Document:

Exhibit 4.1

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION.  NEITHER THESE SECURITIES
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE MAY BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS, AND IN THE
CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES
NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE
LAWS.

 

DIGIMARC
CORPORATION

 

WARRANT TO
PURCHASE SHARES OF COMMON STOCK

 

	
  Warrant No.
  [             ]

  	
  Dated: August [     ], 2003

  

 

Digimarc
Corporation, a Delaware corporation (the “Company”), hereby certifies that, for
value received, [               ]
(the “Holder”), is entitled to purchase from the Company up to a total of [                ]
shares of common stock, $0.001 par value per share (“Common Stock”), of the
Company (each such share, a “Warrant Share” and all such shares, the “Warrant
Shares”) at an exercise price equal to $14.00 per share (as adjusted from time
to time as provided in Section 8, the “Exercise Price”), at any time and from
time to time from and including the date the Registration Statement is declared
effective by the Commission (the “Effective Date”) and through and including
the 15th calendar day (or if such calendar day is a Saturday, Sunday or federal
holiday, the next business day) after the Effective Date (the “Expiration
Date”), subject to the terms and conditions herein, provided, however, that if
there is a Suspension of the Registration Statement following the Effective
Date and prior to the original Expiration Date, such original Expiration Date
shall be automatically extended until such time as the Suspension is terminated
and, thereafter, the Expiration Date, for purposes of this Warrant, shall be
such date following the number of days remaining in the original exercise
period as of the date of the Suspension. This Warrant to Purchase Shares of
Common Stock (this “Warrant”) is one of a series of similar Warrants issued
pursuant to those certain Purchase Agreements, each dated as of the date hereof,
by and between the Company and each of the purchasers whose names are set forth
on the signature pages thereof (hereinafter, the “Purchase Agreement”).

 

1.     Definitions.  In addition to the terms defined elsewhere
in this Warrant, capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Purchase Agreement.

 

1

 

2.     Registration
of Warrant.  The Company shall
register this Warrant, upon records to be maintained by the Company for that
purpose, in the name of the Holder. The Company may deem and treat the
registered Holder as the absolute owner of this Warrant for the purpose of any
exercise hereof and for all other purposes.

 

3.     Exercise
and Duration of Warrant.

 

(a)   Subject
to the other terms and conditions contained herein, this Warrant shall be
exercisable by the registered Holder at any time and from time to time on or
after the Effective Date and through and including the Expiration Date.  At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value and this Warrant shall be terminated and no
longer outstanding.

 

(b)   The
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto (the “Exercise Notice”), completed and duly
signed, (ii) payment of the Exercise Price for the number of Warrant Shares as
to which this Warrant is being exercised, and (iii) the original Warrant,
and the date such items are delivered to the Company (as determined in
accordance with the notice provisions hereof) is an “Exercise Date.” The
delivery by the Holder of the Exercise Notice, the applicable Exercise Price
and the Warrant as provided above shall constitute the Holder’s certification
to the Company that its representations contained in Sections 5(a)(i)-(viii),
(b), (d), (e), (f), (h) and (i) of the Purchase Agreement as to the Warrant
Shares to be purchased pursuant to this Warrant are true and correct as of the
Exercise Date as if remade in their entirety herein.

 

4.     Delivery
of Warrant Shares.

 

(a)   Subject
to the other terms and conditions contained herein, upon exercise of this
Warrant, the Company shall promptly issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate a certificate for the Warrant Shares issuable upon
such exercise. The Holder, or any Person so designated by the Holder to receive
Warrant Shares, shall be deemed to have become holder of record of such Warrant
Shares as of the Exercise Date.

 

(b)   This
Warrant is exercisable either in its entirety or, from time to time as provided
herein, for a portion of the number of Warrant Shares. Upon surrender of this
Warrant following a partial exercise, the Company shall promptly issue or cause
to be issued, at its expense, a new Warrant evidencing the right to purchase
the remaining number of Warrant Shares.

 

5.     Charges,
Taxes and Expenses.  Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any certificates
for Warrant Shares in a name other than that of the Holder or an affiliate
thereof. The Holder shall be

 

2

 

responsible for all other tax
liability that may arise as a result of holding this Warrant or receiving
Warrant Shares upon exercise hereof.

 

6.     Replacement
of Warrant.  If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a new Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and, if
requested, customary and reasonable indemnity, if requested. If the Holder
seeks a new Warrant under such circumstances, it shall also comply with such
other reasonable regulations and procedures and pay such other reasonable third
party costs as the Company may prescribe.

 

7.     Issuance
of Warrant Shares.  The Company covenants that all Warrant Shares
issuable and deliverable upon exercise hereof shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof,
be duly and validly authorized and issued, fully paid and nonassessable.

 

8.     Certain
Adjustments.  The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 8.

 

(a)   Stock
Dividends and Splits.  If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of
this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clauses (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.

 

(b)   Pro
Rata Distributions.  If the Company, at any time while this
Warrant is outstanding, distributes to all holders of Common Stock (i)
evidences of its indebtedness, (ii) any security (other than a distribution of
Common Stock covered by the preceding paragraph), (iii) rights or warrants to
subscribe for or purchase any security, or (iv) any other asset (in each case,
“Distributed Property”), then, upon the exercise of the Warrant that occurs
after the record date fixed for determination of stockholders entitled to
receive such distribution, the Holder shall be entitled to receive, in addition
to the Warrant Shares otherwise issuable upon such exercise (if applicable),
the Distributed Property distributed in respect of one share of Common Stock to
holders of Common Stock as of such record date times the number of Warrant
Shares for which the Holder exercises this Warrant (appropriately adjusted for
any stock splits, combination or similar event between such record date and
such exercise).

 

3

 

(c)   Fundamental
Transactions.  If, at any time while this Warrant is outstanding,
(i) the Company effects any merger or consolidation of the Company with or into
another person, (ii) the Company effects any sale of all or substantially all
of its assets in one or a series of related transactions, (iii) any tender
offer or exchange offer (whether by the Company or another person) is
consummated pursuant to which a majority of holders of Common Stock tender or
exchange their shares for other securities, cash or property, or (iv) the
Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (other than as a result of
a subdivision or combination of shares of Common Stock covered by Section 8(a)
above) (in any such case, a “Fundamental Transaction”), then the Holder shall
have the right thereafter to receive, upon exercise of this Warrant, the same
amount and kind of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of the number of
Warrant Shares then issuable upon exercise in full of this Warrant (the
“Alternate Consideration”). The aggregate Exercise Price for this Warrant will
not be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction. At the Holder’s request, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new Warrant consistent with the foregoing provisions and evidencing the
Holder’s right to purchase the Alternate Consideration for the aggregate
Exercise Price upon exercise thereof. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this
paragraph (c) and insuring that the Warrant (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction.

 

(d)   Number
of Warrant Shares.  Simultaneously with any adjustment to the
Exercise Price pursuant to paragraph (a) of this Section, the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased
or decreased proportionately, so that after such adjustment the aggregate
Exercise Price payable hereunder for the increased or decreased number of
Warrant Shares shall be the same as the aggregate Exercise Price in effect
immediately prior to such adjustment.

 

(e)   Calculations.  All
calculations under this Section 8 shall be made to the nearest cent or the
nearest 1/100th of a share, as applicable. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by
or for the account of the Company; provided that such shares, upon disposition
to a third party, shall then be considered outstanding. Any interpretation or
determination required by this Warrant shall be made by the Company’s Board of
Directors in good faith.

 

(f)    Notice
of Adjustments.  Upon the occurrence of each adjustment pursuant
to this Section 8, the Company at its expense will, at the written request of
the Holder, promptly compute such adjustment in accordance with the terms of
this Warrant and prepare a certificate

 

4

 

setting forth
such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in reasonable detail the facts upon which
such adjustment is based, and deliver a copy of each such certificate to the
Holder.

 

(g)   Notice
of Corporate Events.  If, while this Warrant is outstanding, the
Company (i) declares a dividend or any other distribution of cash, securities
or other property in respect of all of its Common Stock, (ii) authorizes or
approves, enters into any agreement contemplating or solicits stockholder
approval for any Fundamental Transaction or (iii) authorizes the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the Company
shall deliver to the Holder a notice describing the material terms and
conditions of such transaction, at least 15 business days prior to the
applicable record or effective date on which a person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and
the Company will take all steps necessary in order to insure that the Holder is
given the practical opportunity to exercise this Warrant, pursuant to the terms
and conditions herein, prior to such time so as to participate in or vote with
respect to such transaction; provided, however, that the failure to deliver
such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.

 

 9.      Payment of Exercise
Price.  The Holder shall pay the Exercise Price in immediately
available funds.

 

10.     Limitation on Exercise.  Notwithstanding
anything to the contrary contained in this Warrant, if the sale of Warrant
Shares upon exercise of this Warrant would violate any law, rule or regulation
or the issuance of such Warrant Shares would constitute a breach of the
Company’s obligations under its agreements with the National Association of
Securities Dealers, Inc. or the Nasdaq Stock Market, Inc. or the rules and regulations
promulgated thereunder, the Company shall use commercially reasonable efforts
upon exercise of the Warrant to issue as “restricted securities” (within the
meaning of the Securities Act of 1933, as amended) the Warrant Shares or an
equivalent number of shares of Common Stock to the Holder for the aggregate
Exercise Price.

 

11.     Fractional
Shares.  The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section,
be issuable upon exercise of this Warrant, the number of Warrant Shares to be
issued will be rounded down to the nearest whole share.

 

12.     Notices.  All
notices, requests, consents and other communications required or permitted
hereunder (including without limitation any Exercise Notice) shall be in
writing and shall be deemed effectively given: (i) upon delivery to the party
to be notified; (ii) when received by confirmed facsimile; (iii) one (1) business
day after deposit with a nationally recognized overnight carrier, specifying
next business day delivery, with written verification of receipt; or (iv) three
(3) business days after being deposited in the U.S. mail, with postage prepaid,
addressed to the party to be notified. 
The address and facsimile numbers for such notices or communications
shall be as set forth in the Purchase Agreement.

 

5

 

13.     Miscellaneous.

 

(a)   Notwithstanding
anything to the contrary in this Purchase Agreement, the Holder may not assign
or otherwise transfer this Warrant, or any rights herein, and any attempt to do
so shall be null and void.  This Warrant
may not be assigned by the Company except to a successor in the event of a Fundamental
Transaction. Nothing in this Warrant shall be construed to give to any person
other than the Company and the Holder any legal or equitable right, remedy or
cause of action under this Warrant. This Warrant may be amended only in writing
signed by the Company and the Holder.

 

(b)   The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.

 

(c)   This
Warrant shall be governed by and construed in accordance with the laws of the
State of New York and the federal law of the United States of America.  Any legal suit, action or proceeding arising
out of or based upon this Warrant or the transactions contemplated hereby may
be instituted in the federal courts of the United States District Court for the
Southern District of New York (collectively, the “Specified Courts”), and each
party irrevocably submits to the non-exclusive jurisdiction of such Specified
Courts in any such suit, action or proceeding. 
Service of any process, summons, notice or document by mail to such
party’s address set forth herein shall be effective service of process for any
suit, action or other proceeding brought in any such Specified Courts.  The parties irrevocably and unconditionally
waive any objection to the laying of venue of any suit, action or other
proceeding in the Specified Courts and irrevocably and unconditionally waive
and agree not to plead or claim in any such court that any such suit, action or
other proceeding brought in any such court has been brought in an inconvenient
forum.

 

(d)   The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE

FOLLOWS]

 

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IN WITNESS
WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

 

	
   

  	
  DIGIMARC CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

7

 

FORM OF EXERCISE NOTICE

 

(To be executed by the Holder to exercise the right to purchase shares
of Common Stock under

the foregoing Warrant)

 

	
  To:

  	
  DIGIMARC
  CORPORATION

  
	
   

  	
  Attn:

  	
  Controller

  

 

The undersigned is the Holder of Warrant No.
             (the
“Warrant”) issued by DIGIMARC CORPORATION, a Delaware corporation (the “Company”).
Capitalized terms used herein and not otherwise defined have the respective
meanings set forth in the Warrant.

 

1.               The Warrant is
currently exercisable to purchase a total of
             
Warrant Shares. 

 

2.               The undersigned
Holder hereby exercises its right to purchase
            
Warrant Shares pursuant to the Warrant. 

 

3.               The Holder shall
pay the sum of
$             to
the Company in accordance with the terms of the Warrant. 

 

4.               Pursuant to this
exercise, the Company shall deliver to the holder
            
Warrant Shares in accordance with the terms of the Warrant. 

 

5.               Following this
exercise, the Warrant shall be exercisable to purchase a total of
            Warrant
Shares. 

 

	
  Dated:

  	
   

  	
  ,

  	
  Name of Holder:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Print)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform in all respects to name of holder as
  specified on the face of the Warrant)

  
												

 

8Exhibit 10.1

 

PURCHASE AGREEMENT

 

This PURCHASE
AGREEMENT (the “Agreement”) is made as of the 22nd day of August, 2003, by and
between Digimarc Corporation (the “Company”), a corporation organized under the
laws of the State of Delaware, with its principal offices at 19801 S.W. 72nd
Avenue, Suite 250, Tualatin, Oregon 97062, and the purchaser whose name and
address is set forth on the signature page hereof (the “Purchaser”).

