** **

**Exhibit 10.21**

** **

**DIGIMARC CORPORATION 1999 STOCKINCENTIVE PLAN**

** **

**NOTICE OFSTOCK OPTION AWARD**
| Grantee’s Name and  Address: |   |
|-----------------------------------|--------|
|                              |   |
|                              |   |

 

Youhave been granted an option to purchase shares of Common Stock, subject to theterms and conditions of this Notice of Stock Option Award (the “Notice”), theDigimarc Corporation 1999 Stock Incentive Plan, as amended from time to time(the “Plan”) and the Stock Option Award Agreement (the “Option Agreement”)attached hereto, as follows.  Unlessotherwise defined herein, the terms defined in the Plan shall have the samedefined meanings in this Notice.
| Award Number                                  |             |
|-----------------------------------------------|------------------|
| Date of Award                                 |             |
| Vesting Commencement  Date                    |             |
| Exercise Price per  Share                     | $                |   |
| Total Number of Shares  subject to the Option |             |
| Total Exercise Price                          | $                |   |
| Type of Option:                               |             | Incentive  Stock Option |
|                                          |             | Non-Qualified  Stock Option |
| Expiration Date:                              |             |
| Post-Termination  Exercise Period:            | Three (3) Months |
|                                               |                  |  |  |

 

Vesting Schedule:

Subject to Grantee’s Continuous Service and otherlimitations set forth in this Notice, the Plan and the Option Agreement, theOption may be exercised, in whole or in part, in accordance with the followingschedule:

25% of the Shares subject to the Option shall vesttwelve months after the Vesting Commencement Date, and 1/1,460 of the Sharessubject to the Option shall vest on each day thereafter.

During anyauthorized leave of absence, the vesting of the Option as provided in thisschedule shall cease after the leave of absence exceeds a period of ninety (90)days.  Vesting of the Option shall resumeupon the Grantee’s termination of the leave of absence and return to service tothe Company or a Related Entity.

 

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In the event of the Grantee’s change in status fromEmployee to Consultant or from Employee whose customary employment is 20 hoursor more per week to an Employee whose customary employment is fewer than 20hours per week, vesting of the Option shall continue only to the extentdetermined by the Plan Administrator as of such change in status.

IN WITNESS WHEREOF, the Company and the Grantee haveexecuted this Notice and agree that the Option is to be governed by the termsand conditions of this Notice, the Plan, and the Option Agreement.

| Digimarc  Corporation,  |
|-------------------------|
| a Delaware  corporation |
| By:                     |   |
| Title:                  |   |
|                         |  |  |

 

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARESSUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THEGRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTEDTHE OPTION OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE,THE OPTION AGREEMENT, OR THE PLAN SHALL CONFER UPON THE GRANTEE ANY RIGHT WITHRESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE’S CONTINUOUS SERVICE, NORSHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE’S RIGHT OR THE RIGHT OF THEGRANTEE’S EMPLOYER TO TERMINATE GRANTEE’S CONTINUOUS SERVICE, WITH OR WITHOUTCAUSE.

The Grantee acknowledges receipt of a copy of the Planand the Option Agreement, and represents that he or she is familiar with theterms and provisions thereof, and hereby accepts the Option subject to all ofthe terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Plan, and the Option Agreementin their entirety, has had an opportunity to obtain the advice of counsel priorto executing this Notice, and fully understands all provisions of this Notice,the Plan and the Option Agreement.  TheGrantee hereby agrees that all disputes arising out of or relating to thisNotice, the Plan and the Option Agreement shall be resolved in accordance withSection 15 of the Option Agreement.  TheGrantee further agrees to notify the Company upon any change in the residenceaddress indicated in this Notice.
| Dated: |   |   | Signed: |    |   |
|--------|--------|--------|---------|---------|--------|
|   |   |   |    | Grantee |   |

 

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| **Award Number:** |   |
|-------------------|--------|

** **

**DIGIMARC CORPORATION 1999 STOCK INCENTIVE PLAN**

 

**STOCK OPTION AWARD AGREEMENT**

## 1.             Grantof Option.  Digimarc Corporation, aDelaware corporation (the “Company”), hereby grants to the Grantee (the “Grantee”)named in the Notice of Stock Option Award (the “Notice”), an option (the “Option”)to purchase the Total Number of Shares of Common Stock subject to the Option(the “Shares”) set forth in the Notice, at the Exercise Price per Share setforth in the Notice (the “Exercise Price”) subject to the terms and provisionsof the Notice, this Stock Option Award Agreement (the “Option Agreement”) andthe Company’s 1999****Stock****Incentive Plan, as amended from time to time (the “Plan”),which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shallhave the same defined meanings in this Option Agreement.

