.

 

e.             Following any termination of this Agreement, Executive shall
fully cooperate with Digimarc in all matters relating to the winding up of
pending work on behalf of Digimarc and the orderly transfer of work to other
executives of Digimarc.  Executive shall also cooperate in the defense of any
action brought by any third party against Digimarc that relates in any way to
Executive’s acts or omissions while employed by Digimarc.

 

f.              Prior to beginning any employment within two (2) years following
the end of the Term, Executive shall first provide Digimarc with the name and
address of his prospective employer so that Digimarc may provide the new
employer with a copy of this Agreement.

 

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9.             PROPRIETARY INFORMATION AND COVENANT NOT TO COMPETE.

 

a.             Defined.  “Proprietary Information” is all information and any
idea in whatever form, tangible or intangible, pertaining in any manner to the
business of Digimarc, or any Affiliate, or its employees, clients, consultants,
or business associates, which was produced by any employee of Digimarc in the
course of his or her employment or otherwise produced or acquired by or on
behalf of Digimarc.  All Proprietary Information not generally known outside of
Digimarc’s organization, and all Proprietary Information so known only through
improper means, shall be deemed “Confidential Information.”  Without limiting
the foregoing definition, Proprietary and Confidential Information shall
include, but not be limited to:  (i) formulas, teaching and development
techniques, processes, trade secrets, computer programs, electronic codes,
inventions, improvements, and research projects;  (ii) information about costs,
profits, markets, sales, and lists of customers or clients;  (iii) business,
marketing, and strategic plans; and (iv) employee personnel files and
compensation information.  Executive should consult any Digimarc procedures
instituted to identify and protect certain types of Confidential Information,
which are considered by Digimarc to be safeguards in addition to the protection
provided by this Agreement.  Nothing contained in those procedures or in this
Agreement is intended to limit the effect of the other.

 

b.             General Restrictions on Use.  During the Term, Executive shall
use Proprietary Information, and shall disclose Confidential Information, only
for the benefit of Digimarc and as is necessary to carry out his
responsibilities under this Agreement.  Following termination, Executive shall
neither, directly or indirectly, use any Proprietary Information nor disclose
any Confidential Information, except as expressly and specifically authorized in
writing by Digimarc.  The publication of any Proprietary Information through
literature or speeches must be approved in advance in writing by Digimarc.

 

c.             Location and Reproduction.  Executive shall maintain at his work
station and/or any other place under his control only such Confidential
Information as he has a current “need to know.”  Executive shall return to the
appropriate person or location or otherwise properly dispose of Confidential
Information once that need to know no longer exists.  Executive shall not make
copies of or otherwise reproduce Confidential Information unless there is a
legitimate business need for reproduction.

 

d.             Prior Actions and Knowledge.  Executive represents and warrants
that from the time of his first contact with Digimarc, he has held in strict
confidence all Confidential Information and has not disclosed any Confidential
Information, directly or indirectly, to anyone outside of Digimarc, or used,
copied, published, or summarized any Confidential Information, except to the
extent otherwise permitted in this Agreement.

 

e.             Third-Party Information.  Executive acknowledges that Digimarc
has received and in the future will receive from third parties their
confidential information subject to a

 

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duty on Digimarc’s part to maintain the confidentiality of this information and
to use it only for certain limited purposes.  Executive agrees that he owes
Digimarc and these third parties, during the Term and thereafter, a duty to hold
all such confidential information in the strictest confidence and not to
disclose or use it, except as necessary to perform his obligations hereunder and
as is consistent with Digimarc’s agreement with third parties.

 

f.              No Competition.  In the interest of preventing the use or
disclosure of Confidential Information in breach of the preceding subsections
and in consideration for Digimarc agreeing to make the post-termination payments
to Executive described in Section 6,  Executive shall not, during the Term and
for a period equal to the longer of (i) one (1) year or (ii) the period during
which Executive is receiving severance payments under Section 6 hereof following
the end of the Term, for any reason, perform work for any of Digimarc’s business
competitors whether as an employee or as a consultant, and shall not serve as a
director, partner, agent or shareholder of such competitor (except that
Executive may hold less than 5% of the outstanding stock of any public company
for investment purposes).