 

IN
CONSIDERATION of the mutual covenants contained in this Agreement, the Company and
the Purchaser agree as follows:

 

SECTION 1.           Authorization of
Sale of the Units.  Subject to the
terms and conditions of this Agreement, the Company has authorized the issuance
and sale of up to 1,785,996 separable units (the “Units”), with each Unit representing
(i) one share of common stock, par value $0.001 per share (“Common
Stock”), of the Company (collectively, the “Shares”) and (ii) a Warrant in
the form of Exhibit A hereto to purchase an additional 0.15 of a share
of Common Stock on the terms and conditions set forth therein (collectively,
the “Warrants”).

 

SECTION 2.           Agreement to Sell
and Purchase the Units.  At the
Closing (as defined in Section 3), the Company will issue and sell to the
Purchaser, and the Purchaser will buy from the Company, upon the terms and
conditions hereinafter set forth, the number of Units (at the purchase price
per Unit below) shown below: 

 

	
  Number of Units

  to Be

  Purchased

  	
   

  	
  Purchase
  Price Per

  Unit In

  Dollars

  	
   

  	
  Aggregate

  Price

  	
   

  
	
   

  	
   

  	
  $

  	
  14.00

  	
   

  	
  $

  	
      

  	
   

  
								

 

The Company
proposes to enter into the same form of purchase agreement with certain other
investors (the “Other Purchasers”) and expects to complete sales of the Units
at the same price per Unit to them. The Purchaser and the Other Purchasers are
hereinafter sometimes collectively referred to as the “Purchasers,” and this
Agreement and the agreements executed by the Other Purchasers are hereinafter
sometimes collectively referred to as the “Agreements.”  The term “Placement Agent” shall mean SG
Cowen Securities Corporation.  The
Company and the Purchaser agree that the obligations of each Purchaser are
several and not joint, and the Purchaser shall not be responsible in any way
for the performance of the obligations of Other Purchasers.  The decision of the Purchaser to purchase
Units pursuant to this Agreement has been made by the Purchaser independently
of any Other Purchaser and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of any subsidiary of the Company
which may have been made or given by any Other Purchaser or by any agent or
employee of any Other Purchaser, and neither the Purchaser nor any of its
agents or employees shall have any liability to any Other Purchaser (or any
other person) relating to or arising from any such information, materials,
statements or opinions.  Nothing
contained in this Agreement, and no action taken by the Purchaser or any of the
Other Purchasers, shall be deemed to constitute the Purchaser and any or all of
the

 

 

Other Purchasers as a
partnership, an association, a joint venture, or any other kind of entity, or
create the presumption that the Purchaser and any or all of the Other
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement.  The Purchaser acknowledges that no Other
Purchaser has acted as agent for the Purchaser in connection with making its
investment hereunder and that no Other Purchaser will be acting as agent of the
Purchaser in connection with monitoring its investment hereunder.  The Purchaser shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement, and it shall not be necessary for any Other
Purchaser to be joined as an additional party in any proceeding for such
purpose.

 

SECTION 3.           Delivery of the
Units at the Closing.  The completion
of the purchase and sale of the Units (the “Closing”) shall occur at the
offices of Morrison & Foerster LLP, 425 Market Street, San Francisco,
California 94105-2482 as soon as practicable and as agreed to by the parties
hereto, on the same day of execution of the Agreements, or on such later date
or at such different location as the parties shall agree, but not prior to the
date that the conditions for Closing set forth below have been satisfied or
waived by the appropriate party (the “Closing Date”); provided, however,
that if the Closing shall not have occurred by 5:00 p.m. (Pacific Time) on
August 27, 2003, the Agreement may be terminated by the Purchaser or the
Company upon written notice to the other party.

 

At the
Closing, the Company shall deliver to the Purchaser (i) one or more stock
certificates registered in the name of the Purchaser, or, if so indicated on
the Certificate Questionnaire attached hereto as Appendix I, in such nominee
name(s) as designated by the Purchaser, evidencing such number of Shares
included in the Units set forth in Section 2 above, and (ii) a Warrant,
registered in the name of the Purchaser, pursuant to which the Purchaser shall
have the right to acquire such number of shares of Common Stock issuable upon
exercise of the Warrant, on the terms set forth therein, in each such case of
(i) and (ii) above, bearing an appropriate legend referring to the fact that
the Shares and Warrant were sold in reliance upon the exemption from
registration under the Securities Act of 1933, as amended (the “Securities
Act”), provided by Section 4(2) thereof and Rule 506 thereunder.  The name(s) in which the stock certificates
and Warrant are to be registered are set forth in the Certificate Questionnaire
attached hereto as Appendix I.  The Company’s
obligation to complete the purchase and sale of the Units and deliver such
stock certificate(s) and Warrant to the Purchaser at the Closing shall be
subject to the following conditions, any one or more of which may be waived by
the Company:  (a) all documents incident
to the offering and sale of the Units shall be reasonably satisfactory in form
and substance to the Company; (b) receipt by the Company of same-day funds in
the full amount of the aggregate purchase price for the Units being purchased
hereunder; (c) completion of the purchases and sales under the Agreements with
the Other Purchasers; and (d) the accuracy in all material respects of the
representations and warranties made by the Purchaser herein (as if such
representations and warranties were made on the Closing Date) and the
fulfillment of those undertakings of the Purchaser to be fulfilled prior to the
Closing.  The Purchaser’s obligation to
accept delivery of such stock certificate(s) and Warrant and to pay for the
Units shall be subject to the following conditions, any one or more of which
may be waived by the Purchaser: (a) all documents incident to the offering
and sale of the Units shall be reasonably satisfactory in form and substance to
the Purchaser; (b) approval of the offering and sale of the Units
(including the shares of Common Stock issuable upon exercise of the Warrants)
by the Company’s Board of Directors and/or, if applicable, a committee thereof;
(c) the accuracy in all material respects of the representations and
warranties of the Company made herein (as if such representations and
warranties were made on the Closing Date), except for those representations and
warranties that address matters as of a particular date, which representations
and warranties shall be accurate in all material respects as of such date;

 

2

 

(d) the delivery to the
Purchaser of a copy of the legal opinion called for by Section 4.20
substantially in the form of Exhibit B hereto; and (e) the fulfillment
in all material respects of those undertakings of the Company to be fulfilled
prior to Closing.  The Company’s and the
Purchaser’s obligations hereunder are expressly conditioned on the purchase by
any or all of the Purchasers of at least 1,500,000 Units.

 

SECTION 4.           Representations,
Warranties and Covenants of the Company. 
Except as set forth in the Schedule of Exceptions, dated as of the date
hereof (the “Schedule of Exceptions”), attached to this Agreement (which
Schedule of Exceptions shall be deemed to be representations and warranties to
the Purchaser and which Schedule of Exceptions shall expressly identify the
specific representation, warranty or covenant in this Section 4 to which such
exception pertains), the Company hereby represents and warrants to, and
covenants with, the Purchaser as follows:

 

4.1           Organization and Qualification.  The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and the Company is qualified to do business as a foreign
corporation in each jurisdiction in which qualification is required, except
where failure to so qualify would not reasonably be expected to have a Material
Adverse Effect (as defined herein).  The
material subsidiaries of the Company are listed on Exhibit C hereto
(each a “Subsidiary” and collectively, the “Subsidiaries”).  Each Subsidiary is a direct or indirect
wholly owned subsidiary of the Company. 
The Company owns, directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and clear of any lien,
charge, claim, security interest, encumbrance, right of first refusal or other
restriction and all the issued and outstanding shares of capital stock or
comparable equity interest of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights.  Each Subsidiary is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and is qualified to do business as a foreign entity in each jurisdiction in
which qualification is required, except where failure to so qualify would not
reasonably be expected to have a Material Adverse Effect.  For purposes of this Agreement, the term
“Material Adverse Effect” shall mean a material adverse effect upon the
business, financial condition, properties or results of operations of the
Company and its Subsidiaries, taken as a whole, or on the ability of the
Company to perform its obligations hereunder.

 

4.2           Authorized Capital Stock.  The
Company’s authorized capital stock consists of a total of 100,000,000 shares of
Common Stock, $0.001 par value per share, of which 18,029,004 shares of Common
Stock were issued and outstanding as of August 15, 2003, and a total of
5,000,000 shares of preferred stock of the Company, $0.001 par value per share
(“Preferred Stock”), none of which Preferred Stock is issued or
outstanding as of the date hereof.  The
issued and outstanding shares of the Company’s Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities. 
Except for outstanding options to purchase 6,548,997 shares of Common
Stock and an additional 1,727,090 shares of Common Stock reserved for issuance
under the Company’s stock incentive plans and employee stock purchase plan,
each as of August 15, 2003, and except for the shares of Common Stock issuable
upon exercise of the Warrants (the “Underlying Shares”), there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock.  The
issuance and sale of the Shares, Warrants and, if applicable, the Underlying
Shares will not obligate the Company to issue shares of Common Stock or other
securities to any person or entity (other than the Purchasers) and

 

3

 

will
not result in a right of any holder of securities of the Company to adjust the
exercise, conversion, exchange or reset price under such securities.

 

4.3           Issuance, Sale and Delivery of the Shares.  The
Shares, the Warrants and the Underlying Shares have been duly authorized and,
when issued, delivered and paid for in accordance with this Agreement and the
Warrants, as applicable, will be duly authorized, validly issued, fully paid
and nonassessable and free and clear of all pledges, liens, restrictions and
encumbrances (other than restrictions on transfer under state and/or federal
securities laws) as a result of the Company’s actions.  No preemptive rights or other rights to subscribe
for or purchase exist with respect to the issuance and sale of the Units or the
Underlying Shares by the Company pursuant to this Agreement.  Except as set forth in the Schedule of
Exceptions, no stockholder of the Company has any right (which has not been
waived or has not expired, including by reason of lapse of time following
notification of the Company’s intent to file the registration statement to be
filed by it pursuant to Section 7.1 (the “Registration Statement”)) to require
the Company to register the sale of any shares owned by such stockholder under
the Securities Act in the Registration Statement.  No further approval or authority of the stockholders or the Board
of Directors of the Company will be required for the issuance and sale of the
Units or the Underlying Shares to be sold by the Company as contemplated
herein.  The Company has reserved from
its duly authorized capital stock shares of Common Stock issuable upon exercise
of the Warrants.

 

4.4           Due Execution, Delivery and Performance.  The
Company has full legal right, corporate power and authority to enter into this
Agreement, including the Warrants, and perform the transactions contemplated
hereby.  This Agreement has been duly
authorized, executed and delivered by the Company.  The execution, delivery and performance of this Agreement,
including the Warrants, by the Company and the consummation of the transactions
herein contemplated will not violate any provision of the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries and will not
result in the creation of any lien, charge, security interest or encumbrance
upon any assets of the Company or any of its Subsidiaries pursuant to the terms
or provisions of, and will not (i) conflict with, result in the breach or
violation of, or constitute, either by itself or upon notice or the passage of
time or both, a default under (A) any agreement, lease, franchise, license,
permit or other instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective properties may be bound or affected and in each case which would
have a Material Adverse Effect, or (B) to the Company’s knowledge, any statute
or any judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental body applicable to
the Company or any of its Subsidiaries or any of their respective properties
where such conflict, breach, violation or default is likely to result in a
Material Adverse Effect.  No
registration with, consent, authorization or approval of, notice to, other
action by, or other order of any court, regulatory body, administrative agency
or other governmental body is required for the execution and delivery of this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for compliance with the blue sky laws and federal securities
laws applicable to the offering of the Units, including the filing of a Form D
in accordance with Regulation D under the Securities Act.  Upon the execution and delivery of this
Agreement and the Warrant, and assuming the valid execution of the Agreement by
the Purchaser, this Agreement and the Warrant will constitute a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and except as the

 

4

 

indemnification
agreements of the Company in Section 7.3 hereof may be limited by federal or
state securities laws or the public policy underlying such laws.

 

4.5           Accountants.  The firm of KPMG LLP, which
has expressed its opinion with respect to the consolidated financial statements
to be included or incorporated by reference in the Registration Statement and
the prospectus which forms a part thereof (the “Prospectus”), is an independent
accountant as required by the Securities Act and the rules and regulations
promulgated thereunder (the “Rules and Regulations”).

 

4.6           No Defaults.  Except as disclosed in the
Company’s filings with the Securities and Exchange Commission (the
“Commission”) made at least two (2) business days prior to the date hereof,
neither the Company nor any of its Subsidiaries is in violation or default of
any provision of its certificate of incorporation or bylaws, or in breach of or
default with respect to any provision of any agreement, judgment, decree,
order, lease, franchise, license, permit or other instrument to which it is a
party or by which it or any of its properties are bound which could reasonably
be expected to have a Material Adverse Effect and there does not exist any
state of facts which, with notice or lapse of time or both, would constitute an
event of default as defined in such documents on the part of the Company or any
of its Subsidiaries and which would have a Material Adverse Effect.

 

4.7           Contracts.  The material contracts
described in the Company’s filings with the Commission, to the extent that they
continue to be material to the Company, are in full force and effect on the
date hereof; and neither the Company nor any of its Subsidiaries is, nor, to
the Company’s knowledge, is any other party in material breach of or default
under any material contracts which would have a Material Adverse Effect.