If designated in the Notice as an Incentive StockOption, the Option is intended to qualify as an Incentive Stock Option asdefined in Section 422 of the Code. However, notwithstanding such designation, to the extent that theaggregate Fair Market Value of Shares subject to Options designated asIncentive Stock Options which become exercisable for the first time by theGrantee during any calendar year (under all plans of the Company or any Parentor Subsidiary) exceeds $100,000, such excess Options, to the extent of theShares covered thereby in excess of the foregoing limitation, shall be treatedas Non-Qualified Stock Options.  For thispurpose, Incentive Stock Options shall be taken into account in the order inwhich they were granted, and the Fair Market Value of the Shares shall bedetermined as of the date the Option with respect to such Shares is awarded.

## 2.             Exerciseof Option.

### (a)           Right to Exercise.  The Option shall be exercisable during itsterm in accordance with the Vesting Schedule set out in the Notice and with theapplicable provisions of the Plan and this Option Agreement.  The Option shall be subject to the provisionsof Section 4 relating to the exercisability or termination of the Option in theevent of a Corporate Transaction, Change in Control or Related EntityDisposition.  No partial exercise of theOption may be for less than the lesser of five percent (5%) of the total numberof Shares subject to the Option or the remaining number of Shares subject tothe Option.  In no event shall theCompany issue fractional Shares.

### (b)           Method ofExercise.  The Option shall beexercisable only by delivery of an Exercise Notice (attached as Exhibit A)which shall state the election to exercise the Option, the whole number ofShares in respect of which the Option is being exercised, such otherrepresentations and agreements as to the holder’s investment intent withrespect to such Shares and such other provisions as may be required by the PlanAdministrator.  The Exercise Notice shallbe signed by the Grantee and shall be delivered in person, by certified mail,or by such other method as determined from time to time by the PlanAdministrator to the Company accompanied 

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### by payment of the Exercise Price.  The Option shall be deemed to be exercisedupon receipt by the Company of such written notice accompanied by the ExercisePrice, which, to the extent selected, shall be deemed to be satisfied by use ofthe broker-dealer sale and remittance procedure to pay the Exercise Priceprovided in Section 5(d), below.

### (c)           Taxes.  No Shares will be delivered to the Grantee orother person pursuant to the exercise of the Option until the Grantee or otherperson has made arrangements acceptable to the Plan Administrator for thesatisfaction of applicable income tax, employment tax, and social security taxwithholding obligations, including, without limitation, obligations incident tothe receipt of Shares or the disqualifying disposition of Shares received onexercise of an Incentive Stock Option. Upon exercise of the Option, the Company or the Grantee’s employer mayoffset or withhold (from any amount owed by the Company or the Grantee’semployer to the Grantee) or collect from the Grantee or other person an amountsufficient to satisfy such tax obligations and/or the employer’s withholdingobligations.

## 3.             Definitions.  As used herein, the following definitionsshall apply:

(a)   “Cause”****means,with respect to the termination by the Company or a Related Entity of theGrantee’s Continuous Service, that such termination is for “Cause” as such termis expressly defined in a then-effective written agreement between the Granteeand the Company or such Related Entity, or in the absence of suchthen-effective written agreement and definition, is based on, in thedetermination of the Plan Administrator, the Grantee’s:  (i) refusal or failure to act inaccordance with any specific, lawful direction or order of the Company or aRelated Entity; (ii) unfitness or unavailability for service or unsatisfactoryperformance (other than as a result of Disability); (iii) performance of anyact or failure to perform any act in bad faith and to the detriment of theCompany or a Related Entity; (iv) dishonesty, intentional misconduct ormaterial breach of any agreement with the Company or a Related Entity; or (v)commission of a crime involving dishonesty, breach of trust, or physical oremotional harm to any person.  At least30 days prior to the termination of the Grantee’s Continuous Service pursuantto (i) or (ii) above, the Plan Administrator shall provide the Grantee withnotice of the Company’s or such Related Entity’s intent to terminate, thereason therefor, and an opportunity for the Grantee to cure such defects in hisor her service to the Company’s or such Related Entity’s satisfaction.  During this 30 day (or longer) period, noAward issued to the Grantee under the Plan may be exercised or purchased.

