Digimarc Corp S-4, filed Mar 12, 2026
Digimarc Corp (DMRC)
As filed with the Securities and Exchange Commission on March 12, 2026
Registration 333‑
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
Form
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________
(Exact name of registrant as specified in its charter)
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Oregon |
7373
8500 SW Creekside Place (503) 469‑4800 |
41-4528284 |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
________________________
Charles Beck
Chief Financial Officer, Treasurer and Secretary
c/o Digimarc Corporation
8500 SW Creekside Place
Beaverton, Oregon 97008
(503) 469‑4800
(Name, address, including zip code, and telephone number, including area code, of agent for service)
________________________
Copies to:
John R. Thomas
Perkins Coie LLP
1120 NW Couch Street, Tenth Floor
Portland, Oregon 97209-4128
(503) 727‑2000
________________________
Approximate date of commencement of proposed sale of the securities to the public: Upon consummation of the Reorganization described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post‑effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
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Large Accelerated Filer |
☐ |
Accelerated filer |
☐ |
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☒ |
Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e‑4(i) (Cross‑Border Issuer Tender Offer) ☐
Exchange Act Rule 14d‑1(d) (Cross‑Border Third‑Party Tender Offer) ☐
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information in this preliminary proxy statement/prospectus is not complete and may be changed. These securities may not be issued until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary proxy statement/prospectus does not constitute an offer to sell or a solicitation of offers to buy these securities in any jurisdiction in which such offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 12, 2026
DEFINITIVE PROXY STATEMENT INTENDED TO BE RELEASED TO THE SHAREHOLDERS
ON OR ABOUT MARCH 24, 2026
PROXY STATEMENT FOR ANNUAL MEETING OF
DIGIMARC CORPORATION
PROXY STATEMENT/PROSPECTUS
A REORGANIZATION AND HOLDING COMPANY MERGER IS PROPOSED
YOUR VOTE IS IMPORTANT
Dear Shareholders of Digimarc Corporation:
It is my pleasure to invite you to attend the 2026 Annual Meeting of Shareholders (“Annual Meeting”) of Digimarc Corporation (“Digimarc” or the “Company”), to be held on , , 2026 at 11:00 a.m. Pacific Daylight Time, at the headquarters of the Company, 8500 S.W. Creekside Place, Beaverton, Oregon 97008.
At the Annual Meeting, you will be asked to consider and act upon the following actions:
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(1) |
a proposal to approve an agreement and plan of reorganization, including the agreement and plan of merger attached thereto (the “Reorganization Agreement”) to effect a transaction in which Digimarc will become a wholly owned subsidiary of Deschutes Parent, Inc., a newly formed Oregon corporation (“Holdings”), immediately followed by a conversion of Digimarc into an Oregon limited liability company, and each outstanding share of common stock, $0.001 par value per share, of Digimarc (“Company Common Stock”) will be exchanged for one share of common stock, $0.001 par value per share, of Holdings (“Holdings Common Stock”), and each outstanding share of preferred stock, $0.001 par value per share, of Digimarc (“Company Preferred Stock”) will be exchanged for one share of preferred stock, $0.001 par value per share, of Holdings (“Holdings Preferred Stock”) (together, the “Reorganization” and the proposal, the “Reorganization Proposal”); |
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(2) |
a proposal to elect eight directors for a term of one year (the “Election Proposal”); |
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(3) |
a proposal to ratify the appointment of KPMG LLP as Digimarc’s independent registered public accounting firm for the year ending December 31, 2026 (the “Ratification Proposal”); |
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(4) |
a proposal to approve, by non-binding vote, the compensation paid to our named executive officers (the “Compensation Proposal”); |
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(5) |
a proposal to approve the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to approve the Reorganization Proposal (the “Adjournment Proposal”); and |
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(6) |
to conduct any other business properly brought before the meeting. |
If the Reorganization Proposal is approved and the transactions contemplated by the Reorganization Agreement, which we refer to as the “Reorganization,” are completed, we will become a wholly owned subsidiary of Holdings, and your shares will automatically be exchanged for the same number of shares of Holdings, which will be substantially equivalent in all material respects to the rights, powers, and economic ownership of the shares of Company Common Stock you currently hold. Our Board of Directors, after considering various other approaches to maximize shareholder value by (a) realizing substantial cash savings, (b) reducing shareholder dilution, (c) increasing the Company’s ability to attract and retain key talent needed to drive and support company growth as well as provide for robust succession planning and (d) directly tying the realization of equity compensation, including time-based awards, to shareholder value creation, and after discussing the alternatives with our outside legal, tax and compensation advisors, adopted and approved and decided to recommend for your approval the Reorganization Proposal described in the attached proxy statement/prospectus. For a more detailed description of the expected benefits of the Reorganization, please refer to the section entitled “Proposal 1: The Reorganization Proposal—Reasons for the Reorganization” in the accompanying proxy statement/prospectus.
After the completion of the Reorganization, we expect that shares of Holdings Common Stock will trade on The Nasdaq Stock Market LLC under the symbol “DMRC,” the same ticker symbol currently used by the Company. We intend to rename Holdings to “Digimarc Corporation” following the Reorganization.
Our Board of Directors has unanimously determined that the Reorganization Proposal and the Reorganization Agreement and the transactions contemplated thereby, including the Reorganization, as well as the Election Proposal, the Ratification Proposal, the Compensation Proposal and the Adjournment Proposal, are fair to, advisable and in the best interests of, the Company and its shareholders. Accordingly, our Board of Directors has unanimously approved the Reorganization Agreement and recommends that you vote “FOR” the Reorganization Proposal, “FOR” the Election Proposal, “FOR” the Ratification Proposal, “FOR” the Compensation Proposal and “FOR” the Adjournment Proposal.
Your vote is very important. We cannot complete the Reorganization and realize the expected benefits described in the section entitled “Proposal 1: The Reorganization Proposal—Reasons for the Reorganization” in the accompanying proxy statement/prospectus unless holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast vote to approve the Reorganization Proposal. If you fail to vote on the Reorganization Proposal, it will have the same effect as if you were to vote against the Reorganization Proposal.
Details regarding the business to be conducted at our Annual Meeting are more fully described in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.
On or around March 24, 2026, we expect to mail to our shareholders the proxy statement/prospectus for our Annual Meeting of Shareholders (the “Proxy Statement”), a proxy card, and our Annual Report for the fiscal year ended December 31, 2025 (collectively the “proxy materials”). The Proxy Statement and proxy card will provide instructions on how to vote online or by telephone, and how to receive printed proxy materials by mail.
WHETHER OR NOT YOU PLAN TO ATTEND OUR ANNUAL MEETING, YOUR VOTE IS IMPORTANT AND WE ENCOURAGE YOU TO VOTE PROMPTLY. YOU MAY VOTE BY PROXY OVER THE INTERNET OR BY TELEPHONE, OR BY MAIL BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD. IF YOU ATTEND OUR ANNUAL MEETING, YOU WILL HAVE THE RIGHT TO REVOKE YOUR PROXY AND VOTE DURING THE MEETING. IF YOU HOLD YOUR SHARES THROUGH AN ACCOUNT WITH A BROKERAGE FIRM, BANK, OR OTHER NOMINEE, PLEASE FOLLOW THE INSTRUCTIONS YOU RECEIVE FROM YOUR BROKERAGE FIRM, BANK, OR OTHER NOMINEE TO VOTE YOUR SHARES.
We encourage you to read the accompanying proxy statement/prospectus carefully because it explains the proposed Reorganization, the documents related to the Reorganization and other related matters. You can also obtain other information about us from documents that we have filed with the Securities and Exchange Commission. You should also carefully consider the risks that are described in the “Risk Factors” section beginning on page 20.
On behalf of the Board of Directors, thank you for your continued interest in and support for Digimarc Corporation.
Sincerely,
Katie Kool
Chairman, Digimarc Corporation Board of Directors
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement/prospectus or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated , 2026 and is being first mailed to Digimarc Corporation shareholders on or about , 2026.
ABOUT THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the Securities and Exchange Commission (the “SEC”) by Deschutes Parent, Inc., constitutes a prospectus of Deschutes Parent, Inc. under Section 5 of the Securities Act, with respect to the shares of common stock of Deschutes Parent, Inc. to be issued to Digimarc Corporation shareholders pursuant to the Reorganization Agreement. This document also constitutes a proxy statement of Digimarc Corporation under Section 14(a) of the Exchange Act.
You should rely only on the information contained or incorporated by reference into this proxy statement/prospectus with respect to the Reorganization. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus with respect to the Reorganization. This proxy statement/prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of such incorporated document. Neither the mailing of this proxy statement/prospectus to Digimarc Corporation shareholders nor the issuance by Deschutes Parent, Inc. of its common stock in connection with the Reorganization will create any implication to the contrary.
This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
ADDITIONAL INFORMATION
This document, which is sometimes referred to as this proxy statement/prospectus, constitutes a proxy statement of Digimarc Corporation, which we refer to as the “Company,” with respect to the solicitation of proxies by the Company for the annual meeting described within, and a prospectus of Deschutes Parent, Inc., which we refer to as “Holdings,” for the shares of common stock of Holdings to be issued to Company shareholders in connection with the proposed Reorganization. As permitted under the rules of the SEC, this proxy statement/prospectus incorporates important business and financial information about us that is contained in documents filed with the SEC that are not included in or delivered with this proxy statement/prospectus. You may obtain copies of these documents incorporated by reference into this proxy statement/prospectus, including copies of financial statements and management’s discussion and analysis, without charge, from the website maintained by the SEC at www.sec.gov, as well as other sources. See “Where You Can Find Additional Information” beginning on page 96. You may also obtain copies of these documents, without charge, from the Company by writing or calling:
Digimarc Corporation
8500 SW Creekside Place
Beaverton, Oregon 97008
Telephone: (503) 469-4800
You also may obtain documents incorporated by reference into this proxy statement/prospectus by requesting them in writing or by telephone from the proxy solicitor for the Reorganization at the following address and telephone numbers:
D.F. King & Co., Inc.
28 Liberty Street
53rd Floor
New York, New York 10005
Shareholders may call toll-free: (877) 674-6273
Email: digimarc@dfking.com
To receive timely delivery of the documents in advance of the Annual Meeting, you should make your request no later than , 2026, which is five business days before the Annual Meeting.
In addition, you may obtain copies of documents filed by the Company with the SEC on the Company’s website at www.digimarc.com/investors/quarterly-earnings. We are not incorporating the contents of the websites of the Company or any other entity into this proxy statement/prospectus.
| Digimarc Corporation 8500 S.W. Creekside Place Beaverton, Oregon 97008 |
NOTICE OF 2026 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2026
Dear Shareholders of Digimarc Corporation:
You are cordially invited to attend the 2026 Annual Meeting (“Annual Meeting”) of Shareholders of Digimarc Corporation, an Oregon corporation (“Digimarc,” the “Company,” “we,” “us” or “our”). The meeting will be held on , , 2026, at 11:00 a.m. Pacific Daylight Time, at the headquarters of the Company, 8500 S.W. Creekside Place, Beaverton, Oregon 97008. At the Annual Meeting, our shareholders will be asked:
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(1) |
To approve an agreement and plan of reorganization, including the agreement and plan of merger attached thereto (the “Reorganization Agreement”) to effect a transaction in which Digimarc will become a wholly owned subsidiary of Deschutes Parent, Inc., a newly formed Oregon corporation (“Holdings”), immediately followed by a conversion of Digimarc into an Oregon limited liability company, and each outstanding share of common stock, $0.001 par value per share, of Digimarc (“Company Common Stock”) will be exchanged for one share of common stock, $0.001 par value per share, of Holdings (“Holdings Common Stock”), and each outstanding share of preferred stock, $0.001 par value per share, of Digimarc (“Company Preferred Stock”) will be exchanged for one share of preferred stock, $0.001 par value per share, of Holdings (“Holdings Preferred Stock”) (together, the “Reorganization,” and the proposal, the “Reorganization Proposal”); |
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(2) |
To elect eight directors for a term of one year (the “Election Proposal”); |
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(3) |
To ratify the appointment of KPMG LLP as Digimarc’s independent registered public accounting firm for the year ending December 31, 2026 (the “Ratification Proposal”); |
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(4) |
To approve, by non-binding vote, the compensation paid to our named executive officers (the “Compensation Proposal”); |
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(5) |
To approve the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to approve the Reorganization Proposal (the “Adjournment Proposal”); and |
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(6) |
To conduct any other business properly brought before the meeting. |
Our Board of Directors has approved the proposed Reorganization Agreement and unanimously determined that the Reorganization Proposal and the Reorganization Agreement and the transactions contemplated thereby, including the Reorganization, as well as the Election Proposal, the Ratification Proposal, the Compensation Proposal and the Adjournment Proposal, are fair to, advisable and in the best interests of, the Company and its shareholders, and unanimously recommends that shareholders vote “FOR” the Reorganization Proposal, “FOR” the Election Proposal, “FOR” the Ratification Proposal, “FOR” the Compensation Proposal and “FOR” the Adjournment Proposal.
The items of business listed above are more fully described in the proxy statement/prospectus accompanying this Notice. The record date for the Annual Meeting is , 2026 (the “Record Date”). Only shareholders of record at the close of business on the Record Date may vote at the Annual Meeting or any adjournment thereof.
Regardless of the number of shares you own, your vote is important. Therefore, even if you currently plan to attend the Annual Meeting, please vote or submit your proxy as soon as possible so that your shares can be voted at the Annual Meeting in accordance with your instructions. Both telephone and internet voting are available. For specific instructions on voting, please refer to the instructions in the proxy card. If you do attend the Annual Meeting and wish to vote electronically, you may withdraw your proxy at that time.
The proxy statement/prospectus of which this Notice is a part provides a detailed description of the Reorganization and the Reorganization Agreement and the other matters to be considered at the Annual Meeting. We urge you to carefully read this proxy statement/prospectus (including the Annexes hereto) and any documents incorporated by reference herein in their entirety. In particular, we urge you to carefully read the section entitled “Risk Factors” beginning on page 20.
By Order of the Board of Directors,
Charles Beck
Secretary
Beaverton, Oregon
, 2026
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You are cordially invited to attend the Annual Meeting. Whether or not you expect to attend the Annual Meeting, please vote as soon as possible. We encourage you to vote via the Internet. For further details, see “Questions and Answers Regarding the Annual Meeting and Proposals.” |
| Digimarc Corporation 8500 S.W. Creekside Place Beaverton, Oregon 97008 |
FOR THE 2026 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2026
This Proxy Statement and proxy card are furnished in connection with the solicitation of proxies to be voted at the 2026 Annual Meeting of Shareholders (“Annual Meeting”) of Digimarc Corporation (sometimes referred to as “we,” “us,” “our,” the “Company,” or “Digimarc”), which will be held on , , 2026, at 11:00 a.m. Pacific Daylight Time at the headquarters of the Company, 8500 S.W. Creekside Place, Beaverton, Oregon 97008.