 

4.8           No Actions.  Except as disclosed in the
Company’s filings with the Commission made at least two (2) business days prior
to the date hereof, (1) there are no legal or governmental actions, suits or proceedings
pending and (2) to the Company’s knowledge, there are no inquiries or
investigations, nor are there any legal or governmental actions, suits, or
proceedings threatened to which the Company or any of its Subsidiaries is or
may be a party or of which property owned or leased by the Company or any of
its Subsidiaries is or may be the subject, or related to environmental or
discrimination matters, which actions, suits or proceedings, individually or in
the aggregate, might reasonably be expected to have a Material Adverse Effect;
and no labor disturbance by the employees of the Company exists or, to the
Company’s knowledge, is imminent which might reasonably be expected to have a
Material Adverse Effect.  Neither the
Company nor any of its Subsidiaries is party to or subject to the provisions of
any injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body which might reasonably be
expected to have a Material Adverse Effect.

 

4.9           Properties.  The Company and the
Subsidiaries have good and marketable title to all properties and assets
reflected as currently owned in the financial statements included in the
Company’s filings with the Commission made at least two (2) business days prior
to the date hereof, subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except (i) those, if any, reflected in such financial statements,
or (ii) those which are not material in amount and do not adversely affect the
use of such property by the Company and its Subsidiaries.  To the Company’s knowledge, each of the
Company and its Subsidiaries holds its leased properties under valid and
binding leases, with such exceptions as are not materially significant in
relation to its

 

5

 

business
taken as a whole.  Except as disclosed
in the Company’s filings with the Commission, the Company owns or leases all
such properties as are necessary to its operations as now conducted.

 

4.10         No Material Change. 
Since December 31, 2002, and except as described in the Company’s
filings with the Commission made at least two (2) business days prior to the
date hereof, (i) the Company and its Subsidiaries have not incurred any
material liabilities or obligations, indirect or contingent, or entered into
any material oral or written agreement or other transaction which is not in the
ordinary course of business or which could reasonably be expected to result in
a material reduction in the future earnings of the Company and its Subsidiaries,
(ii) the Company and its Subsidiaries have not sustained any material loss or
interference with their businesses or properties from fire, flood, windstorm,
accident or other calamity not covered by insurance, (iii) the Company has not
paid or declared any dividends or other distributions with respect to its
capital stock and neither the Company nor any of its Subsidiaries is in default
in the payment of principal or interest on any outstanding debt obligations,
(iv) there has not been any change in the capital stock of the Company or any
of its Subsidiaries other than the sale of the Units hereunder, shares or
options issued pursuant to equity incentive plans or employee stock purchase
plans approved by the Company’s Board of Directors and repurchases of shares or
options pursuant to repurchase plans already approved by the Company’s Board of
Directors, or indebtedness not incurred in the ordinary course of business that
is material to the Company and its Subsidiaries, taken as a whole, and (v) there
has not been any other event which has caused a Material Adverse Effect.

 

4.11         Intellectual Property. 
Except as described in the Company’s filings with the Commission made at
least two (2) business days prior to the date hereof, the Company’s business,
as presently conducted, does not infringe or violate in any material respect
any patent, copyright, trademark or trade secret of any other person, where
such infringement or violation would have a Material Adverse Effect.  Except as described in the Company’s filings
with the Commission made at least two (2) business days prior to the date
hereof, the Company or its Subsidiaries own or have a valid right to use all
patents, copyrights, trademarks and trade secrets used in and necessary for the
Company’s business as presently conducted. 
Notwithstanding the foregoing two sentences, the Company makes no
representation or warranty with respect to third-party patents that have not,
to the knowledge of the Company’s executive officers, been asserted in writing
against the Company as of the date hereof, other than third-party patents that
the Company, as of the date hereof, has asked legal counsel to analyze whether
such patents read on the Company’s current or anticipated products.  During the past two years none of the
Company or its Subsidiaries has received any written communications alleging
that the Company or its Subsidiaries have infringed or violated a patent,
copyright, trademark or trade secret of any other person where such
infringement or violation, if true, would have a Material Adverse Effect. 

 

4.12         Compliance.  Neither the Company nor any
of its Subsidiaries has been advised, nor has reason to believe, that it is not
conducting its business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting its business,
including, without limitation, all applicable local, state and federal
environmental laws and regulations, except where failure to be so in compliance
would not have a Material Adverse Effect.

 

4.13         Taxes.  Each of the Company and its
Subsidiaries has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and neither the Company nor any of its Subsidiaries has knowledge of a tax

 

6

 

deficiency
which has been or might be asserted or threatened against it which might
reasonably be expected to have a Material Adverse Effect.

 

4.14         Transfer Taxes.  On
the Closing Date, all stock transfer or other taxes (other than income taxes)
which are required to be paid in connection with the sale and transfer of the
Units to be sold to the Purchaser hereunder will be, or will have been, fully
paid or provided for by the Company and all laws imposing such taxes will be or
will have been complied with.

 

4.15         Investment Company.  The
Company is not, and will not be following the sale of the Units to the
Purchasers at the Closing, an “investment company” or an “affiliated person”
of, or “promoter” or “principal underwriter” for an investment company, within
the meaning of the Investment Company Act of 1940, as amended.

 

4.16         Offering Materials.  The
Company has not distributed and will not distribute prior to the Closing Date
any offering material in connection with the offering and sale of the Units
other than the materials entitled “Digimarc Corporation Information Concerning
Possible Private Placement to Selected Institutional Accredited Investors” (the
“Materials”), or any amendment or supplement thereto, but only to the extent
that such materials might be deemed offering material.  Neither the Company nor any person acting on
its behalf has in the past or will hereafter take any action to sell, offer for
sale or solicit offers to buy any securities of the Company which would subject
the offer, issuance or sale of the Units, as contemplated by this Agreement, to
the registration requirements of Section 5 of the Securities Act.  Neither the Company nor any person or entity
acting on the Company’s behalf (including the Placement Agent) has sold or
offered to sell or solicited any offer to buy the Units by means of any form of
general solicitation or advertising. 
Neither the Company nor any of its affiliates nor any person or entity
acting on their behalf (including the Placement Agent) has, directly or
indirectly, at any time within the past six months, made any offer or sale of
any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the
offer and sale by the Company of the Units as contemplated hereby or (ii) cause
the offering of the Units pursuant to the Agreements to be integrated with
prior offerings by the Company for purposes of any applicable law, regulation
or stockholder approval provisions, including, without limitation, under the
rules and regulations of the Nasdaq National Market.  Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 5(a) herein and in the other Agreements, no
registration under the Securities Act is required for the offer and sale of the
Units by the Company to the Purchasers as contemplated herein.

 

4.17         Insurance.  The Company and its
Subsidiaries maintain insurance of the types and in the amounts that the
Company believes are reasonably adequate for their businesses, including, but
not limited to, insurance covering all real and personal property leased by the
Company and its Subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.

 

7

 

4.18         Additional Information.  The
information contained in the following documents, which the Placement Agent has
furnished to the Purchaser, or will furnish prior to the Closing, does not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances in which they were made, not misleading, as
of their respective filing dates or, if amended, as so amended:

 

(a)           the
Company’s Annual Report on Form 10-K for the year ended December 31, 2002;

 

(b)           the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003;

 

(c)           the
Company’s Current Report on Form 8-K filed on April 22, 2003;

 

(d)           the
Company’s definitive Proxy Statement for the Annual Meeting of Stockholders
held on May 22, 2003;

 

(e)           the
Company’s Current Report on Form 8-K filed on July 22, 2003;

 

(f)            the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003;

 

(g)           the
Company’s Current Report on Form 8-K filed on August 18, 2003; and

 

(h)           all
other documents, if any, filed by the Company with the Commission since
December 31, 2002, pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).

 

As of their
respective dates, the Company’s filings with the Commission complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder.  The financial statements of the Company included in the Company’s
filings with the Commission comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial year-end
audit adjustments and to the fact that they may not contain footnotes required
by GAAP.

 

4.19         Price of Common Stock.  The
Company has not taken, and will not take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of the Common Stock to facilitate the sale or resale of the
Shares or the Underlying Shares.

 

8

 

4.20         Legal Opinion.  At
the Closing, the Company will use its best efforts to cause legal counsel to
the Company to deliver a legal opinion in connection with the offering and sale
of the Units, substantially in the form of Exhibit B hereto.  Such opinion also shall state that each of
the Purchasers may rely thereon as though it were addressed directly to such
Purchaser.

 

4.21         Certificate.  At the Closing, the Company
will deliver to Purchaser a certificate executed by the chief executive officer
and the chief financial or accounting officer of the Company, dated as of the
Closing Date, in form and substance reasonably satisfactory to the Purchasers,
to the effect that the representations and warranties of the Company set forth
in this Section 4 are true and correct as of the date of this Agreement and as
of the Closing Date and that the Company has complied with all the agreements
and satisfied all the conditions herein on its part to be performed or
satisfied on or prior to such Closing Date.

 

4.22         Form S-3.  The Company is eligible to
register its Common Stock for resale using Form S-3 promulgated under the
Securities Act.

 

4.23         Nonpublic Information.  The
Company has not disclosed to the Purchaser, whether in the Materials or
otherwise, information that would constitute material nonpublic information as
of the time immediately following the Company’s public announcement of the
transactions contemplated by this Agreement.

 

4.24         Listing.  The Company shall file a
listing application and any other documents required by the Nasdaq National
Market in connection with the listing of the Shares and the Underlying Shares.

 

4.25         Public Announcement. 
Following the Closing, the Company shall promptly issue a press release
describing the transactions contemplated by this Agreement and, to the extent
appropriate, the Company may include the names of Purchasers in such press
release.

 

SECTION 5.           Representations,
Warranties and Covenants of the Purchaser. 
(a) The Purchaser represents and warrants to, and covenants with, the
Company that:  (i) the Purchaser is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares representing an investment
decision like that involved in the purchase of the Shares, Warrants and
Underlying Shares, including investments in securities issued by the Company
and comparable entities, and has had the opportunity to request, receive,
review and consider all information it deems relevant in making an informed
decision to purchase the Units; (ii) the Purchaser is acquiring the amount of
Shares and Warrants reflected in Section 2 above, and when and if
applicable, the Underlying Shares, in the ordinary course of its business and
for its own account for investment purposes only and with no present intention
of distributing any of the Shares, Warrants or Underlying Shares, and no
arrangement or understanding exists with any other persons regarding the
distribution of such Shares, Warrants or Underlying Shares (this representation
and warranty not limiting the Purchaser’s right to sell pursuant to the
Registration Statement or in compliance with the Securities Act and the Rules
and Regulations, or, other than with respect to any claims arising out of a
breach of this representation and warranty, the Purchaser’s right to
indemnification under Section 7.3); (iii) the Purchaser will not, directly or
indirectly, (A) offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of
the Shares, Warrants or Underlying Shares except in compliance with the
Securities Act, the Rules and Regulations and such state securities or blue sky
laws as may be applicable, (B) engage in any short sale prior to the Closing in
connection with any of the Shares,

 

9

 

Warrants or Underlying Shares
and, thereafter, only in compliance with the Securities Act, the Rules and
Regulations and such state securities or blue sky laws as may be applicable, or
(C) hedge the economic risk of the Purchaser’s investment in the Shares,
Warrants or Underlying Shares prior to the Closing and, thereafter, only in
compliance with the Securities Act, the Rules and Regulations and such state
securities or blue sky laws as may be applicable; (iv) the Purchaser has
completed or caused to be completed the Registration Statement Questionnaire,
attached hereto as part of Appendix I, for use in preparation of the
Registration Statement and the answers thereto are true and correct in all
material respects as of the date hereof and will be true and correct in all
material respects as of the effective date of the Registration Statement and
the Purchaser will notify the Company promptly of any material change in any
such information provided in the Registration Statement Questionnaire until
such time as the Purchaser has sold all of its Shares and Underlying Shares, if
any, or until the Company is no longer required to keep the Registration
Statement effective; (v) the Purchaser has, in connection with its decision to
purchase the Units reflected in Section 2 above, relied solely upon the
Materials and the documents filed by the Company with the Commission at least
two (2) business days prior to the date hereof and the documents included
therein or incorporated by reference and the representations and warranties of
the Company contained herein; (vi) the Purchaser has had an opportunity to
discuss this investment with representatives of the Company and ask questions
of them; (vii) the Purchaser is an “accredited investor” within the meaning of
Rule 501(a) of Regulation D promulgated under the Securities Act; (viii) the
Purchaser agrees to notify the Company promptly of any change in any of the
foregoing information until such time as the Purchaser has sold all of its
Shares and Underlying Shares, if any, or the Company is no longer required to
keep the Registration Statement effective; and (ix) the Purchaser has not
engaged, directly or indirectly, from and including the date the Purchaser
first became aware of the potential offering of the Shares by the Company
through and including the date hereof, and will not engage through the Closing
Date, directly or indirectly, in any short sale or hedge of shares of Common
Stock of the Company.  Notwithstanding
anything to the contrary in this Agreement, if the Purchaser is an affiliate of
a broker-dealer, the Purchaser shall not be prohibited in engaging in its
ordinary course of business market making activities and trading activities in
the unrestricted shares of Common Stock of the Company.

 

(b)           The Purchaser understands that the Shares, Warrants and the Underlying
Shares are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of the Securities Act, the Rules and
Regulations and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the Shares, Warrants
and the Underlying Shares.