(b)   “Change in Control”****means a change in ownership or control of the Companyeffected through either of the following transactions:

(i)            thedirect or indirect acquisition by any person or related group of persons (otherthan an acquisition from or by the Company or by a Company-sponsored employeebenefit plan or by a person that directly or indirectly controls, is controlledby, or is under common control with, the Company) of beneficial ownership(within the meaning of Rule 13d-3 of the Exchange Act) of securitiespossessing more than fifty percent (50%) of the total combined voting power ofthe Company’s outstanding securities pursuant to a tender or exchange offermade directly to the Company’s stockholders which a majority of the Continuing 

 

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Directors who are not Affiliates or Associates of theofferor do not recommend such stockholders accept, or

(ii)           a change in the composition of theBoard over a period of thirty-six (36) months or less such that a majority ofthe Board members (rounded up to the next whole number) ceases, by reason ofone or more contested elections for Board membership, to be comprised ofindividuals who are Continuing Directors.

(c)   “Continuing Directors” means membersof the Board who either (i) have been Board members continuously for aperiod of at least thirty-six (36) months or (ii) have been Board membersfor less than thirty-six (36) months and were elected or nominated for electionas Board members by at least a majority of the Board members described inclause (i) who were still in office at the time such election ornomination was approved by the Board.

(d)   “Corporate Transaction”****means any of the following transactions:

(i)            a merger or consolidation in whichthe Company is not the surviving entity, except for a transaction the principalpurpose of which is to change the state in which the Company is incorporated;

(ii)           the sale, transfer or otherdisposition of all or substantially all of the assets of the Company (includingthe capital stock of the Company’s subsidiary corporations) in connection withthe complete liquidation or dissolution of the Company;

(iii)          any reverse merger in which theCompany is the surviving entity but in which securities possessing more thanfifty percent (50%) of the total combined voting power of the Company’soutstanding securities are transferred to a person or persons different fromthose who held such securities immediately prior to such merger; or

(iv)          acquisition by any person or relatedgroup of persons (other than the Company or by a Company-sponsored employeebenefit plan) of beneficial ownership (within the meaning of Rule 13d-3 ofthe Exchange Act) of securities possessing more than fifty percent (50%) of thetotal combined voting power of the Company’s outstanding securities (whether ornot in a transaction also constituting a Change in Control), but excluding anysuch transaction that the Plan Administrator determines shall not be aCorporate Transaction.

(e)   “Good Reason” means the occurrenceafter a Corporate Transaction, Change in Control or a Related EntityDisposition of any of the following events or conditions unless consented to bythe Grantee:

(i)            (A)a change in the Grantee’s status, title, position or responsibilities whichrepresents an adverse change from the Grantee’s status, title, position orresponsibilities as in effect at any time within six (6) months preceding thedate of a Corporate Transaction, Change in Control or Related Entity Dispositionor at any time thereafter or (B) the assignment to the Grantee of anyduties or responsibilities which are inconsistent with the Optionee’s status,title, position or responsibilities as in effect at any time within six (6)months 

 

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preceding the date of a Corporate Transaction, Changein Control or Related Entity Disposition or at any time thereafter;

(ii)           reduction in the Grantee’s basesalary to a level below that in effect at any time within six (6) monthspreceding the date of a Corporate Transaction, Change in Control or RelatedEntity Disposition or at any time thereafter; or

(iii)          requiring the Grantee to be based atany place outside a 50-mile radius from the Grantee’s job location or residenceprior to the Corporate Transaction, Change in Control or Related EntityDisposition, except for reasonably required travel on business which is notmaterially greater than such travel requirements prior to the CorporateTransaction, Change in Control or Related Entity Disposition.

(f)    “Related Entity Disposition” meansthe sale, distribution or other disposition by the Company, a Parent or aSubsidiary of all or substantially all of the interests of the Company, aParent or a Subsidiary in any Related Entity effected by a sale, merger orconsolidation or other transaction involving that Related Entity or the sale ofall or substantially all of the assets of that Related Entity, other than anyRelated Entity Disposition to the Company, a Parent or a Subsidiary.

