Document:

Exhibit
10.32

 

ADVANCED
POWER TECHNOLOGY, INC.

INCENTIVE BONUS PLAN

 

 

Plan Summary

 

Certain of Advanced Power Technology, Inc.’s (APT) management employees,
including executive officers, are eligible for the Incentive Bonus Plan (Plan).

 

The bonus is based on APT’s consolidated pro forma profit before tax and
before incentive bonus expense (PBT). 
Pro forma profit before tax is the profit measure APT’s management uses
to evaluate ongoing operations and excludes such items as non-cash acquisition
related charges, restructuring activities, and deferred tax valuation charges.

 

Each Plan participant is eligible to receive a bonus up to a certain
percentage of their annual salary (Participation Level).  The Participation Level for each eligible
employee, except for the Executive Officers, is determined solely at APT
management’s discretion. The Executive Officers’ Participation Level as well as
the PBT target for 100% payout for all Plan participants is approved annually by
APT’s Board of Directors. Payouts are calculated quarterly in direct proportion
to the amount of PBT achieved in relation to the 100% PBT target set by the
Board of Directors.  The following is an
example of a quarterly payout for an eligible employee.

 

Payout Example

 

	
  Quarterly 100% PBT Target

  	
  =

  	
  $3,000,000

  	
   

  
	
  Employee Participation Level

  	
  =

  	
  10%

  	
   

  
	
  Employee Annual Salary

  	
  =

  	
  $80,000

  	
   

  
	
  Employee Quarterly 100% Bonus

  	
  =

  	
  $2,000 ($80,000 x 10%/4)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Actual PBT for a Quarter

  	
  =

  	
  $1,500,000

  	
   

  
	
  Percentage of Target

  	
  =

  	
  50%
  ($1,500,000/$3,000,000)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Employee Quarterly Bonus Payout

  	
  =

  	
  $1,000 ($2,000 x 50%)

  	
   

  

 

 

Executive Officer Participation Level

 

The Participation Level of APT’s executive officers are as follows:

 

	
  Name

  	
   

  	
  Position

  	
   

  	
  Participation
  Level

  
	
  Patrick P.H. Sireta

  	
   

  	
  President, Chief Executive Officer and Chairman of
  the Board of Directors

  	
   

  	
  87.5%

  
	
  Russell J. Crecraft

  	
   

  	
  Executive Vice President & Chief Operating
  Officer

  	
   

  	
  50.0%

  
	
  Greg M. Haugen

  	
   

  	
  Vice President, Finance and Administration, Chief
  Financial Officer and Secretary

  	
   

  	
  50.0%

  
	
  John I. Hess

  	
   

  	
  Vice President, Switching Power Products

  	
   

  	
  50.0%

  
	
  Thomas A. Loder

  	
   

  	
  Vice President, Sales and Marketing

  	
   

  	
  50.0%

  
	
  Dah Wen Tsang

  	
   

  	
  Vice President, Engineering and Research and
  Development

  	
   

  	
  50.0%

  
	
  Charles C. Leader, III

  	
   

  	
  Vice President, Military, Avionics, and Radar Products

  	
   

  	
  35.0%

  
	
  George J. Krausse, III

  	
   

  	
  Vice President, Commercial RF Products

  	
   

  	
  25.0%Exhibit
10.33

 

ADVANCED
POWER TECHNOLOGY, INC.

SUMMARY OF NON-EMPLOYEE DIRECTOR
COMPENSATION

 

 

Cash Compensation

 

Directors who are not employees of Advanced Power Technology, Inc. are
paid cash compensation as follows:

 

	
  Fee Type

  	
   

  	
  Role

  	
   

  	
  Compensation

  	
   

  
	
  Annual Retainer

  	
   

  	
  Board Member

  	
   

  	
  $

  	
  10,000

  	
   

  
	
  Board Meeting Attendance

  	
   

  	
  Board Member

  	
   

  	
  $

  	
  1,000

  	
   

  
	
  Committee Meeting Attendance

  	
   