 

(c)           For the benefit of the Company, the Purchaser previously agreed orally
with the Placement Agent to keep confidential all information concerning the
private placement transaction contemplated by the Agreements. The Purchaser
understands that the information contained in the Materials is strictly
confidential and proprietary to the Company and has been prepared from the
Company’s publicly available documents and other information and is being
submitted to the Purchaser solely for such Purchaser’s confidential use.  The Purchaser agrees to use the information
contained in the Materials for the sole purpose of evaluating a possible
investment in the Shares and Warrants and the Purchaser hereby acknowledges
that it is prohibited from reproducing or distributing the Materials, this
Agreement, or any offering materials or other information provided by the
Company in connection with the Purchaser’s consideration of its investment in
the Company, in whole or in part, or divulging or discussing any of their
contents,

 

10

 

except to its financial,
investment or legal advisors in connection with its proposed investment in the
Shares and Warrants, which advisors shall also be bound by this paragraph.  Further, the Purchaser understands that the
existence and nature of all conversations and presentations, if any, regarding
the Company and this offering must be kept strictly confidential.  The Purchaser understands that the federal
securities laws impose restrictions on trading based on information regarding
this offering.  In addition, the
Purchaser hereby acknowledges that unauthorized disclosure of information
regarding this offering may result in a violation of Regulation FD.  This obligation will terminate upon the
issuance by the Company of a press release or press releases describing this
offering to the extent of the information contained in such press release or
press releases.  In addition to the
above, the Purchaser shall maintain in confidence the receipt and content of
any notice of a Suspension (as defined in Section 5(h) below).  The foregoing agreements shall not apply to
any information that is or becomes publicly available through no fault of the
Purchaser, or that the Purchaser is legally required to disclose; provided, however,
that if the Purchaser is requested or ordered to disclose any such information
pursuant to any court or other government order or any other applicable legal
procedure, it shall provide the Company with prompt notice of any such request
or order to enable the Company to seek an appropriate protective order and the
Purchaser shall cooperate with the Company, if requested and at the Company’s
expense, in seeking such appropriate protective order.

 

(d)           The Purchaser understands that its investment in the Shares, Warrants
and Underlying Shares involves a significant degree of risk, including a risk
of total loss of the Purchaser’s investment, and the Purchaser has full
cognizance of and understands all of the risk factors related to the
Purchaser’s purchase of the Shares, Warrants and Underlying Shares, including,
but not limited to, those set forth under the caption “Risk Factors” in the
Materials.  The Purchaser understands
that the market price of the Common Stock has been volatile and that no
representation is being made as to the future value of the Common Stock.  The Purchaser has the knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Shares, the Warrants and Underlying
Shares and has the ability to bear the economic risks of an investment in the
Shares, Warrants and Underlying Shares.

 

(e)           The Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed upon or made any
recommendation or endorsement of the Shares, the Warrants and Underlying
Shares.

 

(f)            The Purchaser understands that, until such
time as the Shares and the Underlying Shares have been sold pursuant to the
Registration Statement or Rule 144 under the Securities Act or may be sold by
non-affiliates pursuant to Rule 144 under the Securities Act without any
restriction as to the number of securities as of a particular date that can
then be immediately sold, the Shares, the Warrants and the Underlying Shares
will bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against the transfer of the certificates for
the Shares, the Warrants and the Underlying Shares):

 

“[Neither]
These securities [nor the securities into which these securities are
exercisable] have [not] been registered under the Securities Act of 1933, as
amended (the “Securities Act”), or the securities laws of any state or other
jurisdiction.  [Neither] These
securities [nor the securities into which these securities are exercisable] may
[not] be offered, sold, pledged or otherwise transferred except (1) pursuant to
an exemption from registration under the Securities Act or (2) pursuant to an
effective registration

 

11

 

statement
under the Securities Act, in each case in accordance with all applicable
securities laws of the states and other jurisdictions, and in the case of a
transaction exempt from registration, unless the Company has received an
opinion of counsel reasonably satisfactory to it that such transaction does not
require registration under the Securities Act and such other applicable laws.”

 

(g)           The Purchaser’s principal executive offices are in the jurisdiction set
forth immediately below the Purchaser’s name on the signature pages hereto.

 

(h)           The Purchaser hereby covenants with the Company not to make any sale of
the Shares or the Underlying Shares under the Registration Statement without
complying with the provisions of this Agreement and without effectively causing
the prospectus delivery requirement under the Securities Act to be satisfied,
and the Purchaser acknowledges and agrees that such Shares and Underlying
Shares are not transferable on the books of the Company unless the certificate
submitted to the transfer agent evidencing the Shares or Underlying Shares is
accompanied by a separate Purchaser’s Certificate of Subsequent Sale:  (i) in the form of Appendix II hereto; (ii)
executed by an officer of, or other authorized person designated by, the
Purchaser; and (iii) to the effect that (A) the Shares or Underlying Shares
have been sold in accordance with the Registration Statement, the Securities
Act and any applicable state securities or blue sky laws and (B) the requirement
of delivering a current prospectus has been satisfied.  Alternatively, certificates evidencing
Shares or Underlying Shares may have the legend set forth in Section 5(f) above
removed following the date upon which the Registration Statement covering the
resale of such Shares or Underlying Shares is declared effective under the
Securities Act and the Company shall promptly cause such legend to be removed
for the Purchaser, provided: (i) the Company may continue to keep in place any
stop-transfer order against the transfer of the certificates for the Shares or
the Underlying Shares until such time as otherwise provided herein;
(ii) the Purchaser shall provide a written request to the Company to
delegend such Shares or Underlying Shares, shall affirmatively covenant in such
request to sell or otherwise transfer any such Shares or Underlying Shares only
in accordance with the Registration Statement and the “Plan of Distribution”
set forth therein, the Securities Act and any applicable state securities or blue
sky laws and to satisfy the current prospectus delivery requirements, and shall
delivery to the Company the legended certificate representing such Shares or
Underlying Shares; and (iii) prior to any individual sale of the Shares or
Underlying Shares pursuant to the Registration Statement, the Purchaser shall
notify the Company of its intention to sell or otherwise transfer such Shares
or Underlying Shares and the amount of Shares or Underlying Shares to be sold
or otherwise transferred pursuant to the Registration Statement (each, a
“Registered Sale Notice”).  Upon receipt
of such Registered Sale Notice, the Company shall promptly take steps to lift
any stop-transfer order placed against the transfer of the certificates for the
Shares or the Underlying Shares to be sold or otherwise transferred in
accordance with the Registered Sale Notice. 
The Purchaser will notify the Company promptly after the sale of all of
its Shares and Underlying Shares.  The
Purchaser acknowledges that there may occasionally be times when the Company
must suspend the use of the Prospectus forming a part of the Registration
Statement (a “Suspension”) until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, or such time as the Prospectus has been supplemented, or until such
time as the Company has filed an appropriate report with the Commission
pursuant to the Exchange Act.  In no
event shall the Company, without the prior written consent of a Purchaser,
disclose to such Purchaser any of the facts or circumstances regarding material
nonpublic information giving rise to the Suspension.  The Purchaser hereby covenants that it will not sell any Shares
or Underlying Shares pursuant to said Prospectus during the period

 

12

 

commencing at the time at
which the Company gives the Purchaser written notice of the Suspension of the
use of said Prospectus and ending at the time the Company gives the Purchaser
written notice that the Purchaser may thereafter effect sales pursuant to said
Prospectus.  Notwithstanding the
foregoing, the Company agrees that no individual Suspension shall be for a
period of longer than 30 consecutive days, and no Suspensions, collectively,
shall be for a period of an aggregate in any 365-day period of longer than 90
days.

 

(i)            The Purchaser further represents and warrants
to, and covenants with, the Company that (i) the Purchaser has full right,
power, authority and capacity to enter into this Agreement and to consummate
the transactions contemplated hereby and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, (ii) the
making and performance of this Agreement by the Purchaser and the consummation
of the transactions herein contemplated will not (A) violate any provision
of the organizational documents of the Purchaser or (B) conflict with,
result in the breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a default under any agreement, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which the Purchaser is a party, or any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory
body, administrative agency or other governmental body applicable to the
Purchaser, in each case where such conflict, breach, violation or default is
likely to result in a material adverse effect upon the business, financial
condition, properties or results of operations of the Purchaser and its
subsidiaries, taken as a whole, or on the ability of the Purchaser to perform
its obligations hereunder, (iii) no consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body is required on the part of the Purchaser for the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, (iv) upon the execution and delivery of this Agreement,
this Agreement shall constitute a legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ and contracting parties’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except to the extent enforcement of the indemnification
provisions, set forth in Section 7.3 of this Agreement, may be limited by
federal or state securities laws or the public policy underlying such laws, and
(v) there is not in effect any order enjoining or restraining the Purchaser
from entering into or engaging in any of the transactions contemplated by this
Agreement.

 

SECTION 6.           Survival of
Representations, Warranties and Agreements.  Notwithstanding any investigation made by any party to this
Agreement or by the Placement Agent, all covenants, agreements, representations
and warranties made by the Company and the Purchaser herein and in the
certificates for the Shares, the Warrants and the Underlying Shares delivered
in accordance herewith shall survive the execution of this Agreement, the
delivery to the Purchaser of the Shares, the Warrants and the Underlying Shares
being purchased and the payment therefor.

 

13

 

SECTION 7.           Registration;
Compliance with the Securities Act.

 

7.1           Registration Procedures and Expenses.  The Company shall:

 

(a)           subject to receipt of necessary information in writing from the
Purchasers, as soon as reasonably practicable, but in no event later than
thirty (30) days following the Closing Date (the “Filing Date”), prepare and
file with the Commission the Registration Statement on Form S-3 or other
available form relating to the sale or other transfer of Common Stock
(including Underlying Shares) issued or issuable to the Purchaser and the Other
Purchasers pursuant to the Agreements and the Warrants (collectively,
“Registrable Securities”) from time to time on the Nasdaq National Market or
the facilities of any national securities exchange on which the Common Stock is
then traded or in privately-negotiated transactions; provided, however, that,
if the Company shall have received a request in writing from a Purchaser within
ten (10) days of the Closing and if, at the time of receiving such request, the
Company shall not have filed such Registration Statement with the Commission,
the Company shall provide such Purchaser a reasonable opportunity, but not
longer than two (2) business days, to review and provide comments with respect
to the “Plan of Distribution” of the Registration Statement and any information
regarding such Purchaser to be included in such Registration Statement;

 

(b)           use its commercially reasonable efforts, subject to receipt of
necessary information from the Purchasers, to cause the Commission to declare
the Registration Statement effective within ninety (90) calendar days after the
Closing Date (such date, the “Required Effective Date”); provided, however,
that, if the Registration Statement receives Commission review, then the
Required Effective Date shall be one hundred twenty (120) calendar days after
the Closing Date;

 

(c)           use its reasonably commercial efforts to promptly prepare and file with
the Commission such amendments and supplements to the Registration Statement
and the prospectus used in connection therewith as may be necessary to keep the
Registration Statement effective, subject to receipt of necessary information
from the Purchasers, until the earliest of (i) two years after the expiration
of the Warrants, (ii) such time as the Registrable Securities become eligible
for resale by non-affiliates pursuant to Rule 144(k) under the Securities Act
or (iii) such time as all Registrable Securities purchased by the
Purchaser and all Other Purchasers under the Agreements and the Warrants and
included in the Registration Statement have been sold to the public.  Thereafter, the Company shall be entitled to
file a post-effective amendment to de-register the shares not otherwise sold
under the Registration Statement and the Purchasers shall have no further right
to offer or sell any of the Registrable Securities pursuant to the Registration
Statement;

 

(d)           furnish to the Purchaser with respect to the Registrable Securities
registered under the Registration Statement such number of copies of
prospectuses and such other documents, in each case as the Purchaser may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Registrable Securities by the Purchaser;

 

(e)           file documents required of the Company for normal blue sky clearance in
states specified in writing by the Purchaser and reasonably acceptable to the
Company; provided, however, that the Company shall not be
required to:  (i) qualify to do
business where it would not otherwise be required to qualify but for this
Section 7.1; (ii) file a general consent to service of process in any
such jurisdiction; (iii) subject itself to taxation in any such
jurisdiction; (iv) provide any undertakings that cause material expense or
burden to the Company; or (v) make

 

14

 

any change to its
organizational documents, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;

 

(f)            bear all expenses in connection with the
procedures in paragraphs (a) through (e) of this Section 7.1 and the
registration of the Registrable Securities pursuant to the Registration
Statement, other than fees and expenses, if any, of counsel or other advisers
to the Purchaser or the Other Purchasers or discounts, brokerage fees and
commissions incurred by the Purchaser or the Other Purchasers, if any; and

 

(g)           notify promptly the Purchaser of the effectiveness of the Registration
Statement and any post-effective amendments thereto.

 

Notwithstanding
the foregoing, if the information provided by the Purchaser pursuant to
Appendix I to this Agreement shall not be sufficient for purposes of effecting
the registration of the Registrable Securities, it shall be a condition
precedent to the obligations of the Company to take any action pursuant to
paragraphs (a) through (g) of this Section 7.1, that the Purchaser shall
furnish to the Company such information regarding itself, the Registrable
Securities to be sold or transferred by the Purchaser, and the intended method
of disposition of such Registrable Securities as shall be required to effect
the registration of the Registrable Securities, all of which information shall
be furnished to the Company in writing specifically for use in the Registration
Statement.