On or around , 2026, we began sending this Proxy Statement, the attached Notice of Annual Meeting of Shareholders and the enclosed proxy card to all shareholders entitled to vote at the Annual Meeting. Although not part of this Proxy Statement, we are also sending, along with this Proxy Statement, our Annual Report, which includes our financial statements for the year ended December 31, 2025.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON , 2026
This Proxy Statement, the Notice of Annual Meeting of Shareholders, our form proxy card and our Annual Report are available for viewing, printing and downloading at www.proxyvote.com. To view these materials please have your 16-digit control number(s) available that appears on your proxy card.
Additionally, you can find a copy of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 11, 2026, which includes our financial statements for the fiscal year ended December 31, 2025, on the SEC’s website at www.sec.gov, or on our website at www.digimarc.com/investors/quarterly-earnings. You may also obtain a printed copy of our Annual Report on Form 10-K, which includes our financial statements, free of charge, by sending a written request to Charles Beck, Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Digimarc Corporation, 8500 S.W. Creekside Place, Beaverton, Oregon 97008.
TABLE OF CONTENTS
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ABOUT THIS PROXY STATEMENT/PROSPECTUS |
i |
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ADDITIONAL INFORMATION |
i |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |
1 |
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QUESTIONS AND ANSWERS REGARDING THE ANNUAL MEETING AND PROPOSALS |
2 |
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SUMMARY |
13 |
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RISK FACTORS |
20 |
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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING |
22 |
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PROPOSAL 1: REORGANIZATION PROPOSAL |
26 |
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OPERATIONS OF THE DIGIMARC BOARD AND ITS COMMITTEES |
39 |
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DIRECTOR COMPENSATION |
48 |
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PROPOSAL 2: ELECTION PROPOSAL |
50 |
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REPORT OF THE AUDIT COMMITTEE OF THE DIGIMARC BOARD |
57 |
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PROPOSAL 3: RATIFICATION PROPOSAL |
58 |
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MANAGEMENT TEAM |
59 |
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EXECUTIVE COMPENSATION |
61 |
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PROPOSAL 4: COMPENSATION PROPOSAL |
84 |
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PROPOSAL 5: ADJOURNMENT PROPOSAL |
85 |
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INFORMATION ABOUT DIGIMARC AND HOLDINGS |
86 |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
87 |
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DESCRIPTION OF HOLDINGS’ SECURITIES |
89 |
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COMPARISON OF SHAREHOLDER RIGHTS BEFORE AND AFTER THE REORGANIZATION |
91 |
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LEGAL MATTERS |
95 |
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EXPERTS |
95 |
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SHAREHOLDER PROPOSALS |
95 |
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ANNUAL MEETING MATERIALS |
95 |
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OTHER BUSINESS |
96 |
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WHERE YOU CAN FIND ADDITIONAL INFORMATION |
96 |
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ANNEX A – AGREEMENT AND PLAN OF REORGANIZATION |
A-1 |
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ANNEX B – AGREEMENT AND PLAN OF MERGER |
B-1 |
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ANNEX C – ARTICLES OF INCORPORATION OF HOLDINGS |
C-1 |
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ANNEX D – BYLAWS OF HOLDINGS |
D-1 |
CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
Certain statements in this proxy statement/prospectus, and in documents incorporated by reference in this proxy statement/prospectus, contain “forward-looking” information, as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which represent our management’s beliefs and assumptions concerning future events. When used in this proxy statement/prospectus and in documents incorporated herein by reference, forward-looking statements include, without limitation, statements regarding financial forecasts or projections, and our expectations, beliefs, intentions or future strategies that are signified by the words “anticipates,” “assumption,” “believes,” “continue,” “could,” “estimates,” “expects,” “foresees,” “forecasts,” “intends,” “goals,” “judgment,” “may,” “might,” “outlook,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “targets,” “will,” “would” and the negative of these terms or other similar expressions. All such forward-looking statements are based upon current plans, estimates, expectations and ambitions that are subject to risks, uncertainties and assumptions, many of which are beyond the control of the Company, that could cause actual results to differ materially from those expressed in such forward-looking statements. Key factors that could cause actual results to differ materially include, but are not limited to:
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the risk that we may not obtain the expected benefits of the Reorganization; |
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the risk that certain conditions of the Reorganization may not be satisfied, or completed on a timely basis, if at all; |
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the risk that the listing of Holdings Common Stock on The Nasdaq Stock Market LLC (“Nasdaq”) may not be treated as a substitution listing event under applicable Nasdaq listing rules; |
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the risk that if the Reorganization were to fail to qualify as a “reorganization” within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (“Code”), the shareholders of Digimarc may be required to pay substantial U.S. federal income taxes; and |
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the risk that the Company’s business could be adversely affected if the Reorganization is not approved. |
Forward-looking statements are subject to a number of risks, uncertainties and assumptions. Matters and factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include but are not limited to the matters and factors described in the section entitled “Risk Factors” below or in Digimarc’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 11, 2026, as updated from time to time by Digimarc’s subsequent filings with the SEC, which are incorporated by reference into this proxy statement/prospectus. These statements are based on information available to us as of the date of this proxy statement/prospectus. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
Consequently, all of the forward-looking statements made in this proxy statement/prospectus are qualified by the information contained or incorporated by reference herein, including the information contained under this caption, the information contained in this proxy statement/prospectus, including under the section “Risk Factors,” and the information incorporated by reference herein. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.
You should not put undue reliance on forward-looking statements. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on the results of operations, financial condition or cash flows of Digimarc or Holdings. Actual results may differ materially from those discussed in this proxy statement/prospectus. All forward-looking statements speak only as of the date of this proxy statement/prospectus and neither Digimarc nor Holdings assumes any duty to update or revise forward-looking statements, whether as a result of new information, future events, uncertainties or otherwise, as of any future date.
QUESTIONS AND ANSWERS REGARDING THE ANNUAL MEETING AND THE PROPOSALS
Set forth below are some key questions and answers to provide you with more information about the Annual Meeting. These questions and answers are qualified in their entirety by reference to the more detailed information appearing elsewhere in or accompanying this proxy statement/prospectus. We urge you to review the entire proxy statement/prospectus and accompanying materials carefully.
Why am I receiving these materials?
These proxy materials are being provided because the Board of Directors of Digimarc (the “Digimarc Board”) is soliciting your proxy to vote at our Annual Meeting, which will be held on , , 2026, at 11:00 a.m. Pacific Daylight Time at the headquarters of the Company, 8500 S.W. Creekside Place, Beaverton, Oregon 97008, in order to, among other things, obtain the shareholder approval necessary to adopt the Reorganization Agreement (as defined below). The adoption of the Reorganization Agreement requires the affirmative vote by holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast. It is important that shareholders vote their shares on this matter, in addition to the other proposals provided herein, regardless of the number of shares owned.
This document is being delivered to you as both a proxy statement and a prospectus in connection with the Reorganization. It is the proxy statement by which the Digimarc Board is soliciting proxies from Digimarc shareholders to vote at the Annual Meeting, or at any adjournment or postponement of the Annual Meeting. In addition, this document is the prospectus of Holdings pursuant to which it will issue Holdings Common Stock to the Digimarc shareholders in connection with the Reorganization.
This proxy statement/prospectus, along with the accompanying Notice of Annual Meeting of Shareholders and proxy card, summarizes the purposes of the Annual Meeting and the information you need to know to vote at the Annual Meeting.
We have sent you this proxy statement/prospectus, the Notice of Annual Meeting of Shareholders, the proxy card and a copy of our Annual Report because you owned shares of Company Common Stock on , 2026 (the “Record Date”). We intend to commence distribution of these proxy materials to shareholders on or around , 2026.
What are the proposals I will be voting on at the Annual Meeting?
As a stockholder, you are entitled and requested to:
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1. |
approve the agreement and plan of reorganization (the “Agreement and Plan of Reorganization”), including the agreement and plan of merger attached thereto (the “Merger Agreement” and, together with the Agreement and Plan of Reorganization, the “Reorganization Agreement”) pursuant to which Digimarc will become a wholly owned subsidiary of Deschutes Parent, Inc., a newly formed Oregon corporation, immediately followed by a conversion of Digimarc into an Oregon limited liability company (“Digimarc LLC”), and each outstanding share of common stock, $0.001 par value per share, of Digimarc (“Company Common Stock”) will be exchanged for one share of common stock, $0.001 par value per share, of Holdings (“Holdings Common Stock”), each outstanding share of preferred stock, $0.001 par value per share, of Digimarc (“Company Preferred Stock”) will be exchanged for one share of preferred stock, $0.001 par value per share, of Holdings (“Holdings Preferred Stock”), and each option to purchase shares of Company Common Stock will be assumed by Holdings and become exercisable for the equivalent number of shares of Holdings Common Stock, each share of restricted Company Common Stock (“Company Restricted Stock”) will be exchanged for one share of restricted Holdings Common Stock (“Holdings Restricted Stock”) and remain subject to the same terms and conditions as were applicable to such shares of Company Restricted Stock, each restricted stock unit (“RSU”) to be settled in shares of Company Common Stock will be assumed by Holdings and remain subject to the same terms and conditions as were applicable to such RSU award, but will be converted into an award with respect to the same number of shares of Holdings Common Stock, and each performance-based restricted stock unit (“PRSU”) to be settled in shares of Company Common Stock will be assumed by Holdings and remain subject to the same terms and conditions as were applicable to such PRSU award, but will be converted into an award with respect to the same number of shares of Holdings Common Stock (together, the “Reorganization,” and the proposal, the “Reorganization Proposal”); |
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2. |
approve the election of eight directors to serve for a term of one year (the “Election Proposal”); |
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3. |
approve the ratification of the appointment of KPMG LLP as Digimarc’s independent registered public accounting firm for the year ending December 31, 2026 (the “Ratification Proposal”); |
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4. |
approve, by non-binding vote, the compensation paid to our named executive officers (the “Compensation Proposal”); and |
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5. |
approve the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to approve the Reorganization Proposal (the “Adjournment Proposal”). |
In addition, you are entitled to vote on any other matters that are properly brought before the Annual Meeting.
What shareholder vote is required for the approval of each proposal at the Annual Meeting?
The following are the vote requirements for the approval of the proposals at the Annual Meeting:
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Reorganization Proposal: Approval of the Reorganization Proposal requires the affirmative vote by holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast. Abstentions and broker non-votes will be counted as present for purposes of determining the presence of a quorum and will have the same effect as a vote “AGAINST” this proposal. |
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Election Proposal: Directors are elected by a plurality of the votes cast with respect to such director. This means that, with respect to the Election Proposal, nominees receiving the most “For” votes will be elected. “Withhold” votes will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. |
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Ratification Proposal: To be approved, the Ratification Proposal must receive more “For” votes than “Against” votes cast at the Annual Meeting. Abstentions will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. Because the Ratification Proposal is considered a “routine” proposal, brokers are permitted to vote in their discretion on the Ratification Proposal and, thus, we do not expect to receive any broker-non votes on this proposal. |
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Compensation Proposal: To be approved, the Compensation Proposal must receive more “For” votes than “Against” votes cast at the Annual Meeting. Abstentions will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. The advisory approval of our named executive officer compensation for the year ended December 31, 2025 is advisory and non-binding in nature and cannot overrule any decisions made by the Digimarc Board. |
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Adjournment Proposal: To be approved, the Adjournment Proposal must receive more “For” votes than “Against” votes cast at the Annual Meeting. Abstentions will be counted as present for purposes of determining the presence of a quorum but will not be considered as votes cast on this proposal and will therefore have no effect on the outcome of the vote. Broker non-votes will be counted as present for purposes of determining the presence of a but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. |
How does the Digimarc Board recommend that I vote at the Annual Meeting?
The Digimarc Board unanimously (i) determined that the Reorganization Agreement and the transactions contemplated thereby, including the Reorganization Proposal, as well as the Election Proposal, the Ratification Proposal, the Compensation Proposal and the Adjournment Proposal, are fair to, advisable and in the best interests of, the Company and its shareholders, (ii) approved and declared advisable the Reorganization Agreement, the Reorganization, the Reorganization Proposal, the Election Proposal, the Ratification Proposal, the Compensation Proposal and the Adjournment Proposal and the other transactions contemplated thereby, (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Reorganization Agreement, that the Company’s shareholders vote to adopt the Reorganization Agreement; and (iv) determined to recommend that the Company’s shareholders vote to approve the Election Proposal, the Ratification Proposal, the Compensation Proposal and the Adjournment Proposal.
The Digimarc Board unanimously recommends that Digimarc shareholders vote “FOR” the Reorganization Proposal, “FOR” the Election Proposal, “FOR” the Ratification Proposal, “FOR” the Compensation Proposal and “FOR” the Adjournment Proposal.
If any other matter is presented at the Annual Meeting, your proxy provides that your shares will be voted by the proxy holder listed in the proxy in accordance with his or her best judgment. At the time this proxy statement/prospectus was first made available, we knew of no matters that need to be acted on at the Annual Meeting, other than those discussed in this proxy statement/prospectus.
Who can vote at the Annual Meeting?
Only shareholders of record at the close of business on , 2026, the Record Date, will be entitled to vote at the Annual Meeting. On the Record Date, there were shares of Company Common Stock outstanding. Each holder of Company Common Stock has the right to one vote for each share of Company Common Stock held as of the Record Date.
Registered Shareholders. If your shares of Company Common Stock are registered directly in your name with our transfer agent, Broadridge Corporate Issuer Solutions (“Broadridge”), then you are considered the shareholder of record with respect to those shares, and the proxy materials were provided to you directly by us. As the shareholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote electronically at the Annual Meeting. Throughout this Proxy Statement, we refer to these registered shareholders as “shareholders of record.”
Street Name Shareholders. If your shares of Company Common Stock are held on your behalf in a brokerage account or by a bank or other nominee, then you are considered to be the beneficial owner of shares that are held in “street name” or a street name shareholder, and the proxy materials were forwarded to you by your broker or nominee, who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank, or other nominee as to how to vote your shares. Beneficial owners are also invited to attend the Annual Meeting. However, since a beneficial owner is not the shareholder of record, you may not attend the Annual Meeting and vote your shares of Company Common Stock at the Annual Meeting unless you follow your broker’s procedures for voting. Throughout this proxy statement/prospectus, we refer to shareholders who hold their shares through a broker, bank, or other nominee as “street name shareholders.”
How do I vote?