## 4.             CorporateTransactions/Changes in Control/Related Entity Dispositions.

(a)   In theevent of any Corporate Transaction, this Option automatically shall becomefully vested and exercisable and be released from any restrictions on transfer(other than transfer restrictions under Section 10) and repurchase orforfeiture rights, immediately prior to the specified effective date of suchCorporate Transaction, for all of the Shares at the time represented by thisOption.  Effective upon the consummationof the Corporate Transaction, this Option shall terminate.  However, this Option shall not terminate ifthe Option is, in connection with the Corporate Transaction, assumed by thesuccessor corporation or Parent thereof. In addition, this Option shall not so fully vest and be exercisable andreleased from such limitations if and to the extent:  (i) this Option is, in connection withthe Corporate Transaction, either assumed by the successor corporation orParent thereof or replaced with a comparable Option with respect to shares ofthe capital stock of the successor corporation or Parent thereof or(ii) this Option is to be replaced with a cash incentive program of thesuccessor corporation which preserves the compensation element of this Optionexisting at the time of the Corporate Transaction and provides for subsequentpayout in accordance with the Vesting Schedule set forth in the Notice;provided, however, that this Option (if assumed), the replacement option (ifreplaced), or the cash incentive program automatically shall become fullyvested, exercisable and payable and be released from any restrictions ontransfer (other than transfer restrictions under Section 10) and repurchase orforfeiture rights immediately upon termination of the Grantee’s ContinuousService (substituting the successor employer corporation for “Company orRelated Entity” for the definition of “Continuous Service”) if such ContinuousService is terminated by the successor company without Cause or voluntarily bythe Grantee with Good Reason within twelve (12) months of the CorporateTransaction.  The determination of Optioncomparability 

 

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above shall be made by the Plan Administrator and itsdetermination shall be final, binding and conclusive.

(b)   Following a Change in Control (other than aChange in Control which also is a Corporate Transaction) and upon thetermination of the Continuous Service of a Grantee if such Continuous Serviceis terminated by the Company or Related Entity without Cause or voluntarily bythe Grantee with Good Reason within twelve (12) months of a Change in Control,this Option automatically shall become fully vested and exercisable and bereleased from any restrictions on transfer (other than transfer restrictionsunder Section 10) and repurchase or forfeiture rights, immediately upon thetermination of such Continuous Service.

(c)   Effective upon the consummation of a RelatedEntity Disposition, for purposes of this Option, the Continuous Service of eachGrantee who is at the time engaged primarily in service to the Related Entityinvolved in such Related Entity Disposition shall be deemed to terminate andthis Option automatically shall become fully vested and exercisable and bereleased from any restrictions on transfer (other than transfer restrictionsunder Section 10) and repurchase or forfeiture rights for all of the Shares atthe time represented by this Option and be exercisable in accordance with theterms of this Option Agreement.  However,such Continuous Service shall be not be deemed to terminate if this Option is,in connection with the Related Entity Disposition, assumed by the successorentity or its Parent.  In addition, suchContinuous Service shall not be deemed to terminate and this Option shall notso fully vest and be exercisable and released from such limitations if and tothe extent:  (i) this Option is, inconnection with the Related Entity Disposition, either to be assumed by thesuccessor entity or its parent or to be replaced with a comparable Option withrespect to interests in the successor entity or its parent or (ii) thisOption is to be replaced with a cash incentive program of the successor entitywhich preserves the compensation element of this Option existing at the time ofthe Related Entity Disposition and provides for subsequent payout in accordancewith the Vesting Schedule set forth in the Notice; provided, however, that thisOption (if assumed), the replacement option (if replaced), or the cashincentive program automatically shall become fully vested, exercisable andpayable and be released from any restrictions on transfer (other than transferrestrictions under Section 10) and repurchase or forfeiture rights immediatelyupon termination of the Grantee’s Continuous Service (substituting thesuccessor employer entity for “Company or Related Entity” for the definition of“Continuous Service”) if such Continuous Service is terminated by the successorentity without Cause or voluntarily by the Grantee with Good Reason within twelve(12) months of the Related Entity Disposition. The determination of Option comparability above shall be made by thePlan Administrator.

(d)   The portionof the Option, if an Incentive Stock Option, accelerated under thisSection 4 in connection with a Corporate Transaction, Change in Control orRelated Entity Disposition shall remain exercisable as an Incentive StockOption under the Code only to the extent the $100,000 dollar limitation ofSection 422(d) of the Code is not exceeded.  To the extent such dollar limitation isexceeded, the accelerated excess portion of the Option shall be exercisable asa Non-Qualified Stock Option.