  	
  Audit Committee Chair

  	
   

  	
  $

  	
  1,500

  	
   

  
	
  Committee Meeting Attendance

  	
   

  	
  Audit Committee Member

  	
   

  	
  $

  	
  1,000

  	
   

  
	
  Committee Meeting Attendance

  	
   

  	
  Compensation Committee
  Chair

  	
   

  	
  $

  	
  750

  	
   

  
	
  Committee Meeting Attendance

  	
   

  	
  Compensation Committee
  Member

  	
   

  	
  $

  	
  500

  	
   

  
	
  Committee Meeting Attendance

  	
   

  	
  Nominating Committee Chair

  	
   

  	
  $

  	
  750

  	
   

  
	
  Committee Meeting Attendance

  	
   

  	
  Nominating Committee
  Member

  	
   

  	
  $

  	
  500

  	
   

  

 

Directors are reimbursed for reasonable expenses incurred for board and
committee meeting attendance.

 

Stock Compensation

 

Non-employee directors participate in Advanced Power Technology, Inc.’s
1995 Stock Option Plan and the 2005 Equity Incentive Plan.  Non-employee directors receive options to
purchase Advanced Power Technology, Inc.’s common stock as follows:

 

	
  Type of Grant

  	
   

  	
  Date of Grant

  	
   

  	
  Number of Shares

  	
   

  	
  Exercise Price

  	
   

  	
  Vesting Schedule(1)

  	
   

  
	
  Initial Option

  Grant

  	
   

  	
  Date of initial

  election to board

  	
   

  	
  20,000

  	
   

  	
  Fair market value

  of common stock

  on date of grant

  	
   

  	
  50%
  per year

  	
   

  
	
  Annual Board

  Member Grant

  	
   

  	
  August 1st of

  each year

  	
   

  	
  5,000

  	
   

  	
  Fair market value

  of common stock

  on date of grant

  	
   

  	
  50%
  per year

  	
   

  
	
  Annual

  Committee

  Member Grant

  	
   

  	
  August 1st of

  each year

  	
   

  	
  2,000

  	
   

  	
  Fair market value

  of common stock

  on date of grant

  	
   

  	
  50%
  per year

  	
   

  

(1)  Options granted expire upon
the earlier of a) 90 days after the optionee ceases to be a director of Advanced
Power Technology, Inc. or b) 10 years from the date of grant.Exhibit 10.21

 

DIGIMARC CORPORATION 1999 STOCK
INCENTIVE PLAN

 

NOTICE OF
STOCK OPTION AWARD

	
  Grantee’s Name and
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

You
have been granted an option to purchase shares of Common Stock, subject to the
terms and conditions of this Notice of Stock Option Award (the “Notice”), the
Digimarc 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.  Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined 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 other
limitations set forth in this Notice, the Plan and the Option Agreement, the
Option may be exercised, in whole or in part, in accordance with the following
schedule:

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

During any
authorized leave of absence, the vesting of the Option as provided in this
schedule shall cease after the leave of absence exceeds a period of ninety (90)
days.  Vesting of the Option shall resume
upon the Grantee’s termination of the leave of absence and return to service to
the Company or a Related Entity.

 

1

 

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

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

	
  Digimarc
  Corporation,

  
	
  a Delaware
  corporation

  
	
  By:

  	
   

  
	
  Title:

  	
   

  
			

 

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES
SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE
GRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED
THE 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 WITH
RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE’S CONTINUOUS SERVICE, NOR
SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE’S RIGHT OR THE RIGHT OF THE
GRANTEE’S EMPLOYER TO TERMINATE GRANTEE’S CONTINUOUS SERVICE, WITH OR WITHOUT
CAUSE.