 

g.             Misuse of Confidential Information.  Executive agrees that for a
period equal to the longer of (i) one (1) year or (ii) the period during which
Executive is receiving severance payments under Section 6 hereof following the
end of the Term, he shall not, directly or indirectly, (i) divert or attempt to
divert from Digimarc (or any Affiliate) any business of any kind in which it is
engaged; or (ii) employ or recommend for employment any person employed by
Digimarc (or any Affiliate), unless Executive can prove that any action taken in
contravention of this subsection was done without the use in any way of
Confidential Information.

 

h.             Interference with Business.  In order to avoid disruption of
Digimarc’s business, Executive agrees that for a period equal to the longer of
(i) one (1) year or (ii) the period during which Executive is receiving
severance payments under Section 6 hereof following the end of the Term, he
shall not, directly or indirectly, (i) solicit any customer of Digimarc (or any
Affiliate) known to Executive during the Term to have been a customer; or
(ii) solicit for employment any person employed by Digimarc (or any Affiliate).

 

10.          RELEASE.

 

IN CONSIDERATION FOR DIGIMARC AGREEING TO MAKE THE POST-TERMINATION PAYMENTS TO
EXECUTIVE, EXECUTIVE HEREBY RELEASES DIGIMARC AND OLD DIGIMARC FROM ANY AND ALL
CLAIMS OF ANY KIND, KNOWN OR UNKNOWN, ARISING OUT OF OR RELATED TO EXECUTIVE’S
EMPLOYMENT BY OLD DIGIMARC, EXCLUDING WORKER’S COMPENSATION CLAIMS AND CLAIMS
FOR UNEMPLOYMENT COMPENSATION, AND AGREES NOT TO BRING A CLAIM OR LAWSUIT BASED
ON OR RELATED TO THE RELEASED CLAIMS.  THE CLAIMS EXECUTIVE IS RELEASING
INCLUDE, WITHOUT LIMITATION, ALL CLAIMS THAT EXECUTIVE MAY HAVE UNDER THAT
CERTAIN EMPLOYMENT AGREEMENT DATED JULY 16, 2001 BETWEEN DIGIMARC AND EXECUTIVE,
FOR BREACH OF CONTRACT, FOR “TORTS,” (CIVIL WRONGS OR INJURIES), OR UNDER TITLE
VII OF THE CIVIL RIGHTS ACT OF 1964; THE AGE DISCRIMINATION IN

 

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EMPLOYMENT ACT, EXCEPT THAT THIS AGREEMENT DOES NOT RELEASE ANY CLAIMS UNDER
THAT ACT THAT MAY ARISE AFTER THE SIGNING OF THIS AGREEMENT; THE EQUAL PAY ACT;
THE AMERICANS WITH DISABILITIES ACT; AND ALL OTHER APPLICABLE FEDERAL, STATE OR
LOCAL LAWS.  THE RELEASE EXECUTIVE IS GIVING RELEASES NOT ONLY ALL CLAIMS
EXECUTIVE MAY HAVE AGAINST DIGIMARC AND OLD DIGIMARC, BUT ALSO ALL CLAIMS
EXECUTIVE MAY HAVE AGAINST THEIR  RESPECTIVE PAST AND PRESENT SHAREHOLDERS,
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, REPRESENTATIVES, ATTORNEYS, PARENTS,
SUBSIDIARIES, AFFILIATES, BENEFIT PLANS, PREDECESSORS, SUCCESSORS, TRANSFEREES
AND ASSIGNS.  IT ALSO RELEASES SUCH CLAIMS OF ANYONE ELSE EXECUTIVE CAN BIND IN
THIS AGREEMENT, SUCH AS EXECUTIVE’S HEIRS AND ASSIGNS.  EXECUTIVE UNDERSTANDS
THAT EXECUTIVE IS RELEASING POTENTIALLY UNKNOWN CLAIMS, AND THAT EXECUTIVE HAS
LIMITED KNOWLEDGE WITH RESPECT TO SOME OF THE CLAIMS BEING RELEASED.  EXECUTIVE
AGREE THAT THIS RELEASE IS FAIRLY AND KNOWINGLY MADE.  EXECUTIVE ASSUME THE RISK
OF ANY MISTAKE IN ENTERING INTO THIS AGREEMENT.  EXCLUDED ARE CLAIMS UNDER THIS
AGREEMENT AND ANY FUTURE CLAIMS UNDER EMPLOYEE BENEFIT PLANS IN WHICH EXECUTIVE
MAY HAVE PARTICIPATED.  IN ADDITION, THIS AGREEMENT IS NOT INTENDED TO RELEASE
ANY CLAIMS WHICH AS A MATTER OF LAW OR PUBLIC POLICY CANNOT BE RELEASED.