 

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## 5.             Methodof Payment.  Payment of the ExercisePrice shall be by any of the following, or a combination thereof, at theelection of the Grantee; provided, however, that such exercise method does notthen violate any Applicable Law and, provided further, that the portion of theExercise Price equal to the par value of the Shares must be paid in cash orother legal consideration permitted by the Delaware General Corporation Law:

### (a)                                  cash;

### (b)                                 check;

### (c)           surrenderof Shares or delivery of a properly executed form of attestation of ownershipof Shares as the Plan Administrator may require (including withholding ofShares otherwise deliverable upon exercise of the Option) which have a FairMarket Value on the date of surrender or attestation equal to the aggregateExercise Price of the Shares as to which the Option is being exercised (butonly to the extent that such exercise of the Option would not result in anaccounting compensation charge with respect to the Shares used to pay theexercise price); or

### (d)           paymentthrough a broker-dealer sale and remittance procedure pursuant to which theGrantee (i) shall provide written instructions to a Company designatedbrokerage firm to effect the immediate sale of some or all of the purchasedShares and remit to the Company, out of the sale proceeds available on thesettlement date, sufficient funds to cover the aggregate exercise price payablefor the purchased Shares and (ii) shall provide written directives to theCompany to deliver the certificates for the purchased Shares directly to suchbrokerage firm in order to complete the sale transaction.

## 6.             Restrictionson Exercise.  The Option may not beexercised if the issuance of the Shares subject to the Option upon such****exercise would constitute a violation of any ApplicableLaws.  In addition, the Option, if anIncentive Stock Option, may not be exercised until such time as the Plan hasbeen approved by the stockholders of the Company.

## 7.             Termination or Change ofContinuous Service.  In the event theGrantee’s Continuous Service terminates, the Grantee may, to the extentotherwise so entitled at the date of such termination (the “Termination Date”),exercise the Option during the Post-Termination Exercise Period.  In no event shall the Option be exercisedlater than the Expiration Date set forth in the Notice.  In the event of the Grantee’s change instatus from Employee, Director or Consultant to any other status of Employee,Director or Consultant, the Option shall remain in effect and, except to theextent otherwise determined by the Plan Administrator, continue to vest;provided, however, that with respect to any Incentive Stock Option that shallremain in effect after a change in status from Employee to Director orConsultant, such Incentive Stock Option shall cease to be treated as anIncentive Stock Option and shall be treated as a Non-Qualified Stock Option onthe day three (3) months and one (1) day following such change in status.  Except as provided in Sections 8and 9 below, to the extent that the Grantee is not entitled to exercisethe Option on the Termination Date, or if the Grantee does not exercise theOption within the Post-Termination Exercise Period,****theOption shall terminate.

 

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## 8.           Disabilityof Grantee.  In the event the Grantee’sContinuous Service terminates as a result of his or her Disability, the Granteemay, but only within twelve (12) months from the Termination Date (and in noevent later than the Expiration Date), exercise the Option to the extent he orshe was otherwise entitled to exercise it on the Termination Date; provided,however, that if such Disability is not a “disability” as such term is definedin Section 22(e)(3) of the Code and the Option is an Incentive Stock Option,such Incentive Stock Option shall cease to be treated as an Incentive StockOption and shall be treated as a Non-Qualified Stock Option on the daythree (3) months and one (1) day following the Termination Date.  To the extent that the Grantee is notentitled to exercise the Option on the Termination Date, or if the Grantee doesnot exercise the Option to the extent so entitled within the time specifiedherein, the Option shall terminate.

## 9.             Deathof Grantee.  In the event of thetermination of the Grantee’s Continuous Service as a result of his or herdeath, or in the event of the Grantee’s death during the Post-TerminationExercise Period or during the twelve (12) month period following the Grantee’sTermination of Continuous Service as a result of his or her Disability, theGrantee’s estate, or a person who acquired the right to exercise the Option bybequest or inheritance, may exercise the Option, but only to the extent theGrantee could exercise the Option at the date of termination, within twelve(12) months from the date of death (but in no event later than the ExpirationDate).  To the extent that the Grantee isnot entitled to exercise the Option on the date of death, or if the Option isnot exercised to the extent so entitled within the time specified herein, theOption shall terminate.