The Grantee acknowledges receipt of a copy of the Plan
and the Option Agreement, and represents that he or she is familiar with the
terms and provisions thereof, and hereby accepts the Option subject to all of
the terms and provisions hereof and thereof. 
The Grantee has reviewed this Notice, the Plan, and the Option Agreement
in their entirety, has had an opportunity to obtain the advice of counsel prior
to executing this Notice, and fully understands all provisions of this Notice,
the Plan and the Option Agreement.  The
Grantee hereby agrees that all disputes arising out of or relating to this
Notice, the Plan and the Option Agreement shall be resolved in accordance with
Section 15 of the Option Agreement.  The
Grantee further agrees to notify the Company upon any change in the residence
address indicated in this Notice.

	
  Dated: 

  	
   

  	
   

  	
  Signed: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Grantee

  	
   

  

 

2

 

	
  Award Number: 

  	
   

  

 

DIGIMARC CORPORATION 1999 STOCK INCENTIVE PLAN

 

STOCK OPTION AWARD AGREEMENT

1.             Grant
of Option.  Digimarc Corporation, a
Delaware 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 set
forth in the Notice (the “Exercise Price”) subject to the terms and provisions
of the Notice, this Stock Option Award Agreement (the “Option Agreement”) and
the 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 shall
have the same defined meanings in this Option Agreement.

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

2.             Exercise
of Option.

(a)           Right to Exercise.  The Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice and with the
applicable provisions of the Plan and this Option Agreement.  The Option shall be subject to the provisions
of Section 4 relating to the exercisability or termination of the Option in the
event of a Corporate Transaction, Change in Control or Related Entity
Disposition.  No partial exercise of the
Option may be for less than the lesser of five percent (5%) of the total number
of Shares subject to the Option or the remaining number of Shares subject to
the Option.  In no event shall the
Company issue fractional Shares.

(b)           Method of
Exercise.  The Option shall be
exercisable only by delivery of an Exercise Notice (attached as Exhibit A)
which shall state the election to exercise the Option, the whole number of
Shares in respect of which the Option is being exercised, such other
representations and agreements as to the holder’s investment intent with
respect to such Shares and such other provisions as may be required by the Plan
Administrator.  The Exercise Notice shall
be 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 Plan
Administrator to the Company accompanied 

1

 

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

(c)           Taxes.  No Shares will be delivered to the Grantee or
other person pursuant to the exercise of the Option until the Grantee or other
person has made arrangements acceptable to the Plan Administrator for the
satisfaction of applicable income tax, employment tax, and social security tax
withholding obligations, including, without limitation, obligations incident to
the receipt of Shares or the disqualifying disposition of Shares received on
exercise of an Incentive Stock Option. 
Upon exercise of the Option, the Company or the Grantee’s employer may
offset or withhold (from any amount owed by the Company or the Grantee’s
employer to the Grantee) or collect from the Grantee or other person an amount
sufficient to satisfy such tax obligations and/or the employer’s withholding
obligations.

3.             Definitions.  As used herein, the following definitions
shall apply:

(a)   “Cause” means,
with respect to the termination by the Company or a Related Entity of the
Grantee’s Continuous Service, that such termination is for “Cause” as such term
is expressly defined in a then-effective written agreement between the Grantee
and the Company or such Related Entity, or in the absence of such
then-effective written agreement and definition, is based on, in the
determination of the Plan Administrator, the Grantee’s:  (i) refusal or failure to act in
accordance with any specific, lawful direction or order of the Company or a
Related Entity; (ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability); (iii) performance of any
act or failure to perform any act in bad faith and to the detriment of the
Company or a Related Entity; (iv) dishonesty, intentional misconduct or
material breach of any agreement with the Company or a Related Entity; or (v)
commission of a crime involving dishonesty, breach of trust, or physical or
emotional harm to any person.  At least
30 days prior to the termination of the Grantee’s Continuous Service pursuant
to (i) or (ii) above, the Plan Administrator shall provide the Grantee with
notice of the Company’s or such Related Entity’s intent to terminate, the
reason therefor, and an opportunity for the Grantee to cure such defects in his
or her service to the Company’s or such Related Entity’s satisfaction.  During this 30 day (or longer) period, no
Award 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 Company
effected through either of the following transactions:

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

 