 

11.          NOTICES.

 

Any notice to be given hereunder by Digimarc to Executive will be deemed to be
given if delivered to Executive in person, or if mailed to Executive, by
certified mail, postage prepaid, return receipt requested, at his address last
shown on the records of Digimarc.  Any notice to be given by Executive to
Digimarc will be deemed to be given if delivered in person or by mail, postage
prepaid, return receipt requested to the Chief Financial Officer at Digimarc’s
principal executive office, unless Executive or Digimarc will have duly notified
the other party in writing of a change of address. If mailed, notice will be
deemed to have been given when deposited in the mail as set forth above;
provided, however, that solely for purposes of Section 5(d), Executive shall not
be deemed to have given Digimarc notice of his termination for Good Reason (or
of the event constituting Good Reason) until such time as Digimarc receives
Executive’s written notice thereof.

 

12.          AMENDMENTS.

 

This Agreement will not be modified or discharged, in whole or in part, except
by an agreement in writing signed by an executive officer of Digimarc other than
Executive on the one hand, and Executive on the other hand.

 

13.          ENTIRE AGREEMENT.

 

This Agreement, together with any and all other written agreement(s) made
contemporaneously herewith and applicable options and benefits plans of
Digimarc, constitute the entire agreement between the parties with respect to
Executive’s employment by Digimarc from and after the Effective Date. The
parties are not relying on any other representation or understanding with
respect thereto, express or implied, oral or written. This Agreement, as
supplemented by such contemporaneous agreement(s),

 

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supersedes any prior employment agreement, written or oral, of Digimarc with
respect to Executive, and including the Employment Agreement between Old
Digimarc and Executive dated July 16, 2001.

 

14.          CAPTIONS.

 

The captions contained in this Agreement are for convenience of reference only
and do not affect the meaning of any terms or provisions hereof.

 

15.          BINDING EFFECT.

 

The rights and obligations of Digimarc hereunder will inure to the benefit of,
and will be binding upon, Digimarc and its respective successors and assigns,
and the rights and obligations of Executive hereunder will inure to the benefit
of, and will be binding upon, Executive and his heirs, personal representatives
and estate.  All references in this Agreement to “Digimarc” will be deemed to
include its successors and assigns.

 

16.          SEVERABLE PROVISIONS.

 

If any provision of this Agreement, or its application to any person, place, or
circumstance, is held by an arbitrator or a court of competent jurisdiction to
be invalid, unenforceable, or void, such provision shall be enforced to the
greatest extent permitted by law, and the remainder of this Agreement and such
provision as applied to other persons, places, and circumstances shall remain in
full force and effect..

 

17.          GOVERNING LAW.

 

This Agreement will be interpreted, construed, and enforced in all respects in
accordance with the laws of the State of Oregon.

 

18.          INTERPRETATION.

 

This Agreement shall be construed as a whole, according to its fair meaning, and
not in favor of or against any party.  By way of example and not in limitation,
this Agreement shall not be construed in favor of the party receiving a benefit
nor against the party responsible for any particular language in this
Agreement.  Captions are used for reference purposes only and should be ignored
in the interpretation of the Agreement.

 

19.          EMPLOYEE ACKNOWLEDGEMENT.

 

Executive acknowledges that he has had the opportunity to consult legal counsel
in regard to this Agreement, that he has read and understands this Agreement,
that he is fully aware of its legal effect, and that he has entered into it
freely and voluntarily and based on his own judgment and not on any
representations or promises other than those contained in this Agreement.

 

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[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.

 

DIGIMARC CORPORATION

EXECUTIVE

 

 

 

 

By:

/s/ Robert P. Chamness

 

/s/ Bruce Davis

Its:

Robert P. Chamness
EVP, CLO & Secretary

 

BRUCE DAVIS

 

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