## 10.           Transferabilityof Option.  The Option, if an IncentiveStock Option, may not be transferred in any manner other than by will or by thelaws of descent and distribution and may be exercised during the lifetime ofthe Grantee only by the Grantee; provided, however, that the Grantee maydesignate a beneficiary of the Grantee’s Incentive Stock Option in the event ofthe Grantee’s death on a beneficiary designation form provided by the PlanAdministrator.  The Option, if aNon-Qualified Stock Option may be transferred to any person by will and by thelaws of descent and distribution. Non-Qualified Stock Options also may be transferred during the lifetimeof the Grantee by gift and pursuant to a domestic relations order to members ofthe Grantee’s Immediate Family to the extent and in the manner determined by thePlan Administrator. ** **The terms of the Option shall bebinding upon the executors, administrators, heirs, successors and transfereesof the Grantee.

## 11.           Termof Option.  The Option may beexercised no later than the Expiration Date set forth in the Notice or suchearlier date as otherwise provided herein.

## 12.           TaxConsequences.  Set forth below is abrief summary as of the date of this Option Agreement of some of the federaltax consequences of exercise of the Option and disposition of the Shares.  THIS SUMMARY IS NECESSARILY INCOMPLETE, ANDTHE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.  THE GRANTEE SHOULD CONSULT A TAX ADVISERBEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

### (a)           Exercise of Incentive Stock Option.  If the Option qualifies as an Incentive StockOption, there will be no regular federal income tax liability upon the exerciseof the 

 

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### Option,although the excess, if any, of the Fair Market Value of the Shares on the dateof exercise over the Exercise Price will be treated as income for purposes ofthe alternative minimum tax for federal tax purposes and may subject theGrantee to the alternative minimum tax in the year of exercise.

### (b)           Exerciseof Incentive Stock Option Following Disability.  If the Grantee’s Continuous Serviceterminates as a result of Disability that is not total and permanent disabilityas defined in Section 22(e)(3) of the Code, to the extent permitted on the dateof termination, the Grantee must exercise an Incentive Stock Option withinthree (3) months of such termination for the Incentive Stock Option to bequalified as an Incentive Stock Option.

### (c)           Exerciseof Non-Qualified Stock Option.  Onexercise of a Non-Qualified Stock Option, the Grantee will be treated as havingreceived compensation income (taxable at ordinary income tax rates) equal tothe excess, if any, of the Fair Market Value of the Shares on the date ofexercise over the Exercise Price.  If theGrantee is an Employee or a former Employee, the Company will be required towithhold from the Grantee’s compensation or collect from the Grantee and pay tothe applicable taxing authorities an amount in cash equal to a percentage ofthis compensation income at the time of exercise, and may refuse to honor theexercise and refuse to deliver Shares if such withholding amounts are notdelivered at the time of exercise.

### (d)           Dispositionof Shares.  In the case of aNon-Qualified Stock Option, if Shares are held for more than one year, any gainrealized on disposition of the Shares will be treated as long-termcapital gain for federal income tax purposes and subject to tax at a maximumrate of 20%.  In the case of an IncentiveStock Option, if Shares transferred pursuant to the Option are held for morethan one year after receipt of the Shares and are disposed more than two yearsafter the Date of Award, any gain realized on disposition of the Shares alsowill be treated as capital gain for federal income tax purposes and subject tothe same tax rates and holding periods that apply to Shares acquired uponexercise of a Non-Qualified Stock Option. If Shares purchased under an Incentive Stock  Option are disposed of prior to the expirationof such one-year or two-year periods, any gain realized on suchdisposition will be treated as compensation income (taxable at ordinary incomerates) to the extent of the difference between the Exercise Price and thelesser of (i) the Fair Market Value of the Shares on the date of exercise,or (ii) the sale price of the Shares.

## 13.           Entire Agreement: Governing Law.  The Notice, the Plan and this OptionAgreement constitute the entire agreement of the parties with respect to thesubject matter hereof and supersede in their entirety all prior undertakingsand agreements of the Company and the Grantee with respect to the subjectmatter hereof, and may not be modified adversely to the Grantee’s interestexcept by means of a writing signed by the Company and the Grantee.  Nothing in the Notice, the Plan and thisOption Agreement (except as expressly provided therein) is intended to conferany rights or remedies on any persons other than the parties.  The Notice, the Plan and this OptionAgreement are to be construed in accordance with and governed by the internallaws of the****State of Oregon without givingeffect to any choice of law rule that would cause the application of the lawsof any jurisdiction other than the internal laws of the State of 

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## Oregonto the rights and duties of the parties. Should any provision of the Notice, the Plan or this Option Agreement bedetermined by a court of law to be illegal or unenforceable, such provisionshall be enforced to the fullest extent allowed by law and the other provisionsshall nevertheless remain effective and shall remain enforceable.