2

 

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

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

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

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

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

(ii)           the sale, transfer or other
disposition of all or substantially all of the assets of the Company (including
the capital stock of the Company’s subsidiary corporations) in connection with
the complete liquidation or dissolution of the Company;

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

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

(e)   “Good Reason” means the occurrence
after a Corporate Transaction, Change in Control or a Related Entity
Disposition of any of the following events or conditions unless consented to by
the Grantee:

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

 

3

 

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

(ii)           reduction in the Grantee’s base
salary to a level below that in effect at any time within six (6) months
preceding the date of a Corporate Transaction, Change in Control or Related
Entity Disposition or at any time thereafter; or

(iii)          requiring the Grantee to be based at
any place outside a 50-mile radius from the Grantee’s job location or residence
prior to the Corporate Transaction, Change in Control or Related Entity
Disposition, except for reasonably required travel on business which is not
materially greater than such travel requirements prior to the Corporate
Transaction, Change in Control or Related Entity Disposition.

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

4.             Corporate
Transactions/Changes in Control/Related Entity Dispositions.

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

 

4

 

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

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

(c)   Effective upon the consummation of a Related
Entity Disposition, for purposes of this Option, the Continuous Service of each
Grantee who is at the time engaged primarily in service to the Related Entity
involved in such Related Entity Disposition shall be deemed to terminate and
this Option automatically shall become fully vested and exercisable and be
released from any restrictions on transfer (other than transfer restrictions
under Section 10) and repurchase or forfeiture rights for all of the Shares at
the time represented by this Option and be exercisable in accordance with the
terms 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 successor
entity or its Parent.  In addition, such
Continuous Service shall not be deemed to terminate and this Option shall not
so fully vest and be exercisable and released from such limitations if and to
the extent:  (i) this Option is, in
connection with the Related Entity Disposition, either to be assumed by the
successor entity or its parent or to be replaced with a comparable Option with
respect to interests in the successor entity or its parent or (ii) this
Option is to be replaced with a cash incentive program of the successor entity
which preserves the compensation element of this Option existing at the time of
the Related Entity Disposition and provides for subsequent payout in accordance
with the Vesting Schedule set forth in the Notice; provided, however, that this
Option (if assumed), the replacement option (if replaced), or the cash
incentive program automatically shall become fully vested, exercisable and
payable and be released from any restrictions on transfer (other than transfer
restrictions under Section 10) and repurchase or forfeiture rights immediately
upon termination of the Grantee’s Continuous Service (substituting the
successor employer entity for “Company or Related Entity” for the definition of
“Continuous Service”) if such Continuous Service is terminated by the successor
entity 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 the
Plan Administrator.

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

 

5

 

5.             Method
of Payment.  Payment of the Exercise
Price shall be by any of the following, or a combination thereof, at the
election of the Grantee; provided, however, that such exercise method does not
then violate any Applicable Law and, provided further, that the portion of the
Exercise Price equal to the par value of the Shares must be paid in cash or
other legal consideration permitted by the Delaware General Corporation Law:

(a)                                  cash;

(b)                                 check;

(c)           surrender
of Shares or delivery of a properly executed form of attestation of ownership
of Shares as the Plan Administrator may require (including withholding of
Shares otherwise deliverable upon exercise of the Option) which have a Fair
Market Value on the date of surrender or attestation equal to the aggregate
Exercise Price of the Shares as to which the Option is being exercised (but
only to the extent that such exercise of the Option would not result in an
accounting compensation charge with respect to the Shares used to pay the
exercise price); or

(d)           payment
through a broker-dealer sale and remittance procedure pursuant to which the
Grantee (i) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased Shares and (ii) shall provide written directives to the
Company to deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction.

6.             Restrictions
on Exercise.  The Option may not be
exercised if the issuance of the Shares subject to the Option upon such exercise would constitute a violation of any Applicable
Laws.  In addition, the Option, if an
Incentive Stock Option, may not be exercised until such time as the Plan has
been approved by the stockholders of the Company.