 

Notwithstanding
the foregoing, the parties understand and agree that the Company shall not be
obligated to retain an underwriter with respect to the offer and sale of
Registrable Securities pursuant to the Registration Statement.

 

7.2           Transfer After Registration.  The
Purchaser agrees that it will not effect any disposition of the Shares, the
Warrants and the Underlying Shares or its right to purchase the Shares, the
Warrants and the Underlying Shares that would constitute a sale within the
meaning of the Securities Act or any applicable state securities laws, except
as contemplated in the Registration Statement referred to in Section 7.1 or as
otherwise permitted by law, the Agreement and the Warrants, and that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding the Purchaser or its plan of distribution.

 

7.3           Indemnification.  For
the purpose of this Section 7.3:

 

(i)         the term
“Purchaser/Affiliate” shall mean any affiliate of the Purchaser (as defined in
Rule 405 promulgated under the Securities Act), including a transferee who is
an affiliate of the Purchaser, and any person who controls the Purchaser or any
affiliate of the Purchaser within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act; and

 

(ii)        the term “Registration Statement” shall include any final prospectus,
exhibit, supplement or amendment included in or relating to, and any document
incorporated by reference in, the Registration Statement referred to in Section
7.1 hereof.

 

(a)           The Company agrees to indemnify and hold harmless each Purchaser and
each Purchaser/Affiliate against any losses, claims, damages, liabilities or
expenses, joint or

 

15

 

several, to which such
Purchaser or Purchaser/Affiliate may become subject, under the Securities Act,
the Exchange Act, or any other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such settlement
is effected with the prior written consent of the Company), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, including the Prospectus, financial statements and schedules, and
all other documents filed as a part thereof, as amended at the time of
effectiveness of the Registration Statement, including any information deemed
to be a part thereof as of the time of effectiveness pursuant to paragraph (b)
of Rule 430A, of the Rules and Regulations, or the Prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations, or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state in any
of them a material fact required to be stated therein or necessary to make the
statements in any of them (and in the case of the Prospectus, in the light of
the circumstances under which they were made) not misleading, and will promptly
reimburse each such Purchaser and each such Purchaser/Affiliate for any legal
and other expenses as such expenses are reasonably incurred by such Purchaser
or such Purchaser/Affiliate in connection with investigating, defending or
preparing to defend, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the
Company will not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage, liability or expense arises out of
or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Purchaser expressly
for use therein, or (ii) any statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the Purchaser
prior to the pertinent sale or sales by the Purchaser.

 

(b)           The Purchaser will severally indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, against
any losses, claims, damages, liabilities or expenses to which the Company, each
of its directors, each of its officers who signed the Registration Statement or
controlling person may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of the Purchaser) insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue or alleged untrue statement of
any material fact contained in the Registration Statement, the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
in reliance upon and in conformity with information furnished to the Company by
or on behalf of the Purchaser expressly for use therein, and will reimburse the
Company, each of its directors, each of its officers who signed the
Registration Statement or controlling person for any legal and other expense
reasonably incurred by the Company, each of its directors, each of its officers
who signed the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action.

 

16

 

(c)           Promptly after receipt by an indemnified party under this Section 7.3
of notice of the threat or commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 7.3, promptly notify the indemnifying party in writing
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party for
contribution or otherwise under the indemnity agreement contained in this
Section 7.3 to the extent it is not prejudiced as a result of such
failure.  In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, (i) if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded, based on an opinion of
counsel reasonably satisfactory to the indemnifying party, that there may be a
conflict of interest between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties, or
(ii) if the defendants in any such action include both the indemnified
party and the indemnifying party, and if the indemnified party is an affiliate
of a broker-dealer, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses, at the indemnified
party’s sole expense, and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties.  Upon receipt of notice from the indemnifying
party to such indemnified party of its election to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 7.3 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal defenses in
accordance with proviso (i) to the preceding sentence or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of action, in each of which cases the reasonable
fees and expenses of counsel shall be at the expense of the indemnifying party
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel, reasonably satisfactory to
such indemnifying party, representing all of the indemnified parties who are
parties to such action).  In no event
shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved in
writing the terms of such settlement; provided that such consent shall
not be unreasonably withheld.  No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and
indemnification could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.

 

(d)           If the indemnification provided for in this Section 7.3 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) of this Section 7.3 in respect to any losses, claims, damages, liabilities
or expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses referred to herein (i)
in such proportion as is appropriate to reflect

 

17

 

the relative benefits
received by the Company and the Purchaser from the private placement of Common
Stock hereunder or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but the relative
fault of the Company and the Purchaser in connection with the statements or
omissions or inaccuracies in the representations and warranties or failure to
comply with the covenants and agreements in this Agreement and/or the
Registration Statement which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations.  The respective relative
benefits received by the Company on the one hand and each Purchaser on the
other shall be deemed to be in the same proportion as the amount paid by such
Purchaser to the Company pursuant to this Agreement for the Shares and
Underlying Shares purchased by such Purchaser that were sold pursuant to the
Registration Statement bears to the difference (the “Difference”) between the
amount such Purchaser paid for the Shares and Underlying Shares that were sold
pursuant to the Registration Statement and the amount received by such
Purchaser from such sale.  The relative
fault of the Company, on the one hand, and each Purchaser on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Company
or by such Purchaser and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.  The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in paragraph (c) of this Section 7.3, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim.  The provisions set
forth in paragraph (c) of this Section 7.3 with respect to the notice of the
threat or commencement of any threat or action shall apply if a claim for
contribution is to be made under this paragraph (d); provided,
however, that no additional notice shall be required with respect to any
threat or action for which notice has been given under paragraph (c) for
purposes of indemnification.  The
Company and each Purchaser agree that it would not be just and equitable if
contribution pursuant to this Section 7.3 were determined solely by pro rata
allocation (even if the Purchaser were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to in this paragraph.  Notwithstanding the provisions of this
Section 7.3, no Purchaser shall be required to contribute any amount in excess
of the amount by which the Difference exceeds the amount of any damages that
such Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.  The Purchasers’
obligations to contribute pursuant to this Section 7.3 are several and not
joint.

 

(e)           Notwithstanding the provisions of this Section 7.3, the Purchaser shall
not be required to indemnify or contribute any amount in excess of the
aggregate amount of the net proceeds received by the Purchaser upon the sale of
the Registrable Securities giving rise to such indemnification or contribution
obligation.

 

7.4           Termination of Conditions and Obligations.  The
restrictions imposed by Section 5 or this Section 7 upon the transferability of
the Shares and the Underlying Shares shall cease and terminate as to any
particular number of the Shares and Underlying Shares, as applicable, upon the
earliest to occur of (i) the sale of the Shares or Underlying Shares, as
applicable, pursuant to the Registration Statement, (ii) the sale of the
Shares or Underlying Shares, as applicable, pursuant to Rule 144 under the
Securities Act, (iii) the passage of two (2) years from

 

18

 

the
expiration date of the Warrants or (iv) such time as an opinion of counsel
satisfactory in form and substance to the Company shall have been rendered to
the effect that such conditions are not necessary in order to comply with the
Securities Act.

 

7.5           Information Available.  So
long as the Registration Statement is effective, the Company will furnish to
the Purchaser:

 

(a)           as soon as practicable after available (but in the case of the Annual
Report to the Stockholders, within 150 days after the end of each fiscal year
of the Company), one copy of (i) its Annual Report to Stockholders (which
Annual Report shall contain financial statements audited in accordance with
generally accepted accounting principles by a national firm of certified public
accountants), (ii) if not included in substance in the Annual Report to
Stockholders, upon the request of Purchaser, its Annual Report on Form 10-K,
(iii) upon request of Purchaser, its quarterly reports on Form 10-Q, and (iv)
the Registration Statement (the foregoing, in each case, excluding exhibits);
and

 

(b)           upon the reasonable request of the Purchaser, a reasonable number of
copies of the Prospectuses, and any supplements thereto, to supply to any other
party requiring such Prospectuses;

 

and the Company, upon the
reasonable request of the Purchaser and with prior notice, will be available to
the Purchaser or a representative thereof at the Company’s headquarters to
discuss information relevant for disclosure in the Registration Statement and
will otherwise cooperate with any Purchaser conducting an investigation for the
purpose of reducing or eliminating such Purchaser’s exposure to liability under
the Securities Act, including the reasonable production of information at the
Company’s headquarters, subject to appropriate confidentiality limitations.

 

7.6           Cooperation.  It shall be a condition
precedent to the obligations of the Company to take any action under Section
7.1 that the Purchaser shall forward to the Company all such information and
materials and shall take all action as may be reasonably required to permit the
Company to comply with the applicable requirements of the Securities Act and
the Commission.

 

7.7           Delay in Effectiveness of Registration
Statement.  If the Registration Statement is not filed
by the Company with the Commission on or prior to the Filing Date, then for
each month, consisting of a thirty (30) day period (a “Month”) (or pro rata
portion thereof), following the Filing Date, until but excluding the date the
Registration Statement is filed, or if the Registration Statement is not
declared effective by the Commission by the Required Effective Date, then for
each Month (or pro rata portion thereof) following the Required Effective Date,
until but excluding the date the Commission declares the Registration Statement
effective, the Company shall, for each such Month (pro rated for any period
less than thirty (30) days), pay the Purchaser with respect to any such
failure, as liquidated damages and not as a penalty, an amount equal to one and
one-half percent (1.5%) of the aggregate purchase price paid by such Purchaser
for its Units pursuant to this Agreement; and for any such Month, such payment
shall be made no later than the fifth (5th) business day of the calendar month
next succeeding the applicable Month for which payment is to be made by the
Company.  Notwithstanding the foregoing
provisions, in no event shall the Company be obligated to pay such liquidated
damages to more than one Purchaser in respect of the same Shares for the same
period of time and in no event shall the Company be required to pay aggregate
liquidated damages under this Section 7.7 in excess of

 

19

 

twelve
percent (12%) of the aggregate purchase price paid by the Purchasers for the
Units pursuant to this Agreement.  Such
payments shall be made to the Purchaser in cash.

 

7.8           Registration. 
Notwithstanding anything to the contrary contained in the Agreement, the
Company shall not be obligated to include in the Registration Statement any
Underlying Shares if the inclusion of the Underlying Shares would violate any
applicable law, rule or regulation or would constitute a breach of the
Company’s obligations under its agreements with the National Association of
Securities Dealers, Inc. or the Nasdaq Stock Market, Inc. or the rules and
regulations promulgated thereunder.  In
such event, the Company shall use commercially reasonable efforts to register
such Underlying Shares for resale, including by filing a separate registration
statement, and, if the Company shall file a separate registration statement,
such registration statement shall be deemed, for purposes of this Agreement, a
“Registration Statement” with the meaning of such defined term herein.

 

7.9           Lock-up.  The Company agrees that,
during the period prior to effectiveness of the Registration Statement, it will
not, without the prior written consent of Purchasers holding a majority of the
Units sold by the Company, directly or indirectly, (i) pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer (any such transaction, a “Transfer”), any shares of the
Company’s Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock (collectively, the “Lock-Up Securities”) or (ii)
enter into any swap or any other agreement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence of
ownership of the Lock-Up Securities, whether any such swap or transaction is to
be settled by delivery of Common Stock or other securities, in cash or
otherwise.  The foregoing sentence shall
not apply to any Transfer involving (A) the shares of Common Stock to be sold
to the Purchasers upon exercise of the Warrants, (B) shares of Common Stock
issued by the Company upon the conversion of convertible securities outstanding
as of the date hereof or upon the exercise of warrants outstanding as of the
date hereof or permitted to be granted hereunder, or upon the exercise of
options granted under the Company’s stock incentive plans, (C) shares of Common
Stock issued under the Company’s employee stock purchase plan after the date
hereof, (D) shares of Common Stock issued in connection with acquisitions, licensing
agreements, joint ventures, strategic alliances or other similar transactions
approved by the Company’s Board of Directors, and (E) warrants to purchase
Common Stock issued to consultants, lessors, lenders or other similar parties
approved by the Company’s Board of Directors.

 

SECTION 8.           Broker’s Fee.  The Purchaser acknowledges that the Company
intends to pay to the Placement Agent a fee in respect of the sale of the Units
and Underlying Shares to the Purchasers. 
Each of the parties hereto hereby represents that, on the basis of any
actions and agreements by it, there are no other brokers or finders entitled to
compensation in connection with the sale of the Shares, the Warrants and the
Underlying Shares to the Purchasers.

 

20

 

SECTION 9.           Notices.  All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
deemed effectively given: (i) upon delivery to the party to be notified; (ii)
when received by confirmed facsimile; (iii) one (1) business day after deposit
with a nationally recognized overnight carrier, specifying next business day
delivery, with written verification of receipt; or (iv) three (3) business
days after being deposited in the U.S. mail, with postage prepaid, addressed to
the party to be notified.  All
communications shall be sent to the Company and the Purchaser as follows or at
such other addresses as the Company or the Purchaser may designate upon ten
(10) days’ advance written notice to the other party:

 

(a)           if to the Company, to:

 

Digimarc
Corporation

19801 SW 72nd Ave., Suite 250

Tualatin, Oregon 97062

Attention:  Robert P. Chamness, Esq.
Facsimile:  (503) 495-4577

 

with a copy
to:

 

Morrison &
Foerster LLP

425 Market Street

San Francisco, California  94105-2482

Attention:  Gavin B. Grover, Esq.