If on , 2026, your shares were registered directly in your name with our transfer agent, Broadridge, then you are a shareholder of record. Shareholders of record may vote by using the Internet, by telephone, or by mail as described below. Shareholders of record may also attend the Annual Meeting and vote. If you hold shares through a broker, bank, or other nominee, please refer to your proxy card, or other information forwarded by your broker, bank, or other nominee to see which voting options are available to you.
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You may vote via the Internet at www.proxyvote.com by following the instructions for Internet voting on the proxy card mailed to you. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on , 2026. Easy-to-follow instructions are available to allow you to vote your shares and confirm that your instructions have been properly recorded. |
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You may vote by telephone by dialing 1-800-690-6903 and following the instructions for voting by phone on the proxy card mailed to you. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on , 2026. Easy-to-follow voice prompts are available to allow you to vote your shares and confirm that your instructions have been properly recorded. |
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You may vote by mail by completing and mailing in the paper proxy card you received. The method you use to vote will not limit your right to vote at the Annual Meeting if you decide to attend the Annual Meeting. |
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You may vote in person at the meeting by attending the meeting and casting your vote. Street name holders must obtain a legal proxy from their broker, bank, or other nominee and bring the legal proxy to the meeting in order to vote in person at the meeting. |
What if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any voting selections, your shares will be voted “For” the Reorganization Proposal, “For” the Election Proposal, “For” the Ratification Proposal, “For” the Compensation Proposal and “For” the Adjournment Proposal. However, if you are not a shareholder of record, and your shares are held instead through a broker, bank, or other nominee, you must provide voting instructions to the shareholder of record of the shares in accordance with the shareholder of record’s requirements in order for your shares to be properly voted. If any other matter is properly presented at the meeting, your proxy (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.
Who will solicit proxies on behalf of the Digimarc Board?
Digimarc solicits proxies by mail and by direct contact to eligible shareholders. Besides this solicitation by mail, our directors, officers, and other employees may solicit proxies. These persons will not receive any additional compensation for assisting in the solicitation. We will also request that brokerage firms, nominees, custodians, and fiduciaries forward proxy materials to the beneficial owners. We will reimburse these persons and our transfer agent for their reasonable out-of-pocket expenses incurred in forwarding these materials. In addition, we have retained D.F. King & Co., Inc. (“D.F. King”) to act as our proxy solicitor in connection with the proposals to be acted upon at the Annual Meeting.
Who is paying for this proxy solicitation?
We are making this solicitation of proxies on behalf of the Digimarc Board and will pay the solicitation costs. Our directors, officers, and other employees may, without additional compensation except reimbursement for actual expenses, solicit proxies by mail, in person, or by telecommunication. We will reimburse brokers, fiduciaries, custodians, and other nominees for out-of-pocket expenses incurred in sending our proxy materials to, and obtaining instructions relating to such materials from, beneficial owners. In addition, we have retained D.F. King to solicit proxies for a fee not to exceed $20,000, plus reasonable out-of-pocket expenses, to act as our proxy solicitor in connection with the proposals to be acted upon at the Annual Meeting. Pursuant to our agreement with D.F. King, they will provide advice regarding proxy solicitation issues and solicit proxies from our shareholders on our behalf in connection with the Annual Meeting.
If you have any questions about submitting your proxy or require assistance, please contact our proxy solicitor at:
D.F. King & Co., Inc.
28 Liberty Street
53rd Floor
New York, New York 10005
Shareholders may call toll-free: (877) 674-6273
Email: digimarc@dfking.com
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign, and return each proxy card to ensure that all of your shares are voted.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. You may accomplish this in one of the following ways:
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by entering a new vote by Internet or by telephone, |
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by delivering a written notice of revocation to the Secretary of Digimarc, |
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by submitting a new proxy card or new voting instruction card bearing a later date (which automatically revokes the earlier proxy instructions), or |
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by attending the Annual Meeting and voting in person. |
Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request. If your shares are held in a stock brokerage account or by a bank or other nominee, you must obtain a legal proxy from your broker, bank or other nominee authorizing you to vote your shares at the Annual Meeting.
Any written notice revoking a proxy should be sent to Digimarc Corporation, Attention: Charles Beck, Executive Vice President, Chief Financial Officer, Treasurer and Secretary, 8500 S.W. Creekside Place, Beaverton, Oregon 97008, or hand delivered to the Secretary at or before the vote at the Annual Meeting.
How are votes counted?
Votes will be counted by the Inspector of Elections appointed for the meeting, who will separately count “For” and “Against” votes, votes “Withheld,” abstentions, and broker non-votes. Withheld votes, abstentions and broker non-votes will be counted as present for purposes of determining the presence of a quorum.
If your shares are held by your broker, bank or other nominee (that is, in “street name”), you will need to obtain a voting instruction form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker, bank or other nominee to vote your shares. If you do not give instructions to your broker, bank or other nominee, your broker, bank or other nominee can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. See below for more information regarding: “What are “broker non-votes”?” and “Which proposals are considered “routine” or “non-routine”?”
What are “broker non-votes”?
Under Nasdaq rules, brokers, banks or other nominees who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers, banks or other nominees are not allowed to exercise their voting discretion with respect to the approval of matters that Nasdaq determines to be “non-routine.”
Generally, a broker non-vote occurs on an item when (a) a broker, bank or other nominee has discretionary authority to vote on one or more “routine” proposals to be voted on at a meeting of shareholders, but is not permitted to vote on other “non-routine” proposals without instructions from the beneficial owner of the shares and (b) the beneficial owner fails to provide the broker, bank or other nominee with such instructions. On non-discretionary items for which you do not give your broker, bank or other nominee instructions, the shares will be treated as broker non-votes. Accordingly, if you own shares through a broker, bank or other nominee, please be sure to instruct your broker, bank or other nominee how to vote to ensure that your vote is counted on each of the proposals.
What proposals are considered “routine” or “non-routine”?
Under current NYSE rules, even though we are a Nasdaq-listed company, “non-routine” matters are matters that may substantially affect the rights or privileges of shareholders, such as mergers, shareholder proposals, election of directors (even if not contested), executive compensation (including any advisory shareholder vote on executive compensation) and certain corporate governance proposals, even if these proposals are supported by management. Any election of a member of the Digimarc Board, whether contested or uncontested, is considered “non-routine,” and, therefore, brokers do not have discretion to vote your shares held in street name for the Election Proposal in the absence of instructions from you. We also believe that the Reorganization Proposal, the Compensation Proposal and the Adjournment Proposal are each “non-routine” and therefore, if your shares are held through a broker, nominee, fiduciary, or other custodian, your broker does not have discretion to vote the shares with respect to those proposals and your shares will not be voted on those proposals unless you provide voting instructions to your broker.
Any abstentions will have the same effect as a vote “AGAINST” the Reorganization Proposal. The failure to vote will have the same effect as a vote “AGAINST” the Reorganization Proposal. Broker non-votes, if any, will have the same effect as a vote “AGAINST” the Reorganization Proposal. Any abstentions or broker non-votes will have no effect on the Election Proposal, the Compensation Proposal or the Adjournment Proposal.
We believe the Ratification Proposal is a “routine” proposal and thus your broker has discretion to vote the shares with respect to that proposal.
What is the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. A majority of the votes entitled to be cast on the matter constitutes a quorum for action on that matter.
Your shares will be counted towards the quorum only if you submit a valid proxy vote or vote at the Annual Meeting. Withheld votes, abstentions and broker non-votes will be counted towards the quorum requirement.
How will my shares be voted if I mark “Abstain” on my proxy card?
We will count a properly executed proxy card marked “Abstain” as present for purposes of determining whether a quorum is present, but the shares represented by that proxy card will not be voted at the Annual Meeting for the proposals so marked.
I share an address with another shareholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
We have adopted a procedure approved by the SEC called “householding,” under which we can deliver a single copy of the proxy materials and annual report to multiple shareholders who share the same address unless we received contrary instructions from one or more of the shareholders. This procedure reduces our printing and mailing costs. Shareholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, we will promptly deliver a separate copy of the proxy materials and annual report to any shareholders at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy, or, if you are receiving multiple copies, to request that we only send a single copy of next year’s proxy materials and annual report, you may contact us as follows:
Digimarc Corporation
Attn: Investor Relations
8500 S.W. Creekside Place
Beaverton, Oregon 97008
Phone: (503) 469-4800
Fax: (503) 520-0407
Shareholders who hold shares in street name may contact their broker, bank, or other nominee to request information about householding.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. Final voting results will be available on a Current Report on Form 8-K filed with the SEC within four business days after the end of the Annual Meeting.
When are shareholder proposals due for next year’s Annual Meeting?
If you wish to submit a proposal to be considered for inclusion in next year’s proxy materials, your proposal must follow the guidelines outlined in SEC Regulation 14A, Rule 14a-8 and received by the Secretary of the Company on or before , 2026. If you wish to submit a proposal to be presented at the 2027 Annual Meeting of Shareholders, but which will not be included in the Company’s proxy materials, including to nominate a director, your notice must be received by the Secretary of Digimarc at 8500 S.W. Creekside Place, Beaverton, Oregon 97008, no earlier than , 2026, and no later than , 2027; provided, however, that if the 2027 Annual Meeting of Shareholders is held before , 2027 or after , 2027, then your proposal must be received no earlier than the close of business on the 120th day prior to such meeting and not later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. You are advised to review our bylaws (the “Digimarc Bylaws”), which contain additional requirements about advance notice of shareholder proposals and director nominations. In addition to satisfying the foregoing advance notice requirements under the Digimarc Bylaws, to comply with the universal proxy rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than , 2027.
Why is Digimarc proposing the Reorganization?
Digimarc is proposing the Reorganization as a means for Holdings to realize expected substantial cash savings, primarily through the institution of an alternative long-term equity incentive arrangement (the “Long-Term Equity Incentive”) for key management and executive employees. The Long-Term Equity Incentive is also designed to reinforce pay-for-performance principles, strengthening long-term alignment of key management and executive employees’ compensation with Holdings growth strategy and shareholder value creation, while reducing share dilution relative to traditional equity awards.
Holdings expects to realize substantial cash savings when compared to Digimarc’s current share-based incentive plan because (a) awards under the Long-Term Equity Incentive will not require cash tax withholding, which Digimarc has historically implemented through a practice of withholding shares of Company Common Stock in satisfaction of required withholding of income tax liability upon vesting of awards and then paying such income tax withholding amounts, in cash, to the Internal Revenue Service, and (b) employer taxes with respect to such key employees will not be due on awards under the Long-Term Equity Incentive.
In addition to these expected cash savings, Digimarc believes the Long-Term Equity Incentive also maximizes shareholder value in several other ways. First, participation by key employees in the Long-Term Equity Incentive is expected to reduce share dilution to holders of Holdings Common Stock because grantees may realize more after-tax value per unit of equity in Digimarc LLC than they would under a share-based plan and, therefore, fewer profits interest equity units (“Equity Units”) are expected to be required to be granted to incentivize employees. Second, the Digimarc Board also considered Digimarc’s ability to compete for and retain key employees in a highly competitive market for technical and commercial talent. The Reorganization is expected to provide additional flexibility in designing and administering equity incentives that align employee incentives with long-term shareholder value creation. We expect that the ability for new and existing employees to participate in the Long-Term Equity Incentive will aid the Company in attracting and retaining the key talent needed to drive and support company growth as well as provide for robust succession planning. Third, the ability for participants in the Long-Term Equity Incentive to realize any value in respect of awards granted under this arrangement, including time-based grants, depends on the extent that Digimarc LLC generates a profit, further aligning compensation with shareholder value creation as compared to restricted stock, RSU, and PRSU awards. For additional discussion regarding the ability for participants in the Long-Term Equity Incentive to realize any value in respect of awards granted under this arrangement, please see the section below entitled, “Proposal 1: The Reorganization Proposal—Reasons for the Reorganization.”
What will the name of the public company be following the Reorganization?
The name of the public company following the Reorganization is intended to be “Digimarc Corporation,” the same as it currently is.
What will be the business of Holdings after the Reorganization?
The sole activity of Holdings immediately after the Reorganization will be to hold 100% of the equity of Digimarc. The consolidated assets, liabilities and shareholders’ equity of Holdings immediately following the Reorganization will be the same as the consolidated assets, liabilities and shareholders’ equity of Digimarc immediately prior to the Reorganization. Overall, the consolidated company’s business will remain the same immediately after the Reorganization.
Will the Reorganization impact the consolidated financial statements of the Company?
No. The consolidated financial statements of Holdings immediately following the Reorganization will be the same as the consolidated financial statements of Digimarc immediately prior to the Reorganization. The Reorganization will also have no effect on Digimarc’s historical consolidated financial statements.
What will happen to my shares of Company Common Stock after the Reorganization?
If the Reorganization is approved, we will send you a letter of transmittal that will explain how to obtain book-entry shares of Holdings Common Stock in exchange for your shares of Company Common Stock. Exchange of any book-entry shares will be effected in accordance with Broadridge’s customary procedures with respect to securities represented by book entry.
What will I receive in the Reorganization for my shares of Company Common Stock?
You will receive one share of Holdings Common Stock in exchange for each share of Company Common Stock that you hold at the time of the Reorganization.
Will Holdings Common Stock have a different CUSIP than Company Common Stock?
Yes.
What if I fail to exchange my Company Common Stock for Holdings Common Stock?
If you fail to surrender your certificates representing Company Common Stock, you will not receive book-entry shares representing Holdings Common Stock. In that case, you will not receive any distributions made with respect to Holdings Common Stock and you will not be able to transfer your book-entry shares of Holdings Common Stock until the certificates representing your shares of Company Common Stock are surrendered. Should holders choose not to surrender their certificate(s), any unexchanged shares, their Holdings Common Stock entitlement, and any future distributions they may be entitled to will eventually be subject to escheatment regulations.
Exchange of any book-entry shares will be effected in accordance with Broadridge’s customary procedures with respect to securities represented by book entry, and you will not be required to take any action to effect such exchange.
Will Holdings Common Stock be publicly traded?
Yes. After the Reorganization, we expect that Holdings Common Stock will be listed for trading on Nasdaq under the symbol “DMRC,” the same ticker symbol currently used by the Company. We will not complete the Reorganization unless and until Holdings Common Stock is approved for listing on Nasdaq or unless and until such condition is waived.
Will my ownership position in Digimarc be diluted in the Reorganization?
No. You will own indirectly the same portion of Digimarc immediately after the Reorganization that you own directly immediately prior to the Reorganization. Moreover, in addition to our expectation that fewer Equity Units will be required to be granted to incentivize employees under the Long-Term Equity Incentive, certain key employees who otherwise would be issued equity incentive awards under the 2018 Incentive Plan may instead be issued Equity Units under the Long-Term Equity Incentive. For additional discussion of the Equity Units, including a description of any income allocations to holders of such Equity Units and the rights of such holders of Equity Units to receive Tax Distributions (as defined below), please see the section below titled “Proposal 1: The Reorganization Proposal—Reasons for the Reorganization.”