7.             Termination or Change of
Continuous Service.  In the event the
Grantee’s Continuous Service terminates, the Grantee may, to the extent
otherwise 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 exercised
later than the Expiration Date set forth in the Notice.  In the event of the Grantee’s change in
status from Employee, Director or Consultant to any other status of Employee,
Director or Consultant, the Option shall remain in effect and, except to the
extent otherwise determined by the Plan Administrator, continue to vest;
provided, however, that with respect to any Incentive Stock Option that shall
remain in effect after a change in status from Employee to Director or
Consultant, such Incentive Stock Option shall cease to be treated as an
Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on
the day three (3) months and one (1) day following such change in status.  Except as provided in Sections 8
and 9 below, to the extent that the Grantee is not entitled to exercise
the Option on the Termination Date, or if the Grantee does not exercise the
Option within the Post-Termination Exercise Period, the
Option shall terminate.

 

6

 

8.           Disability
of Grantee.  In the event the Grantee’s
Continuous Service terminates as a result of his or her Disability, the Grantee
may, but only within twelve (12) months from the Termination Date (and in no
event later than the Expiration Date), exercise the Option to the extent he or
she was otherwise entitled to exercise it on the Termination Date; provided,
however, that if such Disability is not a “disability” as such term is defined
in 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 Stock
Option and shall be treated as a Non-Qualified Stock Option on the day
three (3) months and one (1) day following the Termination Date.  To the extent that the Grantee is not
entitled to exercise the Option on the Termination Date, or if the Grantee does
not exercise the Option to the extent so entitled within the time specified
herein, the Option shall terminate.

9.             Death
of Grantee.  In the event of the
termination of the Grantee’s Continuous Service as a result of his or her
death, or in the event of the Grantee’s death during the Post-Termination
Exercise Period or during the twelve (12) month period following the Grantee’s
Termination of Continuous Service as a result of his or her Disability, the
Grantee’s estate, or a person who acquired the right to exercise the Option by
bequest or inheritance, may exercise the Option, but only to the extent the
Grantee 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 Expiration
Date).  To the extent that the Grantee is
not entitled to exercise the Option on the date of death, or if the Option is
not exercised to the extent so entitled within the time specified herein, the
Option shall terminate.

10.           Transferability
of Option.  The Option, if an Incentive
Stock Option, may not be transferred in any manner other than by will or by the
laws of descent and distribution and may be exercised during the lifetime of
the Grantee only by the Grantee; provided, however, that the Grantee may
designate a beneficiary of the Grantee’s Incentive Stock Option in the event of
the Grantee’s death on a beneficiary designation form provided by the Plan
Administrator.  The Option, if a
Non-Qualified Stock Option may be transferred to any person by will and by the
laws of descent and distribution. 
Non-Qualified Stock Options also may be transferred during the lifetime
of the Grantee by gift and pursuant to a domestic relations order to members of
the Grantee’s Immediate Family to the extent and in the manner determined by the
Plan Administrator.  The terms of the Option shall be
binding upon the executors, administrators, heirs, successors and transferees
of the Grantee.

11.           Term
of Option.  The Option may be
exercised no later than the Expiration Date set forth in the Notice or such
earlier date as otherwise provided herein.

12.           Tax
Consequences.  Set forth below is a
brief summary as of the date of this Option Agreement of some of the federal
tax consequences of exercise of the Option and disposition of the Shares.  THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.  THE GRANTEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

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

 

7

 

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

(b)           Exercise
of Incentive Stock Option Following Disability.  If the Grantee’s Continuous Service
terminates as a result of Disability that is not total and permanent disability
as defined in Section 22(e)(3) of the Code, to the extent permitted on the date
of termination, the Grantee must exercise an Incentive Stock Option within
three (3) months of such termination for the Incentive Stock Option to be
qualified as an Incentive Stock Option.