Facsimile:  (415) 268-7522

(b)           if to the Purchaser, at
its address as set forth at the end of this Agreement.

 

SECTION 10.         Changes.  Except in connection with the provisions of
Section 7 of this Agreement, this Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.  The terms and provisions of
Section 7 of this Agreement may be modified, amended or waived, or consent
for the departure therefrom granted, by the written consent of the Company and
the Purchasers holding at least fifty percent (50%) of the Registrable
Securities then held by all Purchasers. 
Any modification, amendment, waiver or consent effected in accordance
with the preceding sentence of this Section 10 shall be binding upon each of
the Company and the Purchasers, and each of their respective successors and
assigns.  Each such waiver or consent
shall be effective only in the specific instance and for the purpose for which
it was given, and shall not constitute a continuing waiver or consent.  By acceptance of any benefits under
Section 7 of this Agreement, the Purchaser hereby agrees to be bound by
the provisions of this Section 10.

 

21

 

SECTION 11.         Headings.  The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.

 

SECTION 12.         Severability.  In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

 

SECTION 13.         Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York and the federal
law of the United States of America. 
Any legal suit, action or proceeding arising out of or based upon this
Agreement or the transactions contemplated hereby may be instituted in the
federal courts of the United States District Court for the Southern District of
New York (collectively, the “Specified Courts”), and each party irrevocably
submits to the non-exclusive jurisdiction of such Specified Courts in any such
suit, action or proceeding.  Service of
any process, summons, notice or document by mail to such party’s address set
forth herein shall be effective service of process for any suit, action or
other proceeding brought in any such Specified Courts.  The parties irrevocably and unconditionally
waive any objection to the laying of venue of any suit, action or other
proceeding in the Specified Courts and irrevocably and unconditionally waive
and agree not to plead or claim in any such court that any such suit, action or
other proceeding brought in any such court has been brought in an inconvenient
forum.

 

SECTION 14.         Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered (including by facsimile) to the other parties.

 

SECTION 15.         Entire Agreement.
This Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Purchaser makes any representation, warranty, covenant or
undertaking with respect to such matters.

 

SECTION 16.         Assignment.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the parties hereto and their respective permitted successors, assigns,
heirs, executors and administrators. 
This Agreement and the rights of the Purchaser hereunder may be assigned
by the Purchaser with the prior written consent of the Company, which consent
will not be unreasonably withheld, except such consent shall not be required in
cases of assignments by an investment adviser to a fund for which it is the
adviser or by or among funds that are under common control, provided that such
assignee agrees to be bound by the terms of this Agreement.  Notwithstanding anything to the contrary in
this Agreement, the Purchaser may not assign or otherwise transfer the
Warrants, or any rights therein, and any attempt to do so shall be null and
void.

 

22

 

SECTION 17.         Further Assurances.  Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurance as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and
purposes of this Agreement.

 

[Remainder of Page Left Intentionally Blank]

 

23

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed by their
duly authorized representatives as of the day and year first above written.

 

 

	
   

  	
  DIGIMARC CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
    /s/ Bruce Davis

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print or Type:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name of Purchaser

  
	
   

  	
  (Individual or Institution):

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name of Individual representing

  
	
   

  	
  Purchaser (if an Institution):

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title of Individual representing

  
	
   

  	
  Purchaser (if an Institution):

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Individual Purchaser or Individual

  
	
   

  	
  representing Purchaser:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telecopier:

  	
   

  	
   

  
								

 

24

 

SUMMARY INSTRUCTION SHEET FOR PURCHASER

 

(to be read in conjunction with the entire

Purchase Agreement which this follows)

 

A.            Complete
the following items on BOTH
Purchase Agreements (Please sign two originals):

 

1.                                       Page
24 - Signature:

 

(i)                                     Name of Purchaser
(Individual or Institution)

 

(ii)                                  Name of Individual
representing Purchaser (if an Institution)

 

(iii)                               Title of Individual
representing Purchaser (if an Institution)

 

(iv)                              Signature of Individual
Purchaser or Individual representing Purchaser

 

2.                                       Appendix I -
Certificate Questionnaire/Registration Statement Questionnaire:

 

Provide the
information requested by the Certificate Questionnaire and the Registration
Statement Questionnaire.

 

3.                                       Return BOTH properly completed and signed Purchase
Agreements including the properly completed Appendix I to (initially by
facsimile with hard copy by overnight delivery):

 

SG Cowen
Securities Corporation

Private Equity Group

1221 Avenue of the Americas

New York, New York  10020

Attention:  Richard E. Gormley

Facsimile:  212-278-5503

 

B.            Instructions regarding
the transfer of funds for the purchase of Units will be sent by facsimile to
the Purchaser by the Placement Agent at a later date.

 

C.            Upon the resale of the
Registrable Securities by the Purchasers after the Registration Statement
covering the Registrable Securities is effective, as described in the Purchase
Agreement, the Purchaser:

 

(i)                                     must deliver a
current prospectus of the Company to the buyer (prospectuses must be obtained
from the Company at the Purchaser’s request); and

 

 

(ii)                                  must send a letter in
the form of Appendix II to the Company so that the Registrable Securities may
be properly transferred.

 

 

APPENDIX I

 

DIGIMARC CORPORATION

CERTIFICATE QUESTIONNAIRE

 

Pursuant to
Section 3 of the Agreement, please provide us with the following information: 

 

	
  1.

  	
   

  	
  The exact
  name that your Shares, Warrant and any Underlying Shares are to be registered
  in (this is the name that will appear on your stock certificate(s) and
  Warrant).  You may only use a nominee
  name for your stock certificate(s). 
  The Warrant shall be in the name of the Purchaser:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  The
  relationship between the Purchaser of the Shares, the Warrant and Underlying
  Shares and the Registered Holder listed in response to item 1 above, if
  different:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  The mailing
  address of the Registered Holder listed in response to item 1 above:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  The Social
  Security Number or Tax Identification Number, if any, of the Purchaser and,
  if applicable, the Registered Holder listed in response to item 1 above:

  	
   

  	
   

  

 

1

 

DIGIMARC CORPORATION

REGISTRATION STATEMENT QUESTIONNAIRE

 

In connection
with the preparation of the Registration Statement, please provide us with the
following information:

 

SECTION
1.  Pursuant to the “Selling
Stockholder” section of the Registration Statement, please state your or your
organization’s name exactly as it should appear in the Registration Statement:

 

SECTION
2.  Please provide the number of shares
that you or your organization will own immediately after Closing, including
those Shares purchased by you or your organization pursuant to this Purchase
Agreement, the number of Underlying Shares issuable upon exercise of your
Warrant and those shares purchased by you or your organization through other
transactions:

 

SECTION
3.  Please provide the names, titles and
contact information of all natural persons who have voting or investment
control over the Registrable Securities purchased by you or your organization
pursuant to this Purchase Agreement and purchasable by you or your organization
pursuant to the Warrant:

 

 

 

 

SECTION
4.  Have you or your organization had
any position, office or other material relationship within the past three years
with the Company or its affiliates?

 

o Yes
     o No

 

If yes, please
indicate the nature of any such relationships below:

 

 

 

2

 

SECTION
5.  (a) Are you (i) an NASD Member
(see definition), (ii) a Controlling (see definition) shareholder of an NASD
Member, (iii) a Person Associated with a Member of the NASD (see definition),
or (iv) an Underwriter or a Related Person (see definition) with respect to the
proposed offering; or (b) do you own any shares or other securities of any NASD
Member not purchased in the open market; or (c) have you made any outstanding
subordinated loans to any NASD Member?

 

Answer:  o
Yes    o
No   If “yes,” please describe below

 

 

 

 

NASD Member. 
The term “NASD member” means either any broker or any dealer admitted to
membership in the National Association of Securities Dealers, Inc.
(“NASD”).  (NASD Manual, By-laws Article
I, Definitions)

 

Control. 
The term “control” (including the terms “controlling,” “controlled by”
and “under common control with”) means the possession, direct or indirect, of
the power, either individually or with others, to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities, by contract, or otherwise. 
(Rule 405 under the Securities Act of 1933, as amended)

 

Person Associated with a member of the NASD.  The term “person associated with a member of
the NASD” means every sole proprietor, partner, officer, director, branch
manager or executive representative of any NASD Member, or any natural person
occupying a similar status or performing similar functions, or any natural
person engaged in the investment banking or securities business who is directly
or indirectly controlling or controlled by a NASD Member, whether or not such
person is registered or exempt from registration with the NASD pursuant to its
bylaws.  (NASD Manual, By-laws Article
I, Definitions)

 

Underwriter or a Related Person.  The term “underwriter or a related person”
means, with respect to a proposed offering, underwriters, underwriters’
counsel, financial consultants and advisors, finders, members of the selling or
distribution group, and any and all other persons associated with or related to
any of such persons.  (NASD
Interpretation)

 

3

 

APPENDIX II

[Transfer Agent]

[Address]

 

Attention:

 

PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE

 

The
undersigned, [an officer of, or other person duly authorized by]

 

                                                                                                                                                  
hereby certifies

[fill in official name of individual or institution]

 

that he/she [said institution]
is the Purchaser of the shares evidenced by the attached certificate,

 

and as such, sold such shares on
                                      in accordance with the terms of the 

[date]

 

Purchase Agreement and in accordance with
Registration Statement

 

number
                                                                                                              
or otherwise in accordance with 

[fill in the number of or
otherwise identify Registration Statement]

 

the Securities Act of 1933, as amended, and,
in the case of a transfer pursuant to the Registration

 

Statement, the requirement of delivering a
current prospectus by the Company has been

 

complied with in connection with such sale.

 

Print or Type: 

 

	
  Name of Purchaser

  (Individual or

  Institution):

  	
   

  
	
   

  	
   

  
	
  Name of Individual

  representing

  Purchaser (if an

  Institution):

  	
   

  
	
   

  	
   

  
	
  Title of Individual

  representing

  Purchaser (if an

  Institution):

  	
   

  
	
   

  	
   

  
	
  Signature by:

  Individual Purchaser

  or Individual repre-

  senting Purchaser:

  	
   

  

 

 

EXHIBIT A

Form of Warrant

 

NEITHER THESE SECURITIES NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS
OF THE STATES AND OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT
FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.

 

DIGIMARC CORPORATION

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

	
  Warrant No.
  [           ]

  	
   

  	
  Dated: August [     ], 2003

  

 

Digimarc Corporation, a Delaware corporation (the “Company”), hereby
certifies that, for value received, [                    ]
(the “Holder”), is entitled to purchase from the Company up to a total of [                     ]
shares of common stock, $0.001 par value per share (“Common Stock”), of the
Company (each such share, a “Warrant Share” and all such shares, the “Warrant
Shares”) at an exercise price equal to $14.00 per share (as adjusted from time
to time as provided in Section 8, the “Exercise Price”), at any time and from
time to time from and including the date the Registration Statement is declared
effective by the Commission (the “Effective Date”) and through and including
the 15th calendar day (or if such calendar day is a Saturday, Sunday or federal
holiday, the next business day) after the Effective Date (the “Expiration
Date”), subject to the terms and conditions herein, provided, however, that if
there is a Suspension of the Registration Statement following the Effective
Date and prior to the original Expiration Date, such original Expiration Date
shall be automatically extended until such time as the Suspension is terminated
and, thereafter, the Expiration Date, for purposes of this Warrant, shall be
such date following the number of days remaining in the original exercise
period as of the date of the Suspension. This Warrant to Purchase Shares of
Common Stock (this “Warrant”) is one of a series of similar Warrants issued
pursuant to those certain Purchase Agreements, each dated as of the date
hereof, by and between the Company and each of the purchasers whose names are
set forth on the signature pages thereof (hereinafter, the “Purchase
Agreement”).

 

1.   Definitions.  In addition to the terms defined elsewhere
in this Warrant, capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Purchase Agreement.

 

 

2.   Registration
of Warrant.  The Company shall
register this Warrant, upon records to be maintained by the Company for that
purpose, in the name of the Holder. The Company may deem and treat the
registered Holder as the absolute owner of this Warrant for the purpose of any
exercise hereof and for all other purposes.

 

3.   Exercise
and Duration of Warrant.

 

(a)  Subject to the other terms and conditions contained
herein, this Warrant shall be exercisable by the registered Holder at any time
and from time to time on or after the Effective Date and through and including
the Expiration Date.  At 6:30 P.M., New
York City time on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value and this Warrant
shall be terminated and no longer outstanding.

 

(b)  The Holder may exercise this Warrant by delivering to
the Company (i) an exercise notice, in the form attached hereto (the “Exercise
Notice”), completed and duly signed, (ii) payment of the Exercise Price for the
number of Warrant Shares as to which this Warrant is being exercised, and
(iii) the original Warrant, and the date such items are delivered to the
Company (as determined in accordance with the notice provisions hereof) is an
“Exercise Date.” The delivery by the Holder of the Exercise Notice, the
applicable Exercise Price and the Warrant as provided above shall constitute
the Holder’s certification to the Company that its representations contained in
Sections 5(a)(i)-(viii), (b), (d), (e), (f), (h) and (i) of the Purchase
Agreement as to the Warrant Shares to be purchased pursuant to this Warrant are
true and correct as of the Exercise Date as if remade in their entirety herein.