## 14.           Headings.  The captions used in the Notice and thisOption Agreement are inserted for convenience and shall not be deemed a part ofthe Option for construction or interpretation.

## 15.           DisputeResolution  The provisions of thisSection 15 shall be the exclusive means of resolving disputes arising out of orrelating to the Notice, the Plan and this Option Agreement.  The Company, the Grantee, and the Grantee’sassignees pursuant to Section 10 (the “parties”) shall attempt in good faith toresolve any disputes arising out of or relating to the Notice, the Plan andthis Option Agreement by negotiation between individuals who have authority tosettle the controversy.  Negotiationsshall be commenced by either party by notice of a written statement of theparty’s position and the name and title of the individual who will representthe party.  Within thirty (30) days ofthe written notification, the parties shall meet at a mutually acceptable timeand place, and thereafter as often as they reasonably deem necessary, toresolve the dispute.  If the dispute hasnot been resolved by negotiation, the parties agree that any suit, action, orproceeding arising out of or relating to the Notice, the Plan or this OptionAgreement shall be brought before the U.S. District Court, District of Oregon,and that the parties shall submit to the jurisdiction of such court.  If the U.S. District Court, District ofOregon, does not have jurisdiction over the dispute, the parties agree that anysuit, action, or proceeding arising out of or related to the Notice, the Planor this Option Agreement shall be brought before the Oregon Circuit Court, 4thJudicial District, located in Portland, Oregon, and that the parties shallsubmit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law,any objection the party may have to the laying of venue for any such suit,action or proceeding brought in such courts. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO AJURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.  If any one or more provisions of this Section15 shall for any reason be held invalid or unenforceable, it is the specificintent of the parties that such provisions shall be modified to the minimumextent necessary to make it or its application valid and enforceable.

## 16.           Notices.  Any notice required or permitted hereundershall be given in writing and shall be deemed effectively given upon personaldelivery or upon deposit in the United States mail by certified mail (if theparties are within the United States) or upon deposit for delivery by aninternationally recognized express mail courier service (for internationaldelivery of notice), with postage and fees prepaid, addressed to the otherparty at its address as shown beneath its signature in the Notice, or to suchother address as such party may designate in writing from time to time to theother party.

 

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**EXHIBIT A**

**DIGIMARCCORPORATION 1999 STOCK INCENTIVE PLAN**

 

**EXERCISE NOTICE**

DigimarcCorporation

9405 SW Gemini Drive

Beaverton, Oregon 97008

 

Attention:Secretary

## 1.             Exerciseof Option.  Effective as of today,                            ,       the undersigned (the “Grantee”) herebyelects to exercise the Grantee’s option to purchase                       shares of the Common Stock (the “Shares”) of Digimarc Corporation (the “Company”)under and pursuant to the Company’s 1999 Stock Incentive Plan, as amended fromtime to time (the “Plan”) and the [  ] Incentive[  ] Non-Qualified Stock Option Award Agreement (the “OptionAgreement”) and Notice of Stock Option Award (the “Notice”) dated                             ,                .  Unless otherwise defined herein, the termsdefined in the Plan shall have the same defined meanings in this ExerciseNotice.

## 2.             Representationsof the Grantee.  The Granteeacknowledges that the Grantee has received, read and understood the Notice, thePlan, and the Option Agreement and agrees to abide by and be bound by theirterms and conditions.

## 3.             Rightsas Stockholder.  Until the stockcertificate evidencing such Shares is issued (as evidenced by the appropriateentry on the books of the Company or of a duly authorized transfer agent of theCompany), no right to vote or receive dividends or any other rights as astockholder shall exist with respect to the Shares, notwithstanding theexercise of the Option.  The Companyshall issue (or cause to be issued) such stock certificate promptly after theOption is exercised.  No adjustment willbe made for a dividend or other right for which the record date is prior to thedate the stock certificate is issued, except as provided in Section 10 ofthe Plan.