Separate from the grant of any Equity Units by the Company, the Company anticipates that, following the completion of the Reorganization, members of management may invest cash in Digimarc LLC in exchange for a number of common units of Digimarc LLC to be determined based upon the fair market value of such common units at such time. Such investments will not be made directly into Holdings and, therefore, your direct ownership position in Holdings is not expected to be diluted by reason of such investments into Digimarc LLC. Holdings’ percentage ownership in Digimarc LLC would be diluted by reason of such investments into Digimarc LLC. However, because such investments in Digimarc LLC will be made through cash contributions to Digimarc LLC, such investments are not expected to dilute the value of Holdings’ ownership in Digimarc LLC as of the date of such investments in Digimarc LLC.
Will my voting power be impacted as a result of the Reorganization?
No. The rights and powers of Holdings Common Stock, as in effect immediately after the Reorganization, will be substantially equivalent in all material respects to the rights and powers of Company Common Stock as in effect immediately prior to the Reorganization.
Will there be any change to the rights of shareholders after the Reorganization?
No, the rights of shareholders will not be materially changed after the Reorganization. There are no differences between the Digimarc Bylaws and the bylaws of Holdings (“Holdings Bylaws”). The only differences between our articles of incorporation (the “Digimarc Articles of Incorporation”) and the articles of incorporation of Holdings (“Holdings Articles of Incorporation”) are as set forth in the section entitled “Comparison of Shareholder Rights Before and After the Reorganization” beginning on page 91.
What will be the effect on the expenses related to the Reorganization if the Reorganization is not approved by shareholders?
All expenses related to the Reorganization, including legal and accounting fees and expenses incurred by the Company and expenses and costs of preparing, mailing and soliciting proxies pursuant to this proxy statement/prospectus, will be paid by the Company whether or not the Reorganization is approved by the Company’s shareholders.
What are the U.S. federal income tax consequences of the Reorganization on the shareholders of Digimarc?
In the opinion of Perkins Coie LLP, the Reorganization should constitute a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code for U.S. federal income tax purposes and, accordingly, Digimarc shareholders should (1) recognize no gain or loss upon the conversion of their shares of Company Common Stock into shares of Holdings Common Stock; (2) have an initial tax basis in their Holdings Common Stock that is the same as their adjusted tax basis in their existing Company Common Stock; and (3) have a holding period for their Holdings Common Stock that includes their holding period for their existing Company Common Stock. For further information, see “Proposal 1: Reorganization Proposal—Material Federal Income Tax Consequences.”
After the Reorganization, will Holdings have the same directors and executive officers as the Company?
Yes. The directors and executive officers of Holdings immediately after the Reorganization will be the same as Digimarc’s directors and executive officers immediately prior to the Reorganization.
Will Digimarc equity and other long-term incentive awards be affected by the Reorganization?
Each option to purchase shares of Company Common Stock, whether vested or unvested, will be assumed by Holdings and remain subject to the same terms and conditions as were applicable to such option, but be converted into an option to purchase a number of shares of Holdings Common Stock equal to the number of shares of Company Common Stock immediately prior to the Reorganization, with a per share exercise price equal to the per share exercise price applicable to such option immediately prior to Reorganization. For example, if you currently hold options to purchase 10,000 shares of Company Common Stock at a price of $1.00 per share, as a result of the Reorganization your options will be exercisable for 10,000 shares of Holdings Common Stock at a price of $1.00 per share.
Each share of Company Restricted Stock will be assumed by Holdings and remain subject to the same terms and conditions as were applicable to such shares Company Restricted Stock prior to the Reorganization, but will be exchanged for one share of Holdings Restricted Stock and remain subject to the same terms and conditions as were applicable to such shares of Company Restricted Stock prior to the Reorganization. For example, if you currently hold 10,000 shares of Company Restricted Stock, as a result of the Reorganization your shares of Company Restricted Stock will be exchanged for 10,000 shares of Holdings Restricted Stock.
Each Digimarc RSU award will be assumed by Holdings and remain subject to the same terms and conditions as were applicable to such Digimarc RSU award prior to the Reorganization, but will be converted into an award with respect to a number of shares of Holdings Common Stock equal to the number of shares of Company Common Stock immediately prior to the Reorganization. For example, if you currently hold RSUs to be settled with 10,000 shares of Company Common Stock, as a result of the Reorganization your RSUs will be converted into an award to be settled with 10,000 shares of Holdings Common Stock.
Each Digimarc PRSU award will be assumed by Holdings and remain subject to the same terms and conditions as were applicable to such Digimarc PRSU award prior to the Reorganization, but will be converted into an award with respect to a number of shares of Holdings Common Stock equal to the number of shares of Company Common Stock immediately prior to the Reorganization. For example, if you currently hold PRSUs to be settled, at target performance, with 10,000 shares of Company Common Stock, as a result of the Reorganization your PRSUs will be converted into an award to be settled, at target performance, with 10,000 shares of Holdings Common Stock.
What vote is required to approve the Reorganization?
Under Oregon law, the Digimarc Articles of Incorporation and the Digimarc Bylaws, the affirmative vote of the holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast is required to approve the Reorganization.
Will I have dissenters’ rights in connection with the Reorganization?
No. Under the Oregon Business Corporation Act (the “OBCA”), a shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder’s shares in the event of (only to the extent the shareholder is entitled to vote thereon), a merger, stock exchange, sale or exchange of all or substantially all of the property of the corporation other than in the usual and regular course of business (with certain exceptions), or certain specified charter amendments. Under the OBCA, unless the articles of incorporation provide otherwise (which neither the Digimarc Articles of Incorporation nor the Holdings Articles of Incorporation do), dissenters’ rights do not apply to the holders of any class or series that were registered on a national securities exchange on the record date for the meeting of shareholders at which the corporate action giving rise to dissenters’ rights is to be approved. Because Digimarc’s shares are registered on Nasdaq, dissenters’ rights do not apply to the Reorganization.
When is the Reorganization expected to be completed?
Assuming we receive the requisite shareholder approval at the Annual Meeting, we currently expect to complete the Reorganization promptly thereafter. However, we cannot assure completion of the Reorganization by any particular date, if at all.
What if the Reorganization is not approved by the shareholders?
The Reorganization will not occur, you will continue to hold shares of Company Common Stock and the expected benefits to shareholders of the Reorganization described in the section entitled, “Proposal 1: The Reorganization Proposal—Reasons for the Reorganization” will not be realized.
SUMMARY
This summary highlights selected information from this proxy statement/prospectus regarding the Reorganization and may not contain all of the information that may be important to you in evaluating the proposed Reorganization. The information contained in this summary is qualified in its entirety by, and should be read in conjunction with, the detailed information appearing elsewhere in this proxy statement/prospectus and in the annexes. To understand fully the proposed Reorganization, we strongly encourage you to read this proxy statement/prospectus, the annexes and our most recent Annual Report on Form 10-K for the year ended December 31, 2025. We have included page references in this summary to direct you to a more complete discussion in this proxy statement/prospectus.
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Digimarc (see page 26) |
Digimarc is building the trust layer for the modern world. As artificial intelligence (“AI”) accelerates how people produce, share, and interact with the world, the risks of fraud, counterfeiting, and misinformation are growing exponentially. The impacts of these threats are evidenced by:
● Consumers demanding more transparency into how, where, and by whom products are made.
● Brands and creators facing rampant counterfeiting and IP theft.
● Retailers losing hundreds of billions of dollars annually to shrink and theft.
● Enterprises experiencing an increase in information leaks and digital manipulation.
● AI-generated content blurring reality, sowing confusion and mistrust.
● Regulators increasing pressure on companies to prove product authenticity and data integrity.
Our innovative, highly scalable, and ultra-secure solutions make it possible for consumers, businesses, and intelligent systems to instantly verify what’s real, protect what matters, and transact with confidence. Our solutions for retail loss prevention, product authentication, and digital trust and integrity are built to counter the speed and sophistication of today’s AI-enabled threats. Trusted by a consortium of the world’s central banks (the “Central Banks”) to deter the counterfeiting of global currency, we exist to protect the truth in every interaction, spanning both the physical and digital worlds.
Our commercial solutions run on the Illuminate® platform—a high-performance, hyper-scalable, and ultra-secure software as a service (“SaaS”) cloud-based platform for digital connectivity. Tested and trusted by the most highly demanding and mission-critical ecosystems in the world, the Illuminate platform provides the tools for the application of advanced digital watermarks and dynamic Quick Response (“QR”) codes, Application Programming Interfaces (“APIs”) that allow for direct integration into other mission critical systems, AI-assisted authentication workflows, and a centralized repository for capturing insights about digital interactions as well as automating activities based on that information. |
| The foundational digital watermarking technology used in our commercial solutions is backed by decades of innovation and inventions. It is also the same technology we use to deter digital counterfeiting of global currencies as part of our almost 30-year relationship with the Central Banks. This relationship was the first commercially successful large-scale use of our technologies and today protects hundreds of billions of banknotes in circulation around the world. | |
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Holdings (see page 27) |
Holdings is an Oregon corporation and wholly owned subsidiary of Digimarc. Holdings was recently formed for the purpose of effecting the Reorganization. If the Reorganization is approved and consummated, Digimarc would become a wholly owned subsidiary of Holdings after the Reorganization. We intend to rename Holdings to “Digimarc Corporation” following the Reorganization in accordance with the Reorganization Agreement. |
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Merger Sub (see page 27) |
Merger Sub is an Oregon corporation and a wholly owned subsidiary of Holdings. Merger Sub was recently formed for the purpose of effecting the Reorganization and will cease to exist if the Reorganization is approved and consummated. |
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Reasons for the Reorganization (see page 27) |
Digimarc is proposing the Reorganization as a means for Holdings to realize expected substantial cash savings, primarily through the institution of the Long-Term Equity Incentive for key management and executive employees. The Long-Term Equity Incentive is also designed to reinforce pay-for-performance principles, strengthening long-term alignment of key management and executive employees’ compensation with Holdings growth strategy and shareholder value creation, while reducing share dilution relative to traditional equity awards.
Holdings expects to realize substantial cash savings when compared to Digimarc’s current share-based incentive plan because (a) awards under the Long-Term Equity Incentive will not require cash tax withholding, which Digimarc has historically implemented through a practice of withholding shares of Company Common Stock in satisfaction of required withholding of income tax liability upon vesting of awards and then paying such income tax withholding amounts, in cash, to the Internal Revenue Service, and (b) employer taxes with respect to such key employees will not be due on awards under the Long-Term Equity Incentive. |
| In addition to these expected cash savings, Digimarc believes the Long-Term Equity Incentive also maximizes shareholder value in several other ways. First, participation by key employees in the Long-Term Equity Incentive is expected to reduce share dilution to holders of Holdings Common Stock because grantees may realize more after-tax value per unit of equity in Digimarc LLC than they would under a share-based plan and, therefore, fewer Equity Units are expected to be required to be granted to incentivize employees. Second, the Digimarc Board also considered Digimarc’s ability to compete for and retain key employees in a highly competitive market for technical and commercial talent. The Reorganization is expected to provide additional flexibility in designing and administering equity incentives that align employee incentives with long-term shareholder value creation. We expect that the ability for new and existing employees to participate in the Long-Term Equity Incentive will aid the Company in attracting and retaining the key talent needed to drive and support company growth as well as provide for robust succession planning. Third, the ability for participants in the Long-Term Equity Incentive to realize any value in respect of awards granted under this arrangement, including time-based grants, depends on the extent that Digimarc LLC generates a profit, further aligning compensation with shareholder value creation as compared to restricted stock, RSU, and PRSU awards. For further discussion regarding the ability for participants in the Long-Term Equity Incentive to realize any value in respect of awards granted under this arrangement, please see the section below titled, “Proposal 1: The Reorganization Proposal—Reasons for the Reorganization.” | |
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Summary of the Reorganization (see page 26) |
At the time of the Reorganization:
● each share of Company Common Stock issued and outstanding immediately prior to the merger will be converted upon the effectiveness of the merger into the right to receive one share of Holdings Common Stock;
● each share of Company Preferred Stock issued and outstanding immediately prior to the merger will be converted upon the effectiveness of the merger into the right to receive one share of Holdings Preferred Stock;
● each option to purchase a share of Company Common Stock outstanding immediately prior to the consummation of the merger will be assumed by Holdings upon the consummation of the merger and will become exercisable for a share of Holdings Common Stock;
● each share of Company Restricted Stock will be exchanged for one share of Holdings Restricted Stock and remain subject to the same terms and conditions as were applicable to such shares of Company Restricted Stock;
● each RSU to be settled in shares of Company Common Stock outstanding immediately prior to the merger will be assumed by Holdings upon the consummation of the merger and will remain subject to the same terms and conditions as were applicable to such RSU award, but will be converted into an award with respect to the same number of shares of Holdings Common Stock;
● each PRSU to be settled in shares of Company Common Stock outstanding immediately prior to the merger will be assumed by Holdings upon the consummation of the merger and will remain subject to the same terms and conditions as were applicable to such PRSU award, but will be converted into an award with respect to the same target number of shares of Holdings Common Stock; |
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● each share of common stock of Merger Sub held by Holdings immediately prior to the merger will be automatically converted upon the consummation of the merger into one share of Company Common Stock;
● each share of Holdings Common Stock held by Digimarc immediately prior to the merger will be surrendered to Holdings for cancellation and will be cancelled simultaneously with the effectiveness of the merger; and
● upon the consummation of the merger, Holdings will assume and continue the Company’s obligations under the 2008 Incentive Plan (as defined below) and 2018 Incentive Plan.
The rights, powers, and economic ownership of Holdings Common Stock, as in effect immediately after the Reorganization, will be substantially equivalent in all material respects to the rights, powers, and economic ownership of Company Common Stock as in effect immediately prior to the Reorganization.
After the merger, Digimarc will be converted into an Oregon limited liability company and continue as a wholly owned subsidiary of Holdings. Completion of the Reorganization may be deferred by the Digimarc Board or an authorized officer following the Annual Meeting if the Digimarc Board or an authorized officer determines that deferral would be in the best interests of the Company and its shareholders.
The Agreement and Plan of Reorganization, attached as Annex A and incorporated herein by reference, and the Merger Agreement, attached as Annex B and incorporated herein by reference, may be terminated and the Reorganization abandoned prior to the filing of the articles of merger, whether before or after approval by Digimarc shareholders, if the Digimarc Board determines that the Reorganization for any reason would not be in the best interests of Digimarc and its shareholders.