(c)           Exercise
of Non-Qualified Stock Option.  On
exercise of a Non-Qualified Stock Option, the Grantee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to
the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price.  If the
Grantee is an Employee or a former Employee, the Company will be required to
withhold from the Grantee’s compensation or collect from the Grantee and pay to
the applicable taxing authorities an amount in cash equal to a percentage of
this compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

(d)           Disposition
of Shares.  In the case of a
Non-Qualified Stock Option, if Shares are held for more than one year, any gain
realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes and subject to tax at a maximum
rate of 20%.  In the case of an Incentive
Stock Option, if Shares transferred pursuant to the Option are held for more
than one year after receipt of the Shares and are disposed more than two years
after the Date of Award, any gain realized on disposition of the Shares also
will be treated as capital gain for federal income tax purposes and subject to
the same tax rates and holding periods that apply to Shares acquired upon
exercise of a Non-Qualified Stock Option. 
If Shares purchased under an Incentive Stock  Option are disposed of prior to the expiration
of such one-year or two-year periods, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the difference between the Exercise Price and the
lesser 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 Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and the Grantee with respect to the subject
matter hereof, and may not be modified adversely to the Grantee’s interest
except by means of a writing signed by the Company and the Grantee.  Nothing in the Notice, the Plan and this
Option Agreement (except as expressly provided therein) is intended to confer
any rights or remedies on any persons other than the parties.  The Notice, the Plan and this Option
Agreement are to be construed in accordance with and governed by the internal
laws of the State of Oregon without giving
effect to any choice of law rule that would cause the application of the laws
of any jurisdiction other than the internal laws of the State of 

 

8

 

Oregon
to the rights and duties of the parties. 
Should any provision of the Notice, the Plan or this Option Agreement 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 the other provisions
shall nevertheless remain effective and shall remain enforceable.

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

15.           Dispute
Resolution  The provisions of this
Section 15 shall be the exclusive means of resolving disputes arising out of or
relating to the Notice, the Plan and this Option Agreement.  The Company, the Grantee, and the Grantee’s
assignees pursuant to Section 10 (the “parties”) shall attempt in good faith to
resolve any disputes arising out of or relating to the Notice, the Plan and
this Option Agreement by negotiation between individuals who have authority to
settle the controversy.  Negotiations
shall be commenced by either party by notice of a written statement of the
party’s position and the name and title of the individual who will represent
the party.  Within thirty (30) days of
the written notification, the parties shall meet at a mutually acceptable time
and place, and thereafter as often as they reasonably deem necessary, to
resolve the dispute.  If the dispute has
not been resolved by negotiation, the parties agree that any suit, action, or
proceeding arising out of or relating to the Notice, the Plan or this Option
Agreement 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 of
Oregon, does not have jurisdiction over the dispute, the parties agree that any
suit, action, or proceeding arising out of or related to the Notice, the Plan
or this Option Agreement shall be brought before the Oregon Circuit Court, 4th
Judicial District, located in Portland, Oregon, and that the parties shall
submit 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 A
JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.  If any one or more provisions of this Section
15 shall for any reason be held invalid or unenforceable, it is the specific
intent of the parties that such provisions shall be modified to the minimum
extent necessary to make it or its application valid and enforceable.

16.           Notices.  Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States mail by certified mail (if the
parties are within the United States) or upon deposit for delivery by an
internationally recognized express mail courier service (for international
delivery of notice), with postage and fees prepaid, addressed to the other
party at its address as shown beneath its signature in the Notice, or to such
other address as such party may designate in writing from time to time to the
other party.

 

9

 

EXHIBIT A

DIGIMARC
CORPORATION 1999 STOCK INCENTIVE PLAN

 

EXERCISE NOTICE

Digimarc
Corporation

9405 SW Gemini Drive

Beaverton, Oregon 97008

 

Attention:
Secretary

1.             Exercise
of Option.  Effective as of today,                            ,
       the undersigned (the “Grantee”) hereby
elects 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 from
time to time (the “Plan”) and the [  ] Incentive
[  ] Non-Qualified Stock Option Award Agreement (the “Option
Agreement”) and Notice of Stock Option Award (the “Notice”) dated                             ,
                .  Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Exercise
Notice.