 

4.   Delivery
of Warrant Shares.

 

(a)  Subject to the other terms and conditions contained
herein, upon exercise of this Warrant, the Company shall promptly issue or
cause to be issued and cause to be delivered to or upon the written order of
the Holder and in such name or names as the Holder may designate a certificate
for the Warrant Shares issuable upon such exercise. The Holder, or any Person
so designated by the Holder to receive Warrant Shares, shall be deemed to have
become holder of record of such Warrant Shares as of the Exercise Date.

 

(b)  This Warrant is exercisable either in its entirety or,
from time to time as provided herein, for a portion of the number of Warrant
Shares. Upon surrender of this Warrant following a partial exercise, the
Company shall promptly issue or cause to be issued, at its expense, a new
Warrant evidencing the right to purchase the remaining number of Warrant
Shares.

 

5.   Charges,
Taxes and Expenses.   Issuance and delivery of certificates
for shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares in a name other than that of the Holder or an
affiliate thereof. The Holder shall be

 

 

responsible
for all other tax liability that may arise as a result of holding this Warrant
or receiving Warrant Shares upon exercise hereof.

 

6.   Replacement
of Warrant.   If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a new Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and, if
requested, customary and reasonable indemnity, if requested. If the Holder
seeks a new Warrant under such circumstances, it shall also comply with such
other reasonable regulations and procedures and pay such other reasonable third
party costs as the Company may prescribe.

 

7.   Issuance
of Warrant Shares.   The Company covenants that all Warrant
Shares issuable and deliverable upon exercise hereof shall, upon issuance and
the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized and issued, fully paid and nonassessable.

 

8.   Certain
Adjustments.   The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8.

 

(a)  Stock Dividends and Splits.   If
the Company, at any time while this Warrant is outstanding, (i) pays a stock
dividend on its Common Stock or otherwise makes a distribution on any class of
capital stock that is payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, or (iii)
combines outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution, and any adjustment pursuant
to clauses (ii) or (iii) of this paragraph shall become effective immediately
after the effective date of such subdivision or combination.

 

(b)  Pro Rata Distributions.   If the
Company, at any time while this Warrant is outstanding, distributes to all
holders of Common Stock (i) evidences of its indebtedness, (ii) any security
(other than a distribution of Common Stock covered by the preceding paragraph),
(iii) rights or warrants to subscribe for or purchase any security, or (iv) any
other asset (in each case, “Distributed Property”), then, upon the exercise of
the Warrant that occurs after the record date fixed for determination of
stockholders entitled to receive such distribution, the Holder shall be
entitled to receive, in addition to the Warrant Shares otherwise issuable upon
such exercise (if applicable), the Distributed Property distributed in respect
of one share of Common Stock to holders of Common Stock as of such record date
times the number of Warrant Shares for which the Holder exercises this Warrant
(appropriately adjusted for any stock splits, combination or similar event
between such record date and such exercise).

 

 

(c)  Fundamental Transactions.   If, at
any time while this Warrant is outstanding, (i) the Company effects any merger
or consolidation of the Company with or into another person, (ii) the Company
effects any sale of all or substantially all of its assets in one or a series
of related transactions, (iii) any tender offer or exchange offer (whether by
the Company or another person) is consummated pursuant to which a majority of
holders of Common Stock tender or exchange their shares for other securities,
cash or property, or (iv) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property (other than as a result of a subdivision or combination of shares of
Common Stock covered by Section 8(a) above) (in any such case, a “Fundamental
Transaction”), then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the same amount and kind of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of the number of Warrant Shares then issuable upon
exercise in full of this Warrant (the “Alternate Consideration”). The aggregate
Exercise Price for this Warrant will not be affected by any such Fundamental
Transaction, but the Company shall apportion such aggregate Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. At the
Holder’s request, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new Warrant consistent with
the foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof.
The terms of any agreement pursuant to which a Fundamental Transaction is
effected shall include terms requiring any such successor or surviving entity
to comply with the provisions of this paragraph (c) and insuring that the
Warrant (or any such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.

 

(d)  Number of Warrant Shares.   Simultaneously
with any adjustment to the Exercise Price pursuant to paragraph (a) of this
Section, the number of Warrant Shares that may be purchased upon exercise of
this Warrant shall be increased or decreased proportionately, so that after
such adjustment the aggregate Exercise Price payable hereunder for the
increased or decreased number of Warrant Shares shall be the same as the
aggregate Exercise Price in effect immediately prior to such adjustment.

 

(e)  Calculations.   All calculations
under this Section 8 shall be made to the nearest cent or the nearest 1/100th
of a share, as applicable. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company; provided that such shares, upon disposition to a third party,
shall then be considered outstanding. Any interpretation or determination
required by this Warrant shall be made by the Company’s Board of Directors in
good faith.

 

(f)  Notice of Adjustments.   Upon the
occurrence of each adjustment pursuant to this Section 8, the Company at its
expense will, at the written request of the Holder, promptly compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate

 

 

setting forth
such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in reasonable detail the facts upon which
such adjustment is based, and deliver a copy of each such certificate to the
Holder.

 

(g)  Notice of Corporate Events.   If,
while this Warrant is outstanding, the Company (i) declares a dividend or any
other distribution of cash, securities or other property in respect of all of
its Common Stock, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of the
affairs of the Company, then the Company shall deliver to the Holder a notice
describing the material terms and conditions of such transaction, at least 15
business days prior to the applicable record or effective date on which a
person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps necessary in
order to insure that the Holder is given the practical opportunity to exercise
this Warrant, pursuant to the terms and conditions herein, prior to such time
so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall
not affect the validity of the corporate action required to be described in
such notice.

 

9.   Payment
of Exercise Price.   The Holder shall pay the Exercise Price
in immediately available funds.

 

10.     Limitation
on Exercise.   Notwithstanding anything to the contrary
contained in this Warrant, if the sale of Warrant Shares upon exercise of this
Warrant would violate any law, rule or regulation or the issuance of such Warrant
Shares would constitute a breach of the Company’s obligations under its
agreements with the National Association of Securities Dealers, Inc. or the
Nasdaq Stock Market, Inc. or the rules and regulations promulgated thereunder,
the Company shall use commercially reasonable efforts upon exercise of the
Warrant to issue as “restricted securities” (within the meaning of the
Securities Act of 1933, as amended) the Warrant Shares or an equivalent number
of shares of Common Stock to the Holder for the aggregate Exercise Price.

 

11.     Fractional
Shares.   The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
If any fraction of a Warrant Share would, except for the provisions of this
Section, be issuable upon exercise of this Warrant, the number of Warrant
Shares to be issued will be rounded down to the nearest whole share.

 

12.     Notices.   All
notices, requests, consents and other communications required or permitted
hereunder (including without limitation any Exercise Notice) shall be in
writing and shall be deemed effectively given: (i) upon delivery to the party
to be notified; (ii) when received by confirmed facsimile; (iii) one (1)
business day after deposit with a nationally recognized overnight carrier,
specifying next business day delivery, with written verification of receipt; or
(iv) three (3) business days after being deposited in the U.S. mail, with
postage prepaid, addressed to the party to be notified.  The address and facsimile numbers for such
notices or communications shall be as set forth in the Purchase Agreement.

 

 

13.     Miscellaneous.

 

(a)  Notwithstanding anything to the contrary in this
Purchase Agreement, the Holder may not assign or otherwise transfer this
Warrant, or any rights herein, and any attempt to do so shall be null and
void.  This Warrant may not be assigned
by the Company except to a successor in the event of a Fundamental Transaction.
Nothing in this Warrant shall be construed to give to any person other than the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder.

 

(b)  The Company will not, by amendment of its governing
documents or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.

 

(c)  This Warrant shall be governed by and construed in accordance
with the laws of the State of New York and the federal law of the United States
of America.  Any legal suit, action or
proceeding arising out of or based upon this Warrant or the transactions
contemplated hereby may be instituted in the federal courts of the United
States District Court for the Southern District of New York (collectively, the
“Specified Courts”), and each party irrevocably submits to the non-exclusive
jurisdiction of such Specified Courts in any such suit, action or proceeding.  Service of any process, summons, notice or
document by mail to such party’s address set forth herein shall be effective
service of process for any suit, action or other proceeding brought in any such
Specified Courts.  The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably
and unconditionally waive and agree not to plead or claim in any such court
that any such suit, action or other proceeding brought in any such court has
been brought in an inconvenient forum.

 

(d)  The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE

FOLLOWS]

 

 

IN WITNESS
WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

 

	
   

  	
  DIGIMARC
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
								

 

 

FORM OF EXERCISE NOTICE

 

(To be executed by the Holder to exercise the right to purchase shares
of Common Stock under

the foregoing Warrant)

 

	
  To:

  	
  DIGIMARC
  CORPORATION

  
	
   

  	
  Attn:

  	
  Controller

  

 

The
undersigned is the Holder of Warrant No.
             (the
“Warrant”) issued by DIGIMARC CORPORATION, a Delaware corporation (the
“Company”). Capitalized terms used herein and not otherwise defined have the
respective meanings set forth in the Warrant.

 

1.                    The Warrant is currently
exercisable to purchase a total of              
Warrant Shares. 

 

2.                    The undersigned Holder hereby
exercises its right to purchase
            
Warrant Shares pursuant to the Warrant. 

 

3.                    The Holder shall pay the sum of
$             to
the Company in accordance with the terms of the Warrant. 

 

4.                    Pursuant to this exercise, the
Company shall deliver to the holder
            
Warrant Shares in accordance with the terms of the Warrant. 

 

5.                    Following this exercise, the
Warrant shall be exercisable to purchase a total of
             
Warrant Shares. 

 

 

	
  Dated:

  	
   

  	
  ,

  	
  Name of
  Holder:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Print)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform in all respects to name of holder as
  specified on the face of the Warrant)

  
											

 

 

EXHIBIT B

Form of Legal Opinion

 

[Morrison & Foerster LLP Letterhead]

 

 

August
[    ], 2003

 

 

SG Cowen Securities Corporation

Attn:  Private Equity Group

1221 Avenue of the Americas

New York, New York  10020

 

Re:  Digimarc Corporation

 

Ladies and Gentlemen:

 

We have acted
as counsel for Digimarc Corporation, a Delaware  corporation (the “Company”),
in connection with the issuance and sale of up to 1,785,996 separable units
(the “Units”), with each Unit representing (i) one share of common
stock, par value $0.001 per share (“Common Stock”), of the Company and
(ii) a Warrant to purchase an additional 0.15 of a share of Common Stock
on the terms and conditions set forth therein (collectively, the “Warrants”).  The Units are being issued and sold pursuant
to the Purchase Agreements, dated as of August 22, 2003 (each an “Agreement”
and, collectively, the “Agreements”), by and between the Company and
each of the purchasers whose names are set forth on the signature pages thereof
(each a “Purchaser” and, collectively, the “Purchasers”).  This opinion is furnished to you pursuant to
Section 4.20 of the Agreements.

 

We have
examined originals or copies of the Agreements, including the form of Warrant
attached thereto as Exhibit A, and such records, documents and
certificates of public officials and a certificate of Robert P. Chamness, Esq.,
Vice President of Human Resources, General Counsel, Chief Legal Officer and
Secretary of the Company, dated August [    ], 2003 (the “Opinion
Certificate”), made such inquiries of certain officers of the Company and
considered such questions of law as we have deemed necessary for the purpose of
rendering the opinion set forth herein. 
In rendering this opinion, we have relied upon the Opinion Certificate
as to certain factual matters.  We have
made no independent investigation of the accuracy or completeness of such
matters, but we have no actual knowledge of any such inaccuracy or
incompleteness.

 

We have
assumed the genuineness of all signatures, the authenticity of all items
submitted to us as originals and the conformity with originals of all items
submitted to us as copies.  In making
our examination of the Agreements, we have assumed that each party to the
Agreements (other than the Company) has capacity (with respect to any party that
is an

 

 

individual) and the power and
authority (with respect to any party that is not an individual) to execute and
deliver, and to perform and observe the provisions of, the applicable
Agreement, and has duly authorized, executed and delivered such Agreement, and
that such Agreement constitutes the legal, valid and binding obligations of
such party, enforceable against such party in accordance with its terms.  We also have assumed that the current Board
of Directors of the Company was validly elected.

 

Our opinion in
paragraph 1 below as to the good standing of the Company is based solely
on a certificate of the Secretary of State of the State of Delaware.  We have made no independent investigations
as to whether the certificate is accurate or complete, but we have no actual
knowledge of any such inaccuracy or incompleteness.

 

With respect
to the opinions expressed in paragraphs 6 and 7 below, we have assumed that the
Purchasers are acquiring the Units with no present intention of distributing
the same.  In rendering our opinion
expressed in paragraphs 6 and 7 below, we also have relied upon
(i) the representations and warranties of the Purchasers  contained
in the Agreements, which we have assumed to be true and correct in all respects
as of the date hereof, and (ii) the Opinion Certificate.

 

Our opinions
in paragraphs 3(ii) and 7 are based on a review of those statutes and
regulations of the State of New York, the General Corporation Law of the State
of Delaware and the federal laws of the United States of America which, in our
experience, are normally applicable to the transactions of the type
contemplated by the Agreements.