If the Reorganization is implemented, the number of authorized shares of capital stock of Holdings will be the same as the number of authorized shares of capital stock of Digimarc, namely:
● 50,000,000 shares of common stock, $0.001 par value per share; and
● 2,500,000 shares of preferred stock, $0.001 par value per share. |
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Board of Directors and Management of Holdings (see page 33) |
Immediately after the Reorganization, the executive officers of Holdings will be the same persons who serve as executive officers of Digimarc immediately prior to the Reorganization, and the directors of Holdings will be the same directors who serve as directors of Digimarc immediately prior to the Reorganization. |
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Listing of Holdings Common Stock (see page 30) |
After the Reorganization, we expect that Holdings Common Stock will be listed for trading on Nasdaq under the symbol “DMRC,” the same ticker symbol currently used by the Company. We will not complete the Reorganization unless and until Holdings Common Stock is approved for listing on Nasdaq or unless this condition is waived by Digimarc. |
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Conditions to the Reorganization (see page 34) |
The Reorganization is subject to the satisfaction or waiver of the following conditions:
● receipt by Digimarc of any consents, approvals or authorizations that Digimarc deems necessary or appropriate;
● approval of the Reorganization and adoption of the Reorganization Agreement by holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast as of , 2026;
● adoption and approval of the Reorganization Agreement by the Holdings Board and Digimarc, the sole shareholder of Holdings;
● adoption and approval of the Reorganization Agreement by the board of directors of Merger Sub and Holdings, the sole shareholder of Merger Sub; and
● the listing of Holdings Common Stock on Nasdaq being treated as a substitution listing event in connection with the Reorganization or, in the alternative, approval for listing by Nasdaq of Holdings Common Stock to be issued in the Reorganization. |
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Effective Time of the Reorganization (see page 34) |
The Reorganization will become effective immediately upon the filing of articles of merger with the Secretary of State of the State of Oregon (or at such later time that may be specified in the articles of merger), which the Company expects to occur promptly following approval of the Reorganization at the Annual Meeting. |
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Tax Consequences (see page 36) |
In the opinion of Perkins Coie LLP, the Reorganization should constitute a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code for U.S. federal income tax purposes and, accordingly, Digimarc shareholders generally should recognize neither gain nor loss for U.S. federal income tax purposes as a result of the Reorganization; however, you should consult your own tax adviser to determine the specific tax consequences of the Reorganization to you. For further information, see “Proposal 1: Reorganization Proposal—Material Federal Income Tax Consequences” beginning on page 26 of this proxy statement/prospectus. |
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Accounting Consequences (see page 37) |
The consolidated assets and liabilities of Holdings will be recorded at the historical cost of Digimarc as reflected on the consolidated financial statements of Digimarc immediately prior to the Reorganization. Accordingly, the consolidated financial statements of Holdings immediately following the Reorganization will be the same as the consolidated financial statements of Digimarc immediately prior to the Reorganization. The Reorganization will also have no effect on Digimarc’s historical consolidated financial statements. |
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Exchange of Stock Certificates (see page 35) |
Holders of certificated securities will be asked to surrender to the Company’s transfer agent, Broadridge, certificates representing those securities, in exchange for the applicable book-entry securities of Holdings in accordance with the procedures set forth in a letter of transmittal that will, as soon as practicable after the Reorganization, be mailed by the Company’s transfer agent to the record holders of the certificates representing those securities. Upon proper surrender to the Company’s transfer agent of a certificate representing Company Common Stock for exchange and cancellation, together with a properly completed letter of transmittal, the holder of that certificate will be entitled to receive in exchange therefor book-entry securities representing the equivalent amount of Holdings Common Stock. Exchange of any book-entry securities will be effected in accordance with the transfer agent’s customary procedures with respect to securities represented by book entry. |
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Book-Entry and Uncertificated Shares (see page 36) |
Exchange of any book-entry securities will be effected in accordance with the transfer agent’s customary procedures with respect to securities represented by book entry and you will not be required to take any action to effect such exchange. |
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Interests of Directors and Executive Officers and Significant Shareholders (see page 37) |
Certain of the Company’s executive officers and directors own Company Common Stock, and/or options to purchase shares of Company Common Stock, shares of Company Restricted Stock, RSUs to be settled in shares of Company Common Stock and/or PRSUs to be settled in shares of Company Common Stock and, to that extent, their interest in the Reorganization is the same as that of the other holders of Company Common Stock. |
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Risk Factors (see page 20) |
There are risks and uncertainties related to the occurrence or nonoccurrence of the Reorganization that you should carefully consider in deciding how to vote on the Reorganization. If any of these risks occur, the Company’s business and the value of the Company Common Stock could be materially adversely affected. |
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Other Effects of the Reorganization (see page 35) |
Holdings’ consolidated financial condition after the Reorganization will be the same as that of Digimarc before the Reorganization. Therefore, the financial data for Digimarc, presented on a pro forma basis to give effect to the proposed Reorganization, would look the same at Digimarc’s current financial condition. |
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Dissenters’ Rights (see page 35) |
No holder of Company Common Stock will have dissenters’ rights in connection with the Reorganization because the Company Common Stock is listed on Nasdaq, and we expect that the Holdings Common Stock will be listed on Nasdaq on the effective date of the Reorganization. |
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Expenses (see page 38) |
All expenses related to the Reorganization will be paid by the Company, whether or not the Reorganization is approved. |
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Vote Required for the Reorganization (see page 38) |
The affirmative vote of the holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast is required to approve the Reorganization. |
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Digimarc Board Recommendation for the Reorganization (see page 38) |
The Digimarc Board recommends you vote “FOR” the Reorganization. |
RISK FACTORS
In addition to the other information included in this proxy statement/prospectus (including the annexes hereto) and the information incorporated by reference herein, including, among others, the matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements,” in considering whether to vote in favor of the Reorganization Proposal, you should consider all of the information we have included in this proxy statement/prospectus, including its Annexes, and all of the information included in the documents we have incorporated by reference, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. In addition, you should pay particular attention to the risks described below.
We may not obtain the expected benefits of the Reorganization.
We believe our reorganization into a holding company structure will provide us with benefits in the future, as described under “Proposal 1: The Reorganization Proposal—Reasons for the Reorganization” beginning on page 27.The Company may not obtain the expected benefits of the Reorganization, including substantial cash savings associated with reduced tax withholding payments and payroll taxes, a reduction in dilution to holders of Holdings Common Stock, the ability of the Company to attract and retain key talent, and the direct tying of the realization of equity compensation, including time-based awards, to shareholder value creation. Additionally, if the IRS were to determine that the Equity Units failed to constitute a “profits interest” for U.S. federal income tax purposes and, instead, constituted a compensatory award to the applicable recipient, the Company generally would be subject to payroll withholding and reporting obligations and additional taxes, penalties and interest may be imposed on the Company in respect of grants of Equity Units. As a result, we may incur the costs of implementing the Reorganization Proposal without realizing the possible benefits. These costs include the increased administrative costs and expenses associated with keeping separate records for Holdings and Digimarc LLC.
The Reorganization is subject to conditions, including certain conditions that may not be satisfied, or completed on a timely basis, if at all. If we fail to complete the Reorganization, we cannot obtain the expected benefits of the Reorganization, and we may suffer administrative losses based on our efforts to seek the Reorganization.
The Reorganization Agreement contains conditions to closing the Reorganization that must be fulfilled (or, as permitted by law, waived by the parties) in order to complete the Reorganization. These conditions include, among other customary conditions, the approval by Digimarc shareholders of the Reorganization and the adoption by Digimarc shareholders of the Reorganization Agreement, listing of the Holdings Common Stock on Nasdaq, and obtaining required consents, approvals, or authorizations, if any. Several of these conditions, such as obtaining Digimarc shareholder approval and the Nasdaq listing, are partially or largely outside of the control and timing of Holdings and Digimarc and may be driven by factors unrelated to the Reorganization or the parties thereto, including administrative backlog. Please see “Proposal 1: Reorganization Proposal—Conditions to the Reorganization,” beginning on page 34, for a more detailed discussion. We cannot predict whether and when these other conditions will be satisfied. Any failure to complete or delay in completing the Reorganization could cost the Company additional time, effort and attention, as well as cause us not to realize some or all of the expected benefits that we expect as a result of completing the Reorganization successfully within its expected time frame.
Nasdaq may not treat the listing of Holdings Common Stock as a substitution listing event or list the Holdings Common Stock on its exchange, which could prevent consummation of the Reorganization.
It is a closing condition to the Reorganization that the Holdings Common Stock be approved for listing on Nasdaq, subject only to official notice of a substitute listing event or official notice of issuance, as applicable. If the Reorganization is successfully completed, we expect that the Holdings Common Stock will be listed for trading on Nasdaq under the symbol “DMRC,” the same ticker symbol currently used by the Company. However, there can be no assurance that the listing of Holdings Common Stock on Nasdaq will be treated as a substitution listing event or, in the alternative, that Holdings will be approved for listing on Nasdaq. If the listing of Holdings Common Stock on Nasdaq is not treated as a substitution listing event or if Holdings is not approved for listing on Nasdaq, neither Digimarc nor Holdings would be required to consummate the Reorganization. Even if the Holdings Common Stock is listed on Nasdaq, the public market for the Holdings Common Stock may not be liquid, or Holdings may be unable to maintain the listing on Nasdaq in the future.
If the Reorganization were to fail to qualify as a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code, the holders of Company Common Stock may be required to pay substantial U.S. federal income taxes as a result of the Reorganization.
In the opinion of Perkins Coie LLP, the Reorganization should constitute a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code for U.S. federal income tax purposes. An opinion of counsel represents only that counsel’s best legal judgment and does not bind the Internal Revenue Service (“IRS”) or the courts. We do not intend to request a ruling from the IRS as to the U.S. federal income tax consequences of the Reorganization, and consequently we do not assure you that the IRS or a court of law will treat the Reorganization in the manner described above. If the IRS were to successfully challenge the treatment of the Reorganization, a U.S. Holder (as defined in “Proposal 1: Reorganization Proposal—Material Federal Income Tax Consequences”) of Company Common Stock generally would recognize gain or loss for U.S. federal income tax purposes upon the exchange of Company Common Stock for Holdings Common Stock in the Reorganization. The deductibility or use of any losses may be subject to disallowance or significant limitations under the Code. For a more complete discussion of the material U.S. federal income tax consequences of the Reorganization, see the section entitled “Proposal 1: Reorganization Proposal—Material Federal Income Tax Consequences” beginning on page 36.
The risks applicable to Digimarc are applicable to Holdings.
Immediately after completion of the Reorganization, the risks that apply to Digimarc, including those risks described in Digimarc’s most recent Annual Report on Form 10-K and in its subsequently filed quarterly reports on Form 10-Q, will also be applicable to Holdings.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Digimarc is providing this proxy statement/prospectus to its shareholders as of the Record Date in connection with the solicitation of proxies to be voted at the Annual Meeting (or any adjournment or postponement of the Annual Meeting).
General
Together with the proxy statement/prospectus, Digimarc is also sending shareholders the Notice of Annual Meeting of Shareholders and a form of proxy card that is solicited by the Digimarc Board for use at the Annual Meeting to be held on , , 2026 at 11:00 a.m., Pacific Daylight Time, at the headquarters of the Company, 8500 S.W. Creekside Place, Beaverton, Oregon 97008, and any adjournments or postponements of the Annual Meeting.
Shareholders Entitled to Vote
Only shareholders of record at the close of business on the Record Date will be entitled to vote at the Annual Meeting. On the Record Date, there were shares of Company Common Stock outstanding. Each holder of Company Common Stock has the right to one vote for each share of Company Common Stock held as of the Record Date.
Registered Shareholders
If shares of Company Common Stock are registered directly in your name with our transfer agent, Broadridge, then you are considered the shareholder of record with respect to those shares, and the proxy materials were provided to you directly by us. As the shareholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote electronically at the Annual Meeting. Throughout this proxy statement/prospectus, we refer to these registered shareholders as “shareholders of record.”
Street Name Shareholders
If shares of Company Common Stock are held on your behalf in a brokerage account or by a bank or other nominee, then you are considered to be the beneficial owner of shares that are held in “street name” or a street name shareholder and the proxy materials were forwarded to you by your broker or nominee, who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank, or other nominee as to how to vote your shares. Beneficial owners are also invited to attend the Annual Meeting. However, since a beneficial owner is not the shareholder of record, you may not attend the Annual Meeting and vote at the Annual Meeting unless you follow your broker’s procedures for voting. Throughout this proxy statement/prospectus, we refer to shareholder who hold their shares through a broker, bank, or other nominee as “street name shareholder.”
The Proposals and Required Vote
At the Annual Meeting, holders of Company Common Stock will be asked to consider and vote on the following proposals:
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Proposal No. 1 (Reorganization Proposal): The proposal to adopt the Reorganization Agreement and the transactions contemplated thereunder. To be approved, the Reorganization Proposal must receive the affirmative vote of holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast. Abstentions and broker non-votes will be counted as present for purposes of determining the presence of a quorum and will have the same effect as a vote “AGAINST” the Reorganization Proposal. |
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Proposal No. 2 (Election Proposal): The proposal to elect eight directors to serve until the 2027 Annual Meeting of Shareholders. Directors are elected by a plurality of the votes cast with respect to such director. This means that, with respect to the Election Proposal, nominees receiving the most “For” votes will be elected. “Withheld” votes will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. |
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Proposal No. 3 (Ratification Proposal): The proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2026. To be approved, the Ratification Proposal must receive more “For” votes than “Against” votes cast at the Annual Meeting. Abstentions will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. Because the Ratification Proposal is considered a “routine” proposal, brokers are permitted to vote in their discretion on the Ratification Proposal and, thus, we do not expect to receive any broker-non votes on this proposal. |
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Proposal No. 4 (Compensation Proposal): The proposal to approve, on an advisory basis, our named executive officer compensation for the year ended December 31, 2025, as disclosed herein. To be approved, the Compensation Proposal must receive more “For” votes than “Against” votes cast at the Annual Meeting. Abstentions will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. The advisory approval of our named executive officer compensation for the year ended December 31, 2025 is advisory and non-binding in nature and cannot overrule any decisions made by the Digimarc Board. |
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Proposal No. 5 (Adjournment Proposal): The proposal to approve the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to approve the Reorganization Proposal. To be approved, the Adjournment Proposal must receive more “For” votes than “Against” votes cast at the Annual Meeting. Abstentions will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will not be considered votes cast on this proposal and will therefore have no effect on the outcome of the vote. |
On all matters, each share of Company Common Stock held on the Record Date has one vote.