## 4.             Deliveryof Payment.  The Grantee herewith deliversto the Company the full Exercise Price for the Shares, which, to the extentselected, shall be deemed to be satisfied by use of the broker-dealer sale andremittance procedure to pay the Exercise Price provided in Section 5(d) ofthe Option Agreement.

## 5.             Tax Consultation.  The Grantee understands that the Grantee maysuffer adverse tax consequences as a result of the Grantee’s purchase ordisposition of the Shares.  The Granteerepresents that the Grantee has consulted with any tax consultants the Granteedeems advisable in connection with the purchase or disposition of the Sharesand that the Grantee is not relying on the Company for any tax advice

 

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## 6.             Taxes.  The Grantee agrees to satisfy all applicablefederal, state and local income and employment tax withholding obligations andherewith delivers to the Company the full amount of such obligations or hasmade arrangements acceptable to the Company to satisfy such obligations.  In the case of an Incentive Stock Option, theGrantee also agrees, as partial consideration for the designation of the Optionas an Incentive Stock Option, to notify the Company in writing withinthirty (30) days of any disposition of any shares acquired by exercise ofthe Option if such disposition occurs within two (2) years from the AwardDate or within one (1) year from the date the Shares were transferred tothe Grantee.  If the Company is requiredto satisfy any federal, state or local income or employment tax withholdingobligations as a result of such an early disposition, the Grantee agrees tosatisfy the amount of such withholding in a manner that the Plan Administratorprescribes.

## 7.             Successorsand Assigns.  The Company may assignany of its rights under this Exercise Notice to single or multiple assignees,and this agreement shall inure to the benefit of the successors and assigns ofthe Company.  This Exercise Notice shallbe binding upon the Grantee and his or her heirs, executors, administrators,successors and assigns.

## 8.             Headings.  The captions used in this ExerciseNotice  are inserted for convenience andshall not be deemed a part of this agreement for construction orinterpretation.

## 9.             DisputeResolution.  The provisions ofSection 15 of the Option Agreement shall be the exclusive means of resolvingdisputes arising out of or relating to this Exercise Notice.

## 10.           GoverningLaw; Severability.  This ExerciseNotice is to be construed in accordance with and governed by the internal lawsof the State of Oregon without giving effect to any choice of law rule thatwould cause the application of the laws of any jurisdiction other than theinternal laws of the State of Oregon to the rights and duties of theparties.  Should any provision of thisExercise Notice be determined by a court of law to be illegal or unenforceable,such provision shall be enforced to the fullest extent allowed by law and theother provisions shall nevertheless remain effective and shall remainenforceable.

## 11.           Notices.  Any notice required or permitted hereundershall be given in writing and shall be deemed effectively given upon personaldelivery or upon deposit in the United States mail by certified mail, (if theparties are within the United States) or upon deposit for delivery by an internationallyrecognized express mail courier service (for international delivery of notice)with postage and fees prepaid, addressed to the other party at its address asshown below beneath its signature, or to such other address as such party maydesignate in writing from time to time to the other party.

## 12.           FurtherInstruments.  The parties agree toexecute such further instruments and to take such further action as may bereasonably necessary to carry out the purposes and intent of this agreement.

## 13.           Entire Agreement.  The Notice, the Plan, and the OptionAgreement are incorporated herein by reference, and together with this ExerciseNotice constitute the entire agreement of the parties with respect to thesubject matter hereof and supersede in their entirety 

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## allprior undertakings and agreements of the Company and the Grantee with respectto the subject matter hereof, and may not be modified adversely to the Grantee’sinterest except by means of a writing signed by the Company and theGrantee.  Nothing in the Notice, thePlan, the Option Agreement and this Exercise Notice (except as expresslyprovided therein) is intended to confer any rights or remedies on any personsother than the parties.  

| Submitted by: |   | Accepted by:               |
|---------------|--------|----------------------------|
|          |   |                       |
| GRANTEE:      |   | DIGIMARC  CORPORATION      |
|          |   |                       |
|          |   | By:                        |   |
|          |   |                       |
| (Signature)   |   | Title:                     |   |
|          |   |                       |
| Address:      |   | Address:                   |
|          |   |                       |
|          |   | 9405 SW Gemini Drive  |
|          |   | Beaverton, Oregon 97008    |
|               |        |                            |  |  |

 

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