**Exhibit 10.21**

 

**PERFORMANCEVESTING SHARE AGREEMENT**

 

THIS PERFORMANCE VESTING SHARE AGREEMENT (this “Agreement”) is made effectiveJanuary 3, 2006 (the “Grant Date”), by and between DIGIMARC CORPORATION, aDelaware corporation (the “Company”) and                                           (“Executive”). In connection with his services as                                       ,the Company desires to grant Executive a performance vesting share award of                          shares of the Company’s common stock.

 

# **1.****                                     ****Grant of Performance Vesting Shares****.**The Company hereby grants to Executive as of the GrantDate, a performance vesting share award of                                   shares of the Company’s common stock (the “Shares”) pursuant to the terms andconditions contained in this Agreement and the terms and conditions of theCompany’s Restated 1999 Stock Incentive Plan (the “1999 Plan”), subject to thevesting rules set forth in Section 2 below.

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# **2.****                                     ****Vesting of the Shares****.**

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## **2.1****                              ****PerformanceCondition and Release Date****.**Subject to the terms of this Agreement, if the closing priceof the Company’s common stock is at least $15 for more than 30 consecutivecalendar days during the period that begins on the Grant Date and ends on thethird anniversary of the Grant Date (the “Performance Condition”), then theShares shall vest and no longer be subject to forfeiture on the date on whichthe Performance Condition is satisfied (the “Release Date”). All rights toperformance vesting shares are contingent on Executive remaining continuouslyemployed by the Company, or any parent or subsidiary of the Company, from theGrant Date through the Release Date.

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## **2.2****                              ****TerminationWithout Cause Prior to Release Date****.**In the event of termination by the Company of Executive’semployment without “Cause” (as defined below) prior to the earlier of the thirdanniversary of the Grant Date (the “Expiration Date”) and the Release Date, theShares shall be fully vested and the forfeiture restriction shall lapse as ofthe date of termination of employment by the Company.

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## **2.3****                              ****Termination Dueto Death or Disability****.**Inthe event of termination of Executive’s employment due to Executive’s death or “Disability”(as defined in the 1999 Plan) prior to the earlier of the Expiration Date andthe Release Date, the Shares shall be fully vested and the forfeiturerestriction shall lapse as of the date of Executive’s death or Disability.

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## **2.4****                              ****Resignation forGood Reason Following a Change in Control****.**In the event there is a “Changein Control” of the Company (as defined below) prior to the earlier of theExpiration Date and the Release Date and as a consequence of such Change inControl, Executive resigns for “Good Reason” (as defined below) prior to theearlier of the Expiration Date and the Release Date, the Shares shall be fullyvested and the forfeiture restriction shall lapse as of the date of Executive’sresignation for Good Reason.

 

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## **2.5****                              ****Termination forOther Reasons****.**Inthe event that Executive’s employment terminates prior to the earlier of theExpiration Date and the Release Date for any reason other than those specifiedin Sections 2.2, 2.3, and 2.4 above, including termination voluntarily byExecutive or by the Company for Cause, the Shares shall immediately beforfeited by Executive without payment of any further consideration toExecutive.

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## **2.6****                              ****CertainDefinitions****.**

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(a)                                  “Cause.”  For purposes of this Section 2, “Cause”shall mean: (i) a willful act of embezzlement, fraud, or dishonesty byExecutive, which is materially injurious to the Company; (ii) Executive’scontinued violation of his obligation to perform the duties andresponsibilities normally required of an executive, which are willful orgrossly negligent, after Executive has been given written notice from theCompany’s Board of Directors describing his violations and has failed to cureor commence to cure such violations within thirty (30) days; or (iii) Executive’sconviction of, or plea of nolo contendere to, a felony which the Board ofDirectors reasonably believes has had or will have a material detrimentaleffect on the Company’s reputation or business.

 

(b)                                 “Good Reason.”  For purposes of this Section 2, “GoodReason” shall mean a resignation by Executive of his employment with theCompany, or any parent or subsidiary of the Company, as a result of any of thefollowing:

 

(i)  a meaningful and detrimentalalteration of his position, his title, or the nature or status of hisresponsibilities (including his reporting responsibilities) from those ineffect immediately prior to the Change in Control.

 

(ii)  a reduction by the Company inExecutive’s annual base salary as in effect immediately prior to the Change inControl or as the same may be increased from time to time thereafter;

 

(iii) the relocation of the Company’soffice where Executive is employed as of the Change in Control to a locationwhich is more than seventy-five (75) miles away from such office, or arequirement that Executive be based more than seventy-five (75) miles away fromhis Company office as of the Change in Control.