2.             Representations
of the Grantee.  The Grantee
acknowledges that the Grantee has received, read and understood the Notice, the
Plan, and the Option Agreement and agrees to abide by and be bound by their
terms and conditions.

3.             Rights
as Stockholder.  Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Shares, notwithstanding the
exercise of the Option.  The Company
shall issue (or cause to be issued) such stock certificate promptly after the
Option is exercised.  No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 10 of
the Plan.

4.             Delivery
of Payment.  The Grantee herewith delivers
to the Company the full Exercise Price for the Shares, which, to the extent
selected, shall be deemed to be satisfied by use of the broker-dealer sale and
remittance procedure to pay the Exercise Price provided in Section 5(d) of
the Option Agreement.

5.             Tax Consultation.  The Grantee understands that the Grantee may
suffer adverse tax consequences as a result of the Grantee’s purchase or
disposition of the Shares.  The Grantee
represents that the Grantee has consulted with any tax consultants the Grantee
deems advisable in connection with the purchase or disposition of the Shares
and that the Grantee is not relying on the Company for any tax advice

 

1

 

6.             Taxes.  The Grantee agrees to satisfy all applicable
federal, state and local income and employment tax withholding obligations and
herewith delivers to the Company the full amount of such obligations or has
made arrangements acceptable to the Company to satisfy such obligations.  In the case of an Incentive Stock Option, the
Grantee also agrees, as partial consideration for the designation of the Option
as an Incentive Stock Option, to notify the Company in writing within
thirty (30) days of any disposition of any shares acquired by exercise of
the Option if such disposition occurs within two (2) years from the Award
Date or within one (1) year from the date the Shares were transferred to
the Grantee.  If the Company is required
to satisfy any federal, state or local income or employment tax withholding
obligations as a result of such an early disposition, the Grantee agrees to
satisfy the amount of such withholding in a manner that the Plan Administrator
prescribes.

7.             Successors
and Assigns.  The Company may assign
any 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 of
the Company.  This Exercise Notice shall
be binding upon the Grantee and his or her heirs, executors, administrators,
successors and assigns.

8.             Headings.  The captions used in this Exercise
Notice  are inserted for convenience and
shall not be deemed a part of this agreement for construction or
interpretation.

9.             Dispute
Resolution.  The provisions of
Section 15 of the Option Agreement shall be the exclusive means of resolving
disputes arising out of or relating to this Exercise Notice.

10.           Governing
Law; Severability.  This Exercise
Notice is to be construed in accordance with and governed by the internal laws
of the State of Oregon without giving effect to any choice of law rule that
would cause the application of the laws of any jurisdiction other than the
internal laws of the State of Oregon to the rights and duties of the
parties.  Should any provision of this
Exercise 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 the
other provisions shall nevertheless remain effective and shall remain
enforceable.

11.           Notices.  Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States mail by certified mail, (if the
parties are within the United States) or upon deposit for delivery by an internationally
recognized express mail courier service (for international delivery of notice)
with postage and fees prepaid, addressed to the other party at its address as
shown below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.

12.           Further
Instruments.  The parties agree to
execute such further instruments and to take such further action as may be
reasonably necessary to carry out the purposes and intent of this agreement.

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

 

2

 

all
prior undertakings and agreements of the Company and the Grantee with respect
to the subject matter hereof, and may not be modified adversely to the Grantee’s
interest except by means of a writing signed by the Company and the
Grantee.  Nothing in the Notice, the
Plan, the Option Agreement and this Exercise Notice (except as expressly
provided therein) is intended to confer any rights or remedies on any persons
other than the parties.  

	
  Submitted by:

  	
   

  	
  Accepted by:

  
	
   

  	
   

  	
   

  
	
  GRANTEE:

  	
   

  	
  DIGIMARC
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  9405 SW Gemini Drive 

  
	
   

  	
   

  	
  Beaverton, Oregon 97008

  
					

 

3

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