Document:

Exhibit 10.3

 

RESTRICTED STOCK AGREEMENT

 

This Agreement
(the “Agreement”) is made as of
the 30th day of September, 2008 (“Date
of Award”), between Medarex, Inc., a New Jersey corporation
(the “Company”), and Howard H.
Pien (the “Grantee”).  In consideration of the agreements set forth
below, the Company and the Grantee agree as follows:

 

1.             Grant.  The following restricted stock award (the “Award”) of shares of the Company’s common
stock, $.01 par value per share (“Common
Stock”), is hereby granted by the Company to the Grantee subject to (i) the
terms and conditions hereof, (ii) the provisions of the Medarex, Inc.
2005 Equity Incentive Plan, as amended (the “Plan”),
a copy of which is attached hereto as Exhibit A and the terms of
which are incorporated by reference herein, (iii) the terms and conditions
of the Grantee’s employment agreement with the Company dated May 16, 2007
(the “Employment Agreement”), and (iv) the
receipt by the Company of a stock power endorsed in blank by the Grantee, in
the form attached hereto as Exhibit B:

 

50,000 shares (the “Award Shares”).

 

The term “Change in Control” as used herein shall
have the meaning set forth in the Employment Agreement and not in the
Plan.  All capitalized terms used herein
and not otherwise defined shall have the meanings set forth in the Plan.  In the event of any conflict between the
provisions of this Agreement, the Employment Agreement and those of the Plan,
the provisions of the Plan shall control.

 

2.             Transfer
Restrictions.  None of the Award
Shares shall be sold, assigned, pledged or otherwise transferred, voluntarily
or involuntarily, by the Grantee, except in accordance with the terms of this
Agreement and the Plan.

 

3.             Release of
Restrictions.

 

(a)           The restrictions set
forth in Section 2 above shall lapse as follows, provided that the Grantee
remains employed by the Company from the Date of Award  through the applicable date:

 

The Award
Shares shall vest on June 14, 2012; provided,
however, that if the price of the Common Stock equals or exceeds $26
per share for the 20 consecutive trading days immediately preceding June 14,
2011, then any Award Shares not yet vested will vest on June 14, 2011.

 

(b)           In the event of a
Change in Control, any restrictions on the Award Shares shall immediately lapse
upon the effective date of the Change in Control.

 

(c)           In the event the
Grantee’s employment with the Company is terminated prior to the date the
restrictions lapse, as provided in Section 3(a), due to the Grantee’s
retirement, permanent disability, or death, or in cases of special
circumstances, the

 

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Committee may, in its sole discretion, when it finds that a waiver
would be in the best interests of the Company, waive in whole or in part any or
all remaining restrictions with respect to the Grantee’s Award Shares.

 

4.             Forfeiture.  Except as set forth in Section 3 above,
in the event the Grantee’s employment with the Company is terminated for any
reason prior to the date the restrictions lapse as provided in Section 3
above, the Award Shares for which restrictions have not lapsed shall be
forfeited to the Company.

 

5.             Tender
Offer/Merger; Adjustment of Shares. 
Notwithstanding anything contained herein to the contrary:

 

(a)           Award Shares (i) may
be tendered in response to a tender offer for or a request or invitation to
tenders of greater than 50% of the outstanding Common Stock of the Company or (ii) may
be surrendered in a merger, consolidation or share exchange involving the
Company; provided, however, that
in each case, in the event such tender offer, request for tender, merger,
consolidation or share exchange does not result in a Change in Control, the
securities or other consideration received in exchange therefore shall
thereafter be subject to the restrictions and conditions set forth herein.

 

(b)           In the event of any
change in the outstanding Common Stock resulting from a subdivision or
consolidation of shares, whether through reorganization, recapitalization,
share split, reverse share split, share distribution or combination of shares
or the payment of a share dividend, the Award Shares shall be treated in the
same manner in any such transaction as other Common Stock.  Any Common Stock or other securities received
by the Grantee with respect to the Award Shares in any such transaction shall
be subject to the restrictions and conditions set forth herein.

 

6.             Rights as
Stockholder.  The Grantee shall be
entitled to all of the rights of a stockholder with respect to the Award Shares
held in escrow including the right to vote such shares and to receive dividends
and other distributions payable with respect to such shares since the Date of
Award, even if some or all of such Award Shares have not yet vested and been
released from the restrictions set forth in Section 2 above.

 

7.             Escrow of Share
Certificates.  Certificates for the
Award Shares shall be issued in the Grantee’s name and shall be held in escrow
by the Company until all restrictions lapse or such shares are forfeited as
provided herein; provided, however, that the terms of such escrow shall make
allowance for the transactions contemplated by Section 5 above.  A certificate or certificates representing
the Award Shares as to which restrictions have lapsed shall be delivered to the
Grantee upon such lapse, provided that any withholding obligations of the
Company are satisfied pursuant to Section 9 below.

 

8.             Government
Regulations.  Notwithstanding
anything contained herein to the contrary, the Company’s obligation to issue or
deliver certificates evidencing the Award Shares shall be subject to all
applicable laws, rules and regulations and to such approvals by any
governmental agencies or national securities exchanges as may be required.