 

(c)                                  “Change in Control.”  For purposes of this Section 2, “Changeof Control” means the direct or indirect acquisition by any person or relatedgroup of persons (other than an acquisition from or by the Company or by aCompany-sponsored employee benefit plan or by a person that directly orindirectly controls, is controlled by, or is under common control with, theCompany) of beneficial ownership (within the meaning of Rule 13d-3 of theSecurities Exchange Act of 1934) of securities possessing more than fiftypercent (50%) of the total combined voting power of the Company’s outstandingsecurities pursuant to a tender or exchange offer made directly to the Company’sstockholders, which a majority of the Company’s Board of Directors who are notaffiliated with the offeror do not recommend such stockholders accept.

 

# **3.****                                     ****Restriction on Transfer****.**Executiveshall not sell, transfer, pledge, hypothecate, or otherwise dispose of anyShares prior to the Release Date.

 

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# **4.****                                     ****Escrow of Shares****.**Promptly after the execution of thisAgreement, the Company shall cause the transfer agent for the Company’s commonstock to make a book entry record, showing ownership for the Shares in the nameof Executive subject to the terms and conditions of this Agreement. The Sharesshall be issued from common stock reserved for issuance pursuant to the 1999Plan as granted under such plan. Subject to the terms hereof, Executive shallhave all rights of a shareholder with respect to the Shares while they are heldin escrow, including without limitation the right to vote the Shares andreceive any cash dividends declared thereon. If, from time to time prior to theearlier of the Expiration Date and the Release Date, there is (a) anystock dividend, stock split, or other change in the Shares, or (b) anymerger or sale of all or substantially all of the assets or other acquisitionof the Company, any and all new, substituted, or additional securities to whichExecutive is entitled by reason of his ownership of the Shares shall be held onhis behalf by the Company’s transfer agent and included thereafter as “Shares”for purposes of this Agreement and the forfeiture restriction. A certificatefor the Shares granted pursuant to this Agreement will be issued to Executivefollowing the Release Date, or, at Executive’s election, such Shares may betransferred in book-entry form to Executive’s brokerage account (subjectto any adjustment made therein to withhold Shares to pay taxes as provided in Section 5.2below).

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# **5.****                                     ****Tax Consequences****.**

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## **5.1****                              ****Section 83(b) Election****.**Executive understands that he(and not the Company) shall be responsible for his own tax liability that may ariseas a result of the transactions contemplated by this Agreement. Executiveunderstands that Section 83 of the Internal Revenue Code of 1986, asamended (the “Code”) taxes as ordinary income the fair market value of theShares as of the date the Shares vest and the forfeiture restriction on theShares lapses. Executive understands that he may elect to be taxed at thetime the Shares are granted rather than when the Shares vest and the forfeiturerestriction lapses by filing an election under Section 83(b) of theCode with the Internal Revenue Service within 30 days from the Grant Date. Executiveunderstands that failure to file such an election in a timely manner may resultin adverse tax consequences for Executive; provided, however, that if theelection is timely filed with the IRS, Executive will be responsible for theincome taxes due on the fair market value of the Shares determined as of thedate of this Agreement. The tax payments to the IRS in connection with an 83(b) electioncannot be recovered if the Shares later fail to vest and are forfeited.Executive further understands that an additional copy of such election form shouldbe filed with his federal income tax return for the calendar year in which theGrant Date falls. Executive acknowledges that the foregoing is only a summaryof the effect of United States federal income taxation with respect to thegrant of the Shares hereunder and does not purport to be complete. Executivefurther acknowledges that the Company has directed Executive to seekindependent advice regarding the applicable provisions of the Code, the incometax laws of any municipality, state, or foreign country in which Executive may reside,and the tax consequences of Executive’s death. Executive agrees that he willexecute and deliver to the Company with this executed Agreement a copy of the Section 83(b) Electionset forth on the attached Exhibit A if Executive desires to makesuch an election within thirty days from the date of this Agreement.

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## **5.2****                              ****Withholding****.**The Company shall be required towithhold the amount of taxes required to satisfy any applicable federal, state,and local tax withholding obligations arising from either (a) Executive’s Section 83(b) election,or (b) the lapse of restrictions on the

 

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## Shares. Executive shall satisfy any such taxobligation in cash or by directing the Company to withhold from the Sharesissued to Executive as a result of the lapse of the restrictions on the Sharesthe number of whole shares of the Company’s common stock required to satisfysuch tax obligation, the number to be determined by the fair market value ofthe Shares on the date of the lapse of the restrictions on the Shares. IfExecutive elects to withhold shares of the Company’s common stock to satisfyany such tax obligation, Executive shall pay in cash any obligation thatremains after the application of whole shares that is less than the value of awhole share. It is understood that if Executive makes an 83(b) election(which can only be made within thirty days from the date of this Agreement),Executive cannot satisfy the tax obligation by directing the Company towithhold from the Shares since none of the Shares will be vested at the time ofsuch election.