Under current NYSE rules, even though we are a Nasdaq-listed company, “non-routine” matters are matters that may substantially affect the rights or privileges of shareholders, such as mergers, shareholder proposals, election of directors (even if not contested), executive compensation (including any advisory shareholder vote on executive compensation) and certain corporate governance proposals, even if these proposals are supported by management. Any election of a member of the Digimarc Board, whether contested or uncontested, is considered “non-routine,” and therefore, brokers do not have discretion to vote your shares held in street name for the Election Proposal in the absence of instructions from you. We also believe that the Reorganization Proposal, Compensation Proposal and Adjournment Proposal are each “non-routine” and therefore, if your shares are held through a broker, bank or other nominee, your broker, bank or other nominee does not have discretion to vote the shares with respect to those proposals and your shares will not be voted on those proposals unless you provide voting instructions to your broker, bank or other nominee.
Any abstentions will have the effect of votes “AGAINST” the Reorganization Proposal. The failure to vote will have the same effect as a vote “AGAINST” the Reorganization Proposal. Broker non-votes, if any, will have the same effect as a vote “AGAINST” the Reorganization Proposal. Any abstentions or broker non-votes will have no effect on the Election Proposal, the Compensation Proposal and the Adjournment Proposal.
We believe the Ratification Proposal is a “routine” proposal and thus your broker has discretion to vote the shares with respect to that proposal.
The holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast must vote to approve the Reorganization Proposal at the Annual Meeting as a condition to the completion of the Reorganization. If holders of Company Common Stock fail to approve the Reorganization Proposal by the requisite vote, the Reorganization will not occur.
Recommendation of the Digimarc Board
The Digimarc Board unanimously (i) determined that the Reorganization Proposal and the Reorganization Agreement and the transactions contemplated thereby, including the Reorganization, as well as the Election Proposal, the Ratification Proposal, the Compensation Proposal and the Adjournment Proposal, are fair to, advisable and in the best interests of, the Company and its shareholders, (ii) approved and declared advisable the Reorganization Agreement, the Reorganization, the Reorganization Proposal, the Election Proposal, the Ratification Proposal, the Compensation Proposal and the Adjournment Proposal and the other transactions contemplated thereby, (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Reorganization Agreement, that the Company’s shareholders vote to adopt the Reorganization Agreement; and (iv) determined to recommend that the Company’s shareholders vote to approve the Election Proposal, the Ratification Proposal, the Compensation Proposal and the Adjournment Proposal.
The Digimarc Board unanimously recommends that Digimarc shareholders vote “FOR” the Reorganization Proposal, “FOR” the Election Proposal, “FOR” the Ratification Proposal, “FOR” the Compensation Proposal and “FOR” the Adjournment Proposal.
How Record Holders Vote
You can vote at the Annual Meeting in person or by proxy. We recommend that you vote by proxy even if you plan to attend the Annual Meeting. You can always attend the Annual Meeting and revoke your proxy by voting in person.
If on , 2026, your shares were registered directly in your name with our transfer agent, Broadridge, then you are a shareholder of record. Shareholders of record may vote by using the Internet, by telephone, or by mail as described below. Shareholders may also attend the Annual Meeting and vote in person. If you hold shares through a broker, bank, or other nominee, please refer to your proxy card, or other information forwarded by your broker, bank, or other nominee to see which voting options are available to you.
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You may vote via the Internet at www.proxyvote.com by following the instructions for Internet voting on the proxy card mailed to you. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on , 2026. Easy-to-follow instructions are available to allow you to vote your shares and confirm that your instructions have been properly recorded. |
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You may vote by telephone by dialing 1-800-690-6903 and following the instructions for voting by phone on the proxy card mailed to you. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on , 2026. Easy-to-follow voice prompts are available to allow you to vote your shares and confirm that your instructions have been properly recorded. |
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You may vote by mail by completing and mailing in the paper proxy card you received. The method you use to vote will not limit your right to vote at the Annual Meeting if you decide to attend the Annual Meeting. |
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You may vote in person at the meeting by attending the meeting and casting your vote. Street name holders must obtain a legal proxy from their broker, bank, or other nominee and bring the legal proxy to the meeting in order to vote in person at the meeting. |
By giving us your proxy, you are authorizing the individuals named on our proxy card, the proxies, to vote your shares in the manner you indicate. You may vote “FOR,” “AGAINST” or “ABSTAIN” from voting on (a) the Reorganization Proposal; (b) the Ratification Proposal; (c) the Compensation Proposal and (d) the Adjournment Proposal. You may vote “FOR” or “WITHHOLD” for each director up for election in the Election Proposal.
If you return a signed and dated proxy card without marking any voting selections, your shares will be voted FOR each of the below proposals:
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the Reorganization Proposal; |
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the Election Proposal; |
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the Ratification Proposal; |
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the Compensation Proposal; and |
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the Adjournment Proposal. |
Revocation of Proxies
You can revoke your proxy at any time before the final vote at the meeting. You may revoke your proxy in any one of three ways:
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You may submit another properly completed proxy card with a later date. |
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You may send a written notice indicating that you are revoking your proxy to Digimarc Corporation, Attention: Charles Beck, Executive Vice President, Chief Financial Officer and Secretary, 8500 S.W. Creekside Place, Beaverton, Oregon 97008. |
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You may attend the Annual Meeting and vote or provide written notice revoking a proxy. Simply attending the meeting will not, by itself, revoke your proxy. |
Quorum
A quorum of shareholders is necessary to hold a valid meeting. A majority of the votes entitled to be cast on the matter constitutes a quorum for action on that matter. Your shares will be counted towards the quorum only if you submit a valid proxy vote or vote at the Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement.
We will count a properly executed proxy card marked “Abstain” as present for purposes of determining whether a quorum is present, but the shares represented by that proxy card will not be voted at the Annual Meeting for the proposals so marked.
If a quorum is not present or represented by proxy at the Annual Meeting, the chairman of the Annual Meeting may adjourn the Annual Meeting, without notice other than announcement at the Annual Meeting, until a quorum shall be present or represented. The shareholders present at the Annual Meeting will not have authority to adjourn the Annual Meeting.
Expenses of Proxy Solicitation
We will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors, officers and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors, officers and employees will not be paid any additional compensation for soliciting proxies. We will reimburse brokers, fiduciaries, custodians, and other nominees for out-of-pocket expenses incurred in sending our proxy materials to, and obtaining instructions relating to such materials from, beneficial owners. In addition, we have retained D.F. King to solicit proxies for a fee not to exceed $20,000, plus reasonable out-of-pocket expenses, to act as our proxy solicitor in connection with the proposals to be acted upon at the Annual Meeting. Pursuant to our agreement with D.F. King, they will provide advice regarding proxy solicitation issues and solicit proxies from our shareholders on our behalf in connection with the Annual Meeting.
If you have any questions about submitting your proxy or require assistance, please contact our proxy solicitor at:
D.F. King & Co., Inc.
28 Liberty Street
53rd Floor
New York, New York 10005
Shareholders may call toll-free: (877) 674-6273
Email: digimarc@dfking.com
PROPOSAL 1: REORGANIZATION PROPOSAL
Explanatory Note Regarding the Reorganization Agreement
This section of this proxy statement/prospectus describes the material provisions of the Reorganization Agreement, but it does not describe all of the terms of the Reorganization Agreement and may not contain all of the information about the Reorganization Agreement that is important to you. The following summary is qualified in its entirety by reference to the complete text of the Agreement and Plan of Reorganization, which is attached as Annex A to this proxy statement/prospectus and incorporated by reference in this proxy statement/prospectus, and the Merger Agreement, which is attached as Annex B to this proxy statement/prospectus and incorporated by reference in this proxy statement/prospectus. The rights and obligations of the Company are governed by the express terms and conditions of the Reorganization Agreement and not by this summary or any of the other information contained in this proxy statement/prospectus. You are urged to read the full text of the Reorganization Agreement because it is the legal document that governs the Reorganization.
The Reorganization Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Reorganization Agreement, the Reorganization, the Company, and its respective affiliates and businesses, which is contained in, or incorporated by reference into, this proxy statement/prospectus (including the annexes hereto), as well as in the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments thereto, and other filings that the Company has made or will make with the SEC. See “Where You Can Find Additional Information” beginning on page 96.
The Principal Parties
Digimarc Corporation
Digimarc is building the trust layer for the modern world. As AI accelerates how people produce, share, and interact with the world, the risks of fraud, counterfeiting, and misinformation are growing exponentially. The impacts of these threats are evidenced by:
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Consumers demanding more transparency into how, where, and by whom products are made. |
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Brands and creators facing rampant counterfeiting and IP theft. |
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Retailers losing hundreds of billions of dollars annually to shrink and theft. |
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Enterprises experiencing an increase in information leaks and digital manipulation. |
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AI-generated content blurring reality, sowing confusion and mistrust. |
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Regulators increasing pressure on companies to prove product authenticity and data integrity. |
Our innovative, highly scalable, and ultra-secure solutions make it possible for consumers, businesses, and intelligent systems to instantly verify what’s real, protect what matters, and transact with confidence. Our solutions for retail loss prevention, product authentication, and digital trust and integrity are built to counter the speed and sophistication of today’s AI-enabled threats. Trusted by the Central Banks to deter the counterfeiting of global currency, we exist to protect the truth in every interaction, spanning both the physical and digital worlds.
Our commercial solutions run on the Illuminate® platform—a high-performance, hyper-scalable, and ultra-secure SaaS cloud-based platform for digital connectivity. Tested and trusted by the most highly demanding and mission-critical ecosystems in the world, the Illuminate platform provides the tools for the application of advanced digital watermarks and dynamic QR codes, APIs that allow for direct integration into other mission critical systems, AI-assisted authentication workflows, and a centralized repository for capturing insights about digital interactions as well as automating activities based on that information.
The foundational digital watermarking technology used in our commercial solutions is backed by decades of innovation and inventions. It is also the same technology we use to deter digital counterfeiting of global currencies as part of our almost 30-year relationship with the Central Banks. This relationship was the first commercially successful large-scale use of our technologies and today protects hundreds of billions of banknotes in circulation around the world.
The principal place of business of Digimarc is 8500 S.W. Creekside Place, Beaverton, Oregon 97008, and its telephone number is (503) 469‑4800. Our website address is www.digimarc.com. Information on our website is not incorporated by reference into or otherwise part of the proxy statement/prospectus. The Company Common Stock is listed on Nasdaq under the symbol “DMRC.” Additional information about Digimarc is included in documents incorporated by reference in this proxy statement/prospectus. Please see “Where You Can Find Additional Information” beginning on page 96.
Deschutes Parent, Inc.
Holdings is an Oregon corporation and wholly owned subsidiary of Digimarc. Holdings was recently formed for the purpose of effecting the Reorganization. If the Reorganization is approved and consummated, Digimarc would become a wholly owned subsidiary of Holdings after the Reorganization. We intend to rename Holdings to “Digimarc Corporation” following the Reorganization in accordance with the Reorganization Agreement.
The principal place of business of Holdings is 8500 S.W. Creekside Place, Beaverton, Oregon 97008, and its telephone number is (503) 469‑4800.
Deschutes Merger Sub, Inc.
Merger Sub is an Oregon corporation and a wholly owned subsidiary of Holdings. Merger Sub was recently formed for the purpose of effecting the Reorganization and will cease to exist if the Reorganization is approved and consummated.
The principal place of business of Merger Sub is 8500 S.W. Creekside Place, Beaverton, Oregon 97008, and its telephone number is (503) 469‑4800.
Reasons for the Reorganization
Digimarc is proposing the Reorganization as a means for Holdings to realize expected substantial cash savings, primarily through the institution of the Long-Term Equity Incentive for key management and executive employees. The Long-Term Equity Incentive is also designed to reinforce pay-for-performance principles, strengthening long-term alignment of key management and executive employees’ compensation with Holdings growth strategy and shareholder value creation, while reducing share dilution relative to traditional equity awards.
Holdings expects to realize substantial cash savings when compared to Digimarc’s current share-based incentive plan because (a) awards under the Long-Term Equity Incentive will not require cash tax withholding, which Digimarc has historically implemented through a practice of withholding shares of Company Common Stock in satisfaction of required withholding of income tax liability upon vesting of awards and then paying such income tax withholding amounts, in cash, to the Internal Revenue Service, and (b) employer taxes with respect to such key employees will not be due on awards under the Long-Term Equity Incentive.
In addition to these expected cash savings, Digimarc believes the Long-Term Equity Incentive also maximizes shareholder value in several other ways. First, participation by key employees in the Long-Term Equity Incentive is expected to reduce share dilution to holders of Holdings Common Stock because grantees may realize more after-tax value per unit of equity in Digimarc LLC than they would under a share-based plan and, therefore, fewer Equity Units are expected to be required to be granted to incentivize employees. Second, the Digimarc Board also considered Digimarc’s ability to compete for and retain key employees in a highly competitive market for technical and commercial talent. The Reorganization is expected to provide additional flexibility in designing and administering equity incentives that align employee incentives with long-term shareholder value creation. We expect that the ability for new and existing employees to participate in the Long-Term Equity Incentive will aid the Company in attracting and retaining the key talent needed to drive and support company growth as well as provide for robust succession planning. Third, the ability for participants in the Long-Term Equity Incentive to realize any value in respect of awards granted under this arrangement, including time-based grants, depends on the extent that Digimarc LLC generates a profit, further aligning compensation with shareholder value creation as compared to restricted stock, RSU, and PRSU awards. Under the Long-Term Equity Incentive, participants will receive Equity Units in Digimarc LLC. An Equity Unit is expected primarily to have value insofar as, once vested, it is redeemable for a share of Holdings Common Stock or, at Holdings’ election, for cash, and only to the extent that Digimarc LLC generates the requisite profit and/or value appreciation, as determined under the Digimarc LLC Agreement (as defined below), after the date of grant. From the date of issuance, a participant will generally be allocated, for tax purposes, his or her share, based on percentage interest, of the taxable income or loss generated by Digimarc LLC. A participant would also receive tax distributions (which would be treated as an advance of distributions, and would reduce any future cash distributions dollar-for-dollar) to the extent that he or she does not otherwise receive sufficient cash distributions (based on percentage interest) from Digimarc LLC to satisfy his or her estimated tax liability on such taxable income, if any (“Tax Distributions”). Once an Equity Unit has vested and has appreciated in value equal to that of a share of Holdings Common Stock, the participant will be entitled to redeem such unit for a share of Holdings Common Stock or, at Holdings’ election, for cash. Unless and until such vesting and sufficient profits and/or value appreciation occurs, there is no ability for a participant to redeem his or her Equity Units and receive Holdings Common Stock. The proposed holding company structure is intended to provide Digimarc with greater flexibility in designing long-term equity compensation programs that align employee incentives directly with shareholder value creation, while also enabling more efficient equity utilization and supporting Digimarc’s ability to attract and retain key technical and commercial talent.