 

Whenever our
opinion herein with respect to the existence or absence of facts is indicated
to be based on our knowledge, it is intended to signify that, in the course of
our representation of the Company in connection with the transaction referred
to in the first paragraph hereof, none of Gavin Grover or Peter Romo has
acquired actual knowledge of the existence or absence of such facts.  While the above named persons are the
principal attorneys of this firm who have been actively engaged in the
representation of the Company in connection with that matter, other attorneys
of the firm have represented and continue to represent the Company on other
matters.  We have not undertaken any
independent investigation to determine the existence or absence of such facts,
and no inference as to our knowledge of the existence or absence of such facts
should be drawn from the fact of our representation of the Company.

 

The opinions
hereinafter expressed are subject to the following further qualifications and
exceptions:

 

(i)            We express no opinion
as to the effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, including, without limitation, laws relating to fraudulent
transfers or conveyances, preferences and equitable subordination;

 

(ii)           We express no opinion
as to limitations imposed by general principles of equity upon the availability
of equitable remedies or the enforcement of provisions of the Agreements, and
the effect of judicial decisions which have held that certain provisions are
unenforceable where their enforcement would violate the implied covenant of
good faith and fair dealing, or

 

 

would be commercially
unreasonable, or where a default under a provision of any Agreement is not
material;

 

(iii)          Except to the extent
encompassed by an opinion set forth below with respect to the Company, we
express no opinion as to the effect on the opinions expressed herein of (a) the
compliance or non-compliance of any party to an Agreement with any law,
regulation or order applicable to it, or (b) the legal or regulatory status or
the nature of the business of any such party.

 

(iv)          We express no opinion as
to compliance by the Company with any state securities or “blue sky” law.

 

(v)           We express no opinion
as to the effect of judicial decisions which may permit the introduction of
extrinsic evidence to supplement the terms of the Agreements or to aid in the
interpretation of the Agreements;

 

(vi)          We express no opinion as
to the enforceability of provisions of the Agreements providing for
indemnification or contribution, to the extent such indemnification or
contribution is against public policy;

 

(vii)         We express no opinion as
to the enforceability of provisions of the Agreements which are construed as
effectively imposing a penalty;

 

(viii)        We express no opinion as
to the enforceability of a requirement that provisions of the Agreements may only
be modified in writing to the extent an oral agreement has been executed
modifying provisions of an Agreement;

 

(ix)           We express no opinion
as to the enforceability of any provisions of the Agreements requiring the
Company to submit to the jurisdiction of any New York federal court or
providing that disputes arising under the Agreements are to be determined by
any such court;

 

(x)            Our opinion is based
upon current statutes, rules, regulations, cases and official interpretive
opinions, and it covers certain items that are not directly or definitively
addressed by such authorities;

 

(xi)           We express no opinion
as to compliance with applicable antifraud statutes, rules or regulations of
applicable state and federal laws concerning the issuance or sale of securities;

 

(xii)          We express no opinion as
to compliance with any federal or state antitrust laws, or other federal or
state laws governing restricted trade or unfair competition, including, without
limitation, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended;

 

(xiii)         We express no opinion as
to the enforceability of provisions of the Agreements expressly or by
implication waiving broadly or vaguely stated rights, or waiving rights granted
by law, where such waivers are against public policy;

 

(xiv)        We express no opinion as
to the circumstances under which rights of setoff may be exercised;

 

 

(xv)         We express no opinion as
to the tax treatment of the transactions contemplated by the Agreements; and

 

(xvi)        We express no opinion as
to the fairness of the transactions contemplated by the Agreements to the
Company or its stockholders.

 

Based upon and
subject to the foregoing, we are of the opinion that:

 

1.             The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.

 

2.             The Company has the
corporate power and authority to execute and deliver and to perform and observe
its obligations under the Agreements. 
The Agreements and the Warrants have each been duly authorized, executed
and delivered by the Company and each Agreement and Warrant constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.

 

3.             The execution and
delivery by the Company of the Agreements, and the issuance of the Units as
contemplated therein, (i) do not violate any provision of the Second
Amended and Restated Certificate of Incorporation, as amended (the “Certificate
of Incorporation”), or the Amended and Restated Bylaws, as amended (the “Bylaws”),
of the Company, and (ii) do not violate any federal or New York state
statute or regulation applicable to the Company, or the General Corporation Law
of the State of Delaware.

 

4.             The Units to be
received by each Purchaser pursuant to the Agreement, and the Common Stock to
be received by each Purchaser pursuant to the exercise of the Warrants, have
been duly authorized and, upon issuance and delivery against payment therefor
in accordance with the terms of the Agreement and, in the case of Common Stock
issuable pursuant to the exercise of the Warrants, in accordance with the terms
of the Warrants, will be validly issued, fully paid and nonassessable.

 

5.             There are no
pre-emptive rights to subscribe for or purchase any shares of the Company’s
capital stock pursuant to the Certificate of Incorporation or the Bylaws.

 

6.             Assuming the filing
of a Form D in accordance with Regulation D under the Securities Act of 1933,
as amended (the “Securities Act”), the offer and sale of the Units
pursuant to the terms of the Agreements are exempt from the registration
requirements of the Securities Act.

 

7.             Other than the filing
of a Form D in accordance with Regulation D under the Securities Act,
no registration with, consent or approval of, notice to, or other action by,
any New York, Delaware corporate or federal governmental entity is required on
the part of the Company for the execution and delivery by the Company of the
Agreements, or for the issuance and sale by the Company of the Units, or
(except for state securities and “blue sky” laws, as to which we express no
opinion) if required, such registration has been made, such consent or approval
has been obtained, such notice has been given or such other appropriate action
has been taken.

 

We express no
opinion as to matters governed by any laws other than the substantive laws of
the State of New York, the General Corporation Law of the State of Delaware and
the federal laws of the United States of America, in each case which are in
effect on the date hereof.  

 

 

We express no opinion as to the
effect on the opinions express herein of any laws other than the laws of the
State of New York, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America. 
We have assumed that no provision of the Agreements violates the public
policy of any jurisdiction, other than the State of New York, having a
substantial relationship to the transactions contemplated by the Agreements, or
federal laws of the United States, and that no provision of the law of the
State of New York, the corporate law of the State of Delaware or federal law
applicable to the Agreements violates the public policy of any such other
jurisdiction.  We express no opinion as
to whether the laws of any particular jurisdiction apply, and no opinion to the
extent the laws of any jurisdiction, other than those identified above, are
applicable to the subject matter hereof.

 

This opinion
is solely for your benefit and the benefit of each of the Purchasers and may
not be relied on by, nor may copies be delivered to, any other person, other
than each of the Purchasers, without our prior written consent.

 

Very truly yours,

 

 

EXHIBIT C

 

	
  Name of
  Subsidiary

  	
   

  	
  Jurisdiction of Formation

  
	
   

  	
   

  	
   

  
	
  Digimarc ID
  Systems, LLC

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  Digimarc ID
  Systems II, LLC

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  Digimarc ID
  Systems International

  	
   

  	
  Cayman
  Islands

  
	
   

  	
   

  	
   

  
	
  Digimarc ID
  Systems (UK) Limited

  	
   

  	
  United
  Kingdom

  
	
   

  	
   

  	
   

  
	
  Digimarc ID
  Systems Canada Co.

  	
   

  	
  Canada

  
	
   

  	
   

  	
   

  
	
  Digimarc ID
  Systems Brasil, Ltda.

  	
   

  	
  Brazil

  

 

 

Schedule of Exceptions

 

This Schedule of Exceptions, dated as of
August 22, 2003, is delivered to the Purchaser (as defined below) in connection
with the Purchase Agreements, dated as of August 22, 2003 (collectively, the
“Agreements”), by and between Digimarc Corporation, a Delaware corporation (the
“Company”), and each of the purchasers whose names are set forth on the
signature pages thereof (each a “Purchaser”). 
Any information disclosed or incorporated herein under any section
number of this Schedule of Exceptions and any information disclosed in any
documents incorporated herein by reference shall be deemed to be disclosed only
for purposes of the sections to which it relates, unless a reasonable person
would determine that the disclosure contained in such section contains enough
information to qualify or otherwise apply to other representations and
warranties of the Company.  Section
headings are provided for convenience only. 
Where any representation or warranty is limited or qualified by the
materiality of the matters to which the representation or warranty is given,
the inclusion of any matter in this Schedule of Exceptions does not constitute
a determination by the Company that such matter is material.  Unless otherwise defined, any capitalized
terms in this Schedule of Exceptions shall have the same meanings assigned to
such terms in the Agreements.  Nothing
in this Schedule of Exceptions constitutes an admission of any liability or
obligation of the Company to any third party, nor an admission against the
Company’s interests.

 

4.3          Issuance, Sale and Delivery of the
Shares.

 

                The Company has granted registration rights
with respect to the Company’s securities pursuant to the following agreements:

 

                1) 
The Second Amended and Restated Investor Rights Agreement, dated as of November
2, 1999, by and among the Company and certain stockholders of the Company
listed on the signature pages thereto; and

 

                2) 
Each of two (2) Strategic Investment Agreements, each dated as of
September 17, 2000, as amended, between the Company and each of Macrovision
Corporation and Koninklijke Philips Electronics N.V.

 

                The Company will use commercially reasonable
efforts to obtain from the applicable stockholders waivers of their rights to
require the Company to register the sale of any shares owned by such
stockholders under the Securities Act in the Registration Statement.

 

 

SCHEDULE REGARDING OMITTED DOCUMENTS PURSUANT
TO ITEM 601(a) OF REGULATION S-K

 

Digimarc
Corporation entered into a Purchase Agreement in the form set forth above with
each of the following purchasers in connection with each such purchaser’s
purchase of the following number of Units (as defined in the Purchase
Agreement) at the aggregate price set forth below:

 

	
  Name and Address

  of Investor

  	
   

  	
  Number of

  Units

  	
   

  	
  Aggregate

  Price

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SF Capital
  Partners Ltd.

  c/o Staro Asset Management,

  L.L.C.

  3600 South Lake Drive

  St. Francis, WI  53235

  	
   

  	
  100,000

  	
   

  	
  $

  	
  1,400,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Haff
  Partners LP

  c/o Burnham Asset

  Management Corporation

  1325 Avenue of the Americas,

  26th Floor

  New York, NY  10019

  	
   

  	
    50,000

  	
   

  	
  $

  	
  700,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Harvey
  Gelfenbein

  c/o Burnham Asset

  Management Corporation

  1325 Avenue of the Americas,

  26th Floor

  New York, NY  10019

  	
   

  	
    12,500

  	
   

  	
  $

  	
  175,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Irwin W.
  Silverberg

  c/o Burnham Asset

  Management Corporation

  1325 Avenue of the Americas,

  26th Floor

  New York, NY  10019

  	
   

  	
    18,500

  	
   

  	
  $

  	
  259,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Suzanne
  Chase

  c/o Burnham Asset

  Management Corporation

  1325 Avenue of the Americas,

  26th Floor

  New York, NY  10019

  	
   

  	
    4,000

  	
   

  	
  $

  	
  56,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John P.
  Rosenthal

  c/o Burnham Asset

  Management Corporation

  1325 Avenue of the Americas,

  26th Floor

  New York, NY  10019

  	
   

  	
  15,000

  	
   

  	
  $

  	
  210,000.00

  

 

 

	
  Paisley
  Pacific Master Fund

  Unit Trust

  388 Market Street, Suite 1700

  San Francisco, CA  94111

  	
   

  	
    30,000

  	
   

  	
  $

  	
  420,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Paisley
  Fund, L.P.

  388 Market Street, Suite 1700

  San Francisco, CA  94111

  	
   

  	
    45,000

  	
   

  	
  $

  	
  630,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Portside
  Growth and

  Opportunity Fund

  c/o Ramius Capital Group,

  LLC

  666 Third Avenue, 26th Floor

  New York, NY  10017

  	
   

  	
  107,142

  	
   

  	
  $

  	
  1,499,988.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BayStar
  Capital Management

  LLC

  80 E. Sir Francis Drake Blvd.,

  #2B

  Larkspur, CA  94939

  	
   

  	
  146,428

  	
   

  	
  $

  	
  2,049,992.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gem Partners
  L.P.

  153 E. 53rd Street, 48th Floor

  New York, NY  10022

  	
   

  	
    85,714

  	
   

  	
  $

  	
  1,199,996.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UBS O’Connor
  LLC f/b/o

  O’Connor Global Convertible

  Arbitrage Master Limited

  One North Wacker Drive,

  32nd Floor

  Chicago, IL  60606

  	
   

  	
    81,600

  	
   

  	
  $

  	
  1,142,400.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UBS O’Connor
  LLC f/b/o

  Pipes Corporate Strategies

  Ltd.

  One North Wacker Drive,

  32nd Floor

  Chicago, IL  60606

  	
   

  	
    54,400

  	
   

  	
  $

  	
  761,600.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Crestview
  Capital Fund II,

  L.P.

  95 Revere Drive, Suite F

  Northbrook, IL  60062

  	
   

  	
  107,142

  	
   

  	
  $

  	
  1,499,988.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Goldman,
  Sachs & Co.

  One New York Plaza

  New York, NY  10004

  	
   

  	
  714,285

  	
   

  	
  $

  	
  9,999,990.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Smithfield
  Fiduciary LLC

  c/o Highbridge Capital

  Management, LLC

  9 West 57th Street, 27th Floor

  New York, NY  10019

  	
   

  	
  214,285

  	
   

  	
  $

  	
  2,999,990.00

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