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# **6.****                                     ****Representations by Executive****.**Executiverepresents that the Shares are being acquired for investment and that Executivehas no present intention to transfer, sell, or otherwise dispose of the Shares,except in compliance with applicable securities laws, and the parties agreethat the Shares are being acquired in accordance with and subject to the terms,provisions, and conditions of this Agreement.

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# **7.****                                     ****General Provisions****.**

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## **7.1****                              **This Agreement and the 1999 Planrepresent the entire agreement and understanding between the parties as to thesubject matter hereof and supersede all prior or contemporaneous agreements,whether written or oral.

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## **7.2****                              **Subject to the limitationscontained in this Agreement, all terms and conditions of the 1999 Plan areincorporated in this Agreement and made part of this Agreement as ifstated herein.

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## **7.3****                              **Neither this Agreement nor theissuance of any of the Shares shall confer on Executive any right with respectto continuance of employment or other service with the Company, or any parentor subsidiary of the Company, nor shall they interfere in any way with anyright the Company, or any parent or subsidiary of the Company, would otherwisehave to terminate or modify the terms of Executive’s employment or otherservice at any time.

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## **7.4****                              **This Agreement shall be governedby the laws of the State of Oregon without reference to its conflicts of lawprinciples.

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## **7.5****                              **No waiver, alteration, ormodification of any of the provisions of this Agreement shall be binding,unless in writing and signed by duly authorized representatives of the partieshereto. This Agreement shall be binding on, and shall inure to the benefit of,the parties and their respective successors and assigns.

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## **7.6****                              **This Agreement may beexecuted in two or more counterparts, each of which shall be deemed an originaland all of which together shall constitute one instrument.

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The parties have duly executed this Agreement effective as of the datefirst set forth above.

 

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**TheCompany:**

 

DIGIMARC CORPORATION

 

 
| By:    |   |   |
|--------|--------|--------|
| Name:  |   |   |
| Title: |   |   |
|        |        |        |  |  |

 

**Executive:**

 

 
|           |   |
|----------------|--------|
| Printed  Name: |   |   |
|                |        |  |

 

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**EXHIBIT A**

 

**SECTION 83(b) ELECTION**

 

Theundersigned taxpayer hereby elects, pursuant to Section 83(b) of theInternal Revenue Code, to include in taxpayer’s gross income for the currenttaxable year, the amount of any compensation taxable to taxpayer in connectionwith taxpayer’s receipt of the property described below:

 

1.                                       The name, address, taxpayer identificationnumber and taxable year of the undersigned are as follows:

 
| Name of Taxpayer:                     |   |   |
|---------------------------------------|--------|--------|
| Name of Spouse:                       |   |   |
| Address:                              |   |   |
|                                  |   |   |
| Identification No. of  Taxpayer: |   |   |
| Identification No. of  Spouse:   |   |   |
| Taxable Year:                         |   |   |

 

2.                                       The property with respect to which theelection is made is described as follows:

 

 shares of the Common Stock (the “Shares”) ofDigimarc Corporation, a Delaware corporation (the “Company”).

 

3.                                       The date on which the property wastransferred is: January 3, 2006.

 

4.                                       The property is subject to the followingrestrictions:

 

The Shares will be forfeitedto the Company for no consideration if the performance vesting condition is notmet or taxpayer’s employment terminates under certain circumstances before January 3,2009.

 

5.                                       The fair market value at the time oftransfer, determined without regard to any restriction other than a restrictionwhich by its terms will never lapse, of such property is: $                                                .

 

6.                                       The amount (if any) paid for such propertyis: $0.00.

 

Theundersigned has submitted a copy of this statement to the person for whom theservices were performed in connection with the undersigned’s receipt of theabove-described property. The transferee of such property is the personperforming the services in connection with the transfer of said property. Theundersigned understands that the foregoing election may not be revokedexcept with the consent of the Commissioner.

 
|           |   | Date   |   |   |
|----------------|--------|--------|--------|--------|
| Taxpayer Name: |   |   |   |
|           |   |
|           |   | Date   |   |   |
| Spouse Name:   |   |   |   |
|                |        |        |        |        |  |  |

 

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