In evaluating the Long-Term Equity Incentive, the Digimarc Board and Compensation Committee, in consultation with independent compensation and tax advisors, considered alternative approaches and determined the Long-Term Equity Incentive appropriately balances cash savings, incentive alignment and shareholder dilution considerations.
Pursuant to the limited liability company operating agreement (the “Digimarc LLC Agreement”) that will govern Digimarc LLC after the Reorganization and any applicable award agreement, certain key employees who otherwise in the ordinary course of the Compensation Committee’s operations would be issued long-term equity incentive awards under the Digimarc Corporation 2018 Incentive Plan, as amended (the “2018 Incentive Plan”) may instead be issued Equity Units under the Long-Term Equity Incentive. All awards under the Long-Term Equity Incentive will be subject to approval by the Compensation Committee, including determination of grant size, vesting conditions, and performance requirements. Thereafter, to the extent that Digimarc LLC generates the requisite profit and/or value appreciation, such Equity Units may, at the election of the unitholder, be redeemed by Digimarc LLC for a certain number of shares of Holdings Common Stock (a “Unit Conversion”), or at Holdings’ election, for cash. As a result of any such Unit Conversion, the employee would hold shares of Holdings Common Stock.
Taken together, the Digimarc Board believes the proposed structure supports long-term shareholder value by enabling more efficient equity utilization, generating meaningful cost savings, aligning compensation more directly with performance, and strengthening Digimarc’s ability to attract and retain the talent needed to execute its strategy.
Reorganization Agreement
As depicted in the diagrams starting on page 31, pursuant to the terms of the Reorganization Agreement:
Reorganization
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Merger Sub will be merged with and into Digimarc. Digimarc will survive, and the separate existence of Merger Sub will cease; |
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Digimarc will become a wholly owned subsidiary of Holdings; |
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Digimarc, as the surviving corporation, will succeed (to the extent permitted and/or provided by applicable law) to all of the rights, assets, liabilities and obligations of Merger Sub; |
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after the merger, Digimarc will be converted into an Oregon limited liability company and continue as a wholly owned subsidiary of Holdings; |
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the corporate existence of Digimarc will continue unaffected and unimpaired by the Reorganization, except that, upon the consummation of the Reorganization, all of the outstanding shares of Company Common Stock will be owned by Holdings and, after the merger, will be converted to limited liability company interests pursuant to Digimarc’s conversion into an Oregon limited liability company; and |
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Holdings will be renamed to “Digimarc Corporation” following the Reorganization in accordance with the Reorganization Agreement. |
Conversion of Shares
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each share of Company Common Stock issued and outstanding immediately prior to the merger will be converted upon the effectiveness of the merger into the right to receive one share of Holdings Common Stock; |
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each share of Company Preferred Stock issued and outstanding immediately prior to the merger will be converted upon the effectiveness of the merger into the right to receive one share of Holdings Preferred Stock; |
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each option to purchase a share of Company Common Stock outstanding immediately prior to the consummation of the merger will be assumed by Holdings upon the consummation of the merger and will become exercisable for a share of Holdings Common Stock; |
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each share of Company Restricted Stock will be exchanged for one share of Holdings Restricted Stock and remain subject to the same terms and conditions as were applicable to such shares of Company Restricted Stock; |
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each RSU to be settled in shares of Company Common Stock outstanding immediately prior to the merger will be assumed by Holdings upon the consummation of the merger and will remain subject to the same terms and conditions as were applicable to such RSU award, but will be converted into an award with respect to the same number of shares of Holdings Common Stock; |
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each PRSU to be settled in shares of Company Common Stock outstanding immediately prior to the merger will be assumed by Holdings upon the consummation of the merger and will remain subject to the same terms and conditions as were applicable to such PRSU award, but will be converted into an award with respect to the same target number of shares of Holdings Common Stock; |
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each share of common stock of Merger Sub held by Holdings immediately prior to the merger will be automatically converted upon the consummation of the merger into one share of Company Common Stock; |
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each share of Holdings Common Stock and Holdings Preferred Stock held by Digimarc immediately prior to the merger will be surrendered to Holdings for cancellation and will be cancelled simultaneously with the effectiveness of the merger; and |
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upon the consummation of the merger, Holdings will assume and continue the Company’s obligations under the 2008 Incentive Plan and the 2018 Incentive Plan. |
Articles of Incorporation and Bylaws
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the Digimarc Articles of Incorporation and Digimarc Bylaws as in effect immediately prior to the merger will continue to be the articles of incorporation and bylaws, respectively, of Digimarc from and after the effective time of the merger until the conversion of Digimarc into a limited liability company. Upon the effectiveness of the conversion of Digimarc into a limited liability company, the internal affairs of Digimarc will be governed by its articles of organization and limited liability company operating agreement as set forth below; |
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the Holdings Articles of Incorporation, which form is attached hereto as Annex C, will be substantially similar to the current Digimarc Articles of Incorporation; |
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the Holdings Bylaws, which form is attached hereto as Annex D, will be substantially similar to the current Digimarc Bylaws. |
The rights and powers of the Holdings Common Stock, as in effect immediately after the Reorganization, will be substantially equivalent in all material respects to the rights and powers of the Company Common Stock as in effect immediately prior to the Reorganization. Please see “—Material Federal Income Tax Consequences” beginning on page 36 for a discussion of the tax effects of the Reorganization.
After the merger and pursuant to the conversion of Digimarc into a limited liability company, the articles of incorporation and bylaws of Digimarc will no longer be in effect, and Digimarc will be governed by articles of organization and a limited liability company operating agreement to reflect the fact that Digimarc will be a wholly owned subsidiary of Holdings, will be an Oregon limited liability company, and will no longer be a publicly traded company.
Pursuant to the Reorganization Agreement, the Board of Directors may abandon the Reorganization, without any further action by shareholders, at any time prior to filing the articles of merger with the Secretary of State of the State of Oregon, whether before or after adoption of the Reorganization Agreement by the shareholders, if the Board of Directors determines that the consummation of the Reorganization would not, for any reason, be advisable and in the best interests of the Company and its shareholders.
Listing of Holdings Common Stock
The listing of Holdings Common Stock on Nasdaq being treated as a substitution listing event in connection with the Reorganization or, in the alternative, approval for listing by Nasdaq of Holdings Common Stock is a condition to closing the Reorganization, pursuant to the terms of the Reorganization Agreement. Therefore, we expect the Holdings Common Stock to be approved for listing on Nasdaq prior to the completion of the Reorganization unless this requirement is otherwise waived by Digimarc. In that instance, where this requirement is waived, the Reorganization would give rise to dissenters’ rights under Oregon law. After the Reorganization, we expect that the Holdings Common Stock will be listed for trading on Nasdaq under the symbol “DMRC,” the same ticker symbol currently used by the Company. We will not complete the Reorganization unless and until the Holdings Common Stock is approved for listing on Nasdaq or this condition has been waived.
Structure Charts
Depicted below are diagrams describing the Reorganization.
Current Structure
Current Structure with Merger Subsidiaries
Merger Steps
Final Proposed Structure
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As Equity Unit holders convert Equity Units, they become Common Shareholders. |
Effects of the Reorganization on Shareholders
After the Reorganization, the shares of common stock and preferred stock of Holdings will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to the common stock and preferred stock of Digimarc now authorized. Each shareholder’s percentage ownership of Holdings Common Stock immediately after the Reorganization will not be altered and each shareholder’s indirect economic ownership of Digimarc LLC immediately after the Reorganization will approximate such shareholder’s economic ownership of Digimarc immediately prior to the Reorganization.
The Holdings Common Stock issued pursuant to the Reorganization will be fully paid and non-assessable. The Reorganization is not intended as, and will not have the effect of, a “going-private transaction” covered by Rule 13e‑3 under the Exchange Act. Following the Reorganization, Holdings will continue to be subject to the periodic reporting requirements of the Exchange Act. Please see “—Material Federal Income Tax Consequences” beginning on page 36 for a discussion of the tax effects of the Reorganization.
Board of Directors and Management
Immediately after the Reorganization, the Holdings Board will consist of the same eight individuals who comprise the Digimarc Board immediately before completion of the Reorganization, which directors are to be elected at the Annual Meeting.
Immediately after the Reorganization, the Holdings Board will have committees identical to the committees currently established by the Digimarc Board, which, after the Reorganization, will have the same members as the current comparable committees of the Digimarc Board. Each committee of Holdings will have a charter that is identical to such committee’s charter prior to the Reorganization.
The individuals who are executive officers of Digimarc immediately before the completion of the Reorganization will be the only executive officers of Holdings immediately following the Reorganization, holding corresponding offices.
There will be no change in the compensation amounts or benefits of the directors or executive officers of Digimarc as a result of the Reorganization. As described in the Compensation Discussion and Analysis, the form of the equity incentive grant to Riley McCormack approved in December 2025 will change as a result of the Reorganization. Any future changes to the form of equity incentive grants to existing or new directors or executive officers will be decided in the normal course of business of the Holdings Board, considering the shareholder value benefits of the Long-Term Equity Incentive.
Conditions to the Reorganization
The consummation of the Reorganization is subject to the satisfaction or waiver of the following conditions:
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receipt by Digimarc of any consents, approvals or authorizations that Digimarc deems necessary or appropriate; |
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approval of the Reorganization and adoption of the Reorganization Agreement by holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast as of , 2026; |
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adoption and approval of the Reorganization Agreement by the Holdings Board and Digimarc, the sole shareholder of Holdings; |
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adoption and approval of the Reorganization Agreement by the board of directors of Merger Sub and Holdings, the sole shareholder of Merger Sub; and |
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the listing of Holdings Common Stock on Nasdaq being treated as a substitution listing event in connection with the Reorganization or, in the alternative, approval for listing by Nasdaq of the Holdings Common Stock. |
If the shareholders of Digimarc do not approve the Reorganization, Digimarc will continue to operate in its current form, and Holdings and Merger Sub will be dissolved.
Except for compliance with applicable Oregon law and United States securities and tax laws, no regulatory requirements must be complied with and no governmental approvals must be obtained in connection with the Reorganization.
Deferral and Abandonment
Completion of the Reorganization may be deferred by the Digimarc Board or any authorized officer following the Annual Meeting if the Digimarc Board or an authorized officer determines that deferral would be in the best interests of Digimarc and its shareholders. The Reorganization Agreement may be terminated and the Reorganization abandoned prior to the filing of the articles of merger with the Secretary of State of the State of Oregon, whether before or after approval by the shareholders, if the Digimarc Board determines that consummation of the Reorganization would not, for any reason, be in the best interests of Digimarc and its shareholders.
Effective Time
The Reorganization will become effective immediately upon the filing of the articles of merger with the Secretary of State of the State of Oregon (or at such later time that may be specified in the articles of merger). We expect that the articles of merger will be filed and the Reorganization will be effective promptly following approval by the shareholders at the Annual Meeting.
Other Effects of the Reorganization
Holdings’ consolidated financial condition after the Reorganization would be the same as that of Digimarc before the Reorganization. Therefore, the financial data for Digimarc, presented on a pro forma basis to give effect to the proposed Reorganization, would look the same as Digimarc’s current financial condition. For example, there is no expected change in (1) the historical and pro forma per share data, (2) the book value per share and (3) the income (loss) per share from continuing operations of Digimarc prior to the Reorganization and Holdings after the Reorganization. As such, for clarity and conciseness, pro forma and comparative financial information is not included in this proxy statement/prospectus.
Dissenters’ Rights
Under the OBCA, a shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder’s shares in the event of (only to the extent the shareholder is entitled to vote thereon), a merger, stock exchange, sale or exchange of all or substantially all of the property of the corporation other than in the usual and regular course of business (with certain exceptions), or certain specified charter amendments. Under the OBCA, unless the articles of incorporation provide otherwise (which neither the Digimarc Articles of Incorporation nor Holdings Articles of Incorporation do), dissenters’ rights do not apply to the holders of any class or series that were registered on a national securities exchange on the record date for the meeting of shareholders at which the corporate action giving rise to dissenters’ rights is to be approved. Because Digimarc’s shares are registered on Nasdaq, dissenters’ rights do not apply to the Reorganization.
Exchange of Stock Certificates
Holders of certificated securities will be asked to surrender to the Company’s transfer agent certificates representing those securities, in exchange for the applicable book-entry securities of Holdings in accordance with the procedures set forth in a letter of transmittal that will, as soon as practicable after the Reorganization, be mailed by the Company’s transfer agent to the record holders of the certificates representing those securities. Upon proper surrender to the Company’s transfer agent of a certificate representing Company Common Stock for exchange and cancellation, together with a properly completed letter of transmittal, the holder of that certificate will be entitled to receive in exchange therefor book-entry securities representing the equivalent securities of Holdings. Exchange of any book-entry securities will be effected in accordance with the transfer agent’s customary procedures with respect to securities represented by book entry.
Restrictions on Dividends and Distributions for Certificated Shares of Company Common Stock
Shareholders who fail to exchange their Company Common Stock certificates by surrendering such certificates, together with a properly completed letter of transmittal, to the Company’s transfer agent will not receive book-entry shares representing Holdings Common Stock. Any dividends declared or distributions made on shares of Holdings Common Stock which such holders have a right to receive will be retained by Holdings until such holders surrender their certificates in exchange for book-entry shares of Holdings Common Stock or until paid to a public official pursuant to applicable abandoned property, escheat or similar laws. In no event will the Company’s transfer agent, the Company or Holdings be liable to any holder for dividends or distributions on shares of Holdings Common Stock delivered in good faith to a public official pursuant to any applicable abandoned property, escheat or similar law.
After the effective time of the Reorganization, there shall be no transfers on the stock transfer books of Digimarc of the securities that were issued and outstanding immediately prior to the effective time of the Reorganization. If, after the effective time of the Reorganization, certificates representing shares of Company Common Stock are presented for transfer, no transfer shall be effected on the stock transfer books of Holdings with respect to such shares of Company Common Stock, and no book-entry shares shall be issued representing the shares of Holdings Common Stock for which shares of Company Common Stock are exchanged unless and until the certificate representing such shares (if certificated) is delivered to the Company’s transfer agent together with a properly completed letter of transmittal (or such other documents as are satisfactory to Holdings and the Company’s transfer agent in their sole discretion). In addition, it will be a condition to the issuance of any book-entry shares of Holdings Common Stock in a name other than the name in which the surrendered Company Common Stock certificate is registered that the person requesting the issuance of such book-entry shares either pay to the Company’s transfer agent any transfer or other taxes required by reason of the issuance of book-entry shares representing Holdings Common Stock in a name other than the registered holder of the certificate surrendered or establish to the satisfaction of the Company’s transfer agent that such tax has been paid or is not applicable.