 

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9.             Withholding Taxes.  The Company shall have the right to require
the Grantee to remit to the Company, or to withhold from other amounts payable
to the Grantee, as compensation or otherwise, an amount sufficient to satisfy
all federal, state and local withholding tax requirements which may arise in
connection with this Award.

 

10.           Tax Consequences.   The acquisition and vesting of the Award
Shares may have adverse tax consequences to the Grantee that may be avoided or
mitigated by filing an election under Section 83(b) of the Code.  Such election must be filed within thirty
(30) days after the date this Award is granted. 
The Grantee hereby acknowledges that it is his responsibility, and not
the Company’s, to file a timely election under Section 83(b) of the
Code, even if the Grantee requests the Company to make such filing on his
behalf.

 

11.           Award not a
Service Contract.  This Award is not
an employment or service contract, and nothing in this Award shall be deemed to
create in any way whatsoever any obligation on the Grantee’s part to continue
in the employ of or service to the Company, or on the part of the Company to
continue the Grantee’s employment or service.

 

12.           Governing Law.  This Agreement shall be construed under the
laws of the State of New Jersey, without regard to its conflicts of laws
principles.

 

IN WITNESS
WHEREOF, the Company has caused this Award to be granted on the date first
above written.

 

	
   

  	
  Medarex, Inc.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christian S. Schade

  
	
   

  	
   

  	
   Christian S. Schade,

  
	
   

  	
   

  	
   Senior Vice President and

  
	
   

  	
   

  	
   Chief Financial Officer

  
	
  Accepted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Howard H. Pien

  	
   

  	
   

  
	
  Howard H.
  Pien – Grantee

  	
   

  	
   

  
					

 

3Exhibit 10.1

 

EMPLOYMENT
AGREEMENT

 

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

 

WITNESSETH:

 

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

 

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

 

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

 

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

 

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

 

1.             DEFINITIONS.

 

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

 

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

 

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

 

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

 

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

 

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

 

2.             PERIOD OF EMPLOYMENT.

 

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

 

3.             DUTIES AND RESPONSIBILITIES.

 

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

 

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

 

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

 

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

 

4.             COMPENSATION AND BENEFITS.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5.             TERMINATION.

 

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

 

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

 

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

 

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

 

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

 

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

 

6.             EFFECTS OF TERMINATION.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.             EXCISE TAXES.

 

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

 

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

 

8

 

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

 

8.             TERMINATION OBLIGATIONS.

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

9.             PROPRIETARY INFORMATION AND COVENANT NOT TO COMPETE.

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

10.          RELEASE.

 

In consideration for Digimarc agreeing to make the
post-termination payments to Executive, Executive hereby releases Digimarc and
Old Digimarc from any and all claims of any kind, known or unknown, arising out
of or related to Executive’s employment by Old Digimarc, excluding worker’s compensation
claims and claims for unemployment compensation, and agrees not to bring a
claim or lawsuit based on or related to the released claims.  The claims Executive is releasing include,
without limitation, all claims that Executive may have under that certain
Employment Agreement dated July 16, 2001 between Digimarc and Executive,
for breach of contract, for “torts,” (civil wrongs or injuries), or under Title
VII of the Civil Rights Act of 1964; the Age Discrimination in 

 

11

 

Employment Act, except that this Agreement does not
release any claims under that Act that may arise after the signing of this
Agreement; the Equal Pay Act; the Americans with Disabilities Act; and all
other applicable federal, state or local laws. 
The release Executive is giving releases not only all claims Executive
may have against Digimarc and Old Digimarc, but also all claims Executive may
have against their  respective past and
present shareholders, officers, directors, agents, employees, representatives,
attorneys, parents, subsidiaries, affiliates, benefit plans, predecessors,
successors, transferees and assigns.  It
also releases such claims of anyone else Executive can bind in this Agreement,
such as Executive’s heirs and assigns. 
Executive understands that Executive is releasing potentially unknown
claims, and that Executive has limited knowledge with respect to some of the
claims being released.  Executive agree
that this release is fairly and knowingly made. 
Executive assume the risk of any mistake in entering into this
Agreement.  Excluded are claims under
this Agreement and any future claims under employee benefit plans in which
Executive may have participated.  In
addition, this Agreement is not intended to release any claims which as a
matter of law or public policy cannot be released.

 

11.          NOTICES.

 

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

 

12.          AMENDMENTS.

 

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

 

13.          ENTIRE AGREEMENT.

 

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

 

12

 

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

 

14.          CAPTIONS.

 

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

 

15.          BINDING EFFECT.

 

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

 

16.          SEVERABLE PROVISIONS.

 

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

 

17.          GOVERNING LAW.

 

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

 

18.          INTERPRETATION.

 

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

 

19.          EMPLOYEE ACKNOWLEDGEMENT.

 

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

 

13

 

[SIGNATURE PAGE
FOLLOWS]

 

14

 

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

 

	
  DIGIMARC CORPORATION

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert P. Chamness

  	
   

  	
  /s/ Bruce Davis

  
	
  Its:

  	
  Robert P. Chamness

  EVP, CLO & Secretary

  	
   

  	
  BRUCE DAVIS

  

 

15

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