Book-Entry and Uncertificated Shares
Exchange of any book-entry shares will be effected in accordance with the transfer agent’s customary procedures with respect to securities represented by book entries and you will not be required to take any action to effect such exchange.
Material Federal Income Tax Consequences
The following is a summary of certain U.S. federal income tax consequences relating to the Reorganization as of the date hereof. Except where noted, this summary deals only with shareholders who hold their Company Common Stock as a capital asset. This summary is qualified in its entirety by reference to, and is based upon, laws, regulations, rulings and decisions now in effect, all of which are subject to change, which changes may or may not be retroactive.
For purposes of this summary, a “U.S. Holder” means a beneficial owner of Company Common Stock who is any of the following for U.S. federal income tax purposes: (i) a citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if (1) its administration is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all of its substantial decisions, or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. A non-U.S. holder of Company Common Stock is a shareholder who is not a U.S. holder.
This summary is based upon provisions of the Code, and regulations, rulings, and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax considerations different from those summarized below.
This summary does not represent a detailed description of the U.S. federal income tax consequences to a shareholder in light of his, her or its particular circumstances. In addition, it does not represent a description of the U.S. federal income tax consequences to a shareholder who is subject to special treatment under the U.S. federal income tax laws and does not address the tax considerations applicable to shareholders who may be subject to special tax rules, such as: partnerships; financial institutions; insurance companies; real estate investment trusts; regulated investment companies; grantor trusts; tax-exempt organizations; dealers or traders in securities or currencies; shareholders who hold Company Common Stock as part of a position in a straddle or as part of a hedging, conversion or integrated transaction for U.S. federal income tax purposes or U.S. holders that have a functional currency other than the U.S. dollar; shareholders who actually or constructively own 5 percent or more of the Company's voting stock; shareholders who hold Company Preferred Stock or who acquired their Company Common Stock through the exercise of employee stock options, as a restricted stock award or otherwise as compensation; or a non-U.S. holder who is a U.S. expatriate, “controlled foreign corporation” or “passive foreign investment company.”
Moreover, this description does not address the U.S. federal estate and gift tax, alternative minimum tax, Medicare contributions tax “net investment income” or other tax consequences of the Reorganization.
If any entity classified as a partnership for U.S. federal income tax purposes holds Company Common Stock, the tax treatment of an owner of that entity generally will depend on the status of the owner and the activities of the entity.
Each shareholder should consult his, her or its own tax advisers concerning the particular U.S. federal tax consequences of the Reorganization, as well as the consequences arising under the laws of any other taxing jurisdiction, including any state, local or foreign income tax consequences.
In the opinion of Perkins Coie LLP, in reliance on certain factual representations provided by us and certain other facts and assumptions, the Reorganization should qualify as a “reorganization” described in Section 368(a)(1)(F) of the Code. Assuming the Reorganization so qualifies, (i) no gain or loss will be recognized by a U.S. holder upon the conversion of his, her or its shares of Company Common Stock into shares of Holdings Common Stock; (ii) a U.S. holder will have an initial tax basis in his, her or its Holdings Common Stock that is the same as his, her or its adjusted tax basis in his, her or its existing Company Common Stock surrendered; and (iii) a U.S. holder will have a holding period for his, her or its Holdings Common Stock that includes his, her or its holding period for his, her or its existing Company Common Stock surrendered.
An opinion of counsel represents only that counsel’s best legal judgment and does not bind the IRS or the courts. We do not intend to request a ruling from the IRS as to the U.S. federal income tax consequences of the Reorganization, and consequently we do not assure you that the IRS or a court of law will treat the Reorganization in the manner described above. If the IRS were to successfully challenge the treatment of the Reorganization, a U.S. Holder of Company Common Stock generally would recognize gain or loss for U.S. federal income tax purposes upon the exchange of Company Common Stock for Holdings Common Stock in the Reorganization. The deductibility or use of any losses may be subject to disallowance or significant limitations under the Code.
Accounting Consequences
The consolidated assets and liabilities of Holdings will be recorded at the historical cost of Digimarc as reflected on the consolidated financial statements of Digimarc immediately prior to the Reorganization. Accordingly, the consolidated financial statements of Holdings immediately following the Reorganization will be the same as the consolidated financial statements of Digimarc immediately prior to the Reorganization. For this reason, pro forma and comparative financial information regarding Holdings and its consolidated subsidiaries giving effect to the Reorganization have not been included in this proxy statement/prospectus. Similarly, no selected historical pro forma financial information has been included in this proxy statement/prospectus because the Reorganization will have no effect on Digimarc’s historical consolidated financial statements.
Interests of Directors, Executive Officers and Significant Shareholders in the Reorganization
All of the Company’s directors and its executive officers own Company Common Stock, or options to purchase shares of Company Common Stock, shares of Company Restricted Stock, RSUs to be settled in Company Common Stock, or PRSUs to be settled in Company Common Stock, and to that extent, their interest in the Reorganization is the same as the interest in the Reorganization of the Company’s shareholders generally.
As of , 2026, the Company’s directors and executive officers beneficially owned shares of Company Common Stock, representing approximately % of the voting power of the Company Common Stock. Each director and executive officer of the Company has advised the Company that he or she plans to vote all of his or her shares of Company Common Stock in favor of the Reorganization Proposal. The affirmative vote of the holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast on the Record Date is required to approve the Reorganization Proposal (with each share of Company Common Stock having one vote).
As described in the Compensation Discussion and Analysis, the form of the equity incentive grant to Mr. McCormack approved in December 2025 will depend on whether the Reorganization Proposal is approved by the Company’s shareholders.
Expenses
All expenses related to the Reorganization, including fees and expenses of the Company’s attorneys and accountants and expenses and costs of preparing, mailing and soliciting proxies pursuant to this proxy statement/prospectus, will be paid by the Company whether or not the Reorganization is approved by the Company’s shareholders.
Vote Required
Assuming that a quorum is present, approval of the Reorganization Proposal requires the affirmative vote of the holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast.
Recommendation of the Digimarc Board
THE DIGIMARC BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE REORGANIZATION PROPOSAL.
OPERATIONS OF THE DIGIMARC BOARD AND ITS COMMITTEES
Digimarc Board Meetings and Attendance
The Digimarc Board had five formal meetings in 2025, together with a number of informational sessions between meetings. Each current serving director attended over 80% of the aggregate number of meetings of the Digimarc Board and of applicable committees on which they served in 2025. We encourage but do not require director attendance at our annual meeting of shareholders. Three of the seven directors serving on the date of Digimarc’s annual meeting of shareholders held on May 7, 2025 attended the 2025 annual meeting of shareholders.
Digimarc Board Leadership and Structure
Katie Kool serves as Chair of the Digimarc Board and is also an independent director. As the Chair of the Digimarc Board, Ms. Kool works closely with our Chief Executive Officer and Digimarc Board member, Riley McCormack, the other Digimarc Board members, and the leadership team to engage with and represent the shareholder community, strengthen the Company’s work in and commitment to sustainability practices, and address new ways to enhance overall Digimarc Board and Company operations.
Digimarc Board Independence
The Digimarc Board has been, and continues to be, a strong proponent of board independence. Currently, all our directors other than the Chief Executive Officer, including each member of the Digimarc Board’s Audit Committee, Compensation and Talent Management Committee, and Governance, Nominating, and Sustainability Committee, are independent directors under the Nasdaq listing rules.
The Digimarc Board believes that Digimarc’s corporate governance principles and policies ensure that strong and independent directors will continue to effectively oversee Digimarc’s management and key issues related to long-range business plans, long-range strategic matters and risks, and integrity. The following are keys to independent oversight:
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● |
The independent directors meet at regularly scheduled Digimarc Board meetings, in an executive session chaired by the Chair of the Digimarc Board without the Chief Executive Officer or other management present. |
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In addition to presiding over these executive sessions, the Chair of the Digimarc Board serves as the principal liaison between the independent directors and management and determines information to be sent to the Digimarc Board, meeting agendas, and meeting schedules. |
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● |
Each director is encouraged to suggest items for the Digimarc Board agenda and to raise at any Digimarc Board meeting subjects that are not on the agenda for that meeting. |
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The independent Chair of the Digimarc Board’s significant, clearly delineated duties and responsibilities are highly effective in providing oversight of management and direct accountability to shareholders by ensuring that the Digimarc Board’s views and directives are communicated to and understood by management. |
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Our corporate governance principles provide that the Digimarc Board and all Digimarc Board committees, including those whose members are exclusively independent directors, may seek financial, legal, or other expert advice from a source independent of management, with funding provided by Digimarc. |
Digimarc Board Committees
The Digimarc Board had three standing committees for 2025: an Audit Committee, a Compensation and Talent Management Committee, and a Governance, Nominating, and Sustainability Committee. The current members of these committees as of the date of this proxy statement are set forth in the following table:
Members of the Digimarc Board Committees
|
Non-Employee Directors |
Audit |
Governance, Nominating, and Sustainability |
Compensation and Talent Management |
|||
|
LaShonda Anderson-Williams |
Member |
Chair |
||||
|
Rishi Bajaj |
Member |
Member |
||||
|
Sheila Cheston |
Member |
Chair |
Member |
|||
|
Sandeep Dadlani |
Member |
|||||
|
Katie Kool |
Member |
Member |
||||
|
Dana Mcilwain |
Chair |
Member |
||||
|
Michael Park |
Member |
Member |
The Digimarc Board’s Role in Risk Oversight
The Roles of Management and the Digimarc Board. Digimarc’s management is responsible for identifying, assessing, and managing the material risks facing Digimarc. The Digimarc Board performs an important role in the review and oversight of risks, and generally oversees Digimarc’s risk management practices and processes, with a strong emphasis on financial and entity-level controls.
Delegation to Digimarc Board Committees. The Digimarc Board has delegated primary oversight of the management of risks to its committees. In particular, the Digimarc Board has delegated:
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● |
To the Audit Committee, financial and accounting risks, and information technology security risks, which include risks to the security of our infrastructure and systems, cybersecurity risks, as well as artificial intelligence (“AI ”) governance; |
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● |
To the Compensation and Talent Management Committee, compensation risks, employment policy risks, benefit program risks, and key personnel retention risks; and |
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To the Governance, Nominating, and Sustainability Committee, environmental and social risks, governance and compliance risks related to confidential reporting (via a “hotline”), personnel actions, ethics, related-party transactions, conflicts of interests and litigation, and other entity-level risks. |
Each of these committees reviews these specific risk areas on a quarterly basis and routinely reports to the Digimarc Board regarding that committee’s oversight and findings.
Routine Reporting and Review Process. To permit the Digimarc Board and its committees to perform their respective risk-oversight roles, individual members of management who supervise Digimarc’s risk management report directly to the Digimarc Board or the relevant committee of the Digimarc Board responsible for overseeing the management of specific risks, as applicable. For this purpose, management has a high degree of access and communication with independent directors. In addition, the Digimarc Board oversees and participates annually in a process of risk assessment that is designed to identify the most salient enterprise risks facing Digimarc’s business and to evaluate how the Company’s corporate strategies align with those risks.
Annual Risk Assessment and Review. On an annual basis, the Chief Financial Officer of Digimarc prepares, and the executive management team reviews, a master risk assessment analysis (which provides an aggregate listing of strategic, financial, employee, operational, legal, compliance, internal process, and similar risks) and provides to the Digimarc Board the assessment of the immediacy and intensity of the risks. The analysis focuses on the various types of risks that can affect the operations and financial performance of the Company. The management team identifies and categorizes the key risks facing the Company and then ranks these risks as to their seriousness and probability based on management’s assessment of the risk relative to Digimarc’s operating environment. Taking into consideration Digimarc’s risk controls and mitigation plans, the Digimarc Board reviews management’s analysis to identify and assess the degree and likelihood of the risks profiled. Having directors who are both knowledgeable about and sensitive to various aspects of the market and industry risks facing our business ensures that risks are reviewed from multiple vantage points.
Finally, the Digimarc Board oversees organizational structure, policies, and procedures at Digimarc, such as the Code of Business Conduct and other internal policies and guidelines designed to support Digimarc’s corporate governance guidelines and to comply with the laws, rules, and regulations that apply to Digimarc’s business operations. Policies and procedures also allow the Digimarc Board to receive information from employees, vendors, and other interested parties. For example, the Digimarc Board maintains a hotline where employees, vendors, and other interested parties may anonymously report suspected violations of any applicable law by any employee or agent, questionable accounting or auditing matters, or other ethical or legal matters. The Chair of the Digimarc Board, the Chair of the Governance, Nominating, and Sustainability Committee, and the Chair of the Audit Committee receive any communication received via this hotline by default (as long as that individual is not named in the communication).
Audit Committee
We have a standing Audit Committee of the Digimarc Board, consisting of Mr. Mcilwain (Chair), Mr. Bajaj, Ms. Cheston, Mr. Dadlani, and Ms. Kool. Mr. Bajaj was appointed to the Audit Committee in September 2025. During 2025, the Audit Committee had four formal meetings. The Digimarc Board has adopted a charter for the Audit Committee, a copy of which is posted on our website, www.digimarc.com, on the Company/Corporate-Governance page.
The Audit Committee is responsible for overseeing the quality and integrity of our accounting, auditing, and financial reporting practices, the audits of our financial statements, internal control over financial reporting, and other duties assigned by the Digimarc Board. The committee’s role includes a particular focus on the qualitative aspects of financial reporting to shareholders, our processes to manage business and financial risk, and compliance with significant applicable legal, ethical, and regulatory requirements.
The committee is also responsible for overseeing risks in the areas of information technology, cybersecurity standards, and AI governance, and overseeing the training and testing within those areas.
The committee serves as our Qualified Legal Compliance Committee.
The committee is directly responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting firm engaged to issue an audit report on our financial statements and internal controls over financial reporting, and to perform other audit, review, and attestation services for us. The committee is responsible for resolving any disagreements between management and the independent registered public accounting firm regarding financial reporting.
The Digimarc Board has determined that each of the members of the Audit Committee:
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● |
meets the requirements for “independence” set forth in Nasdaq Listing Rules 5605(a)(2) and 5605(c)(2) and applicable SEC rules; and |
|
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has the requisite financial sophistication called for by Nasdaq Listing Rule 5605(c)(2). |
The Digimarc Board also has determined that each of Mr. Mcilwain, Mr. Bajaj, and Ms. Kool satisfy the requirements for an “audit committee financial expert” in compliance with Item 407(d)(5) of Regulation S-K of the Securities Act of 1933, as amended (the “Securities Act”).
Compensation and Talent Management Committee
We have a standing Compensation and Talent Management Committee, consisting of Ms. Anderson-Williams (Chair), Ms. Cheston, Ms. Kool, and Mr. Park. The committee had five formal meetings in 2025. The committee has a written charter, a copy of which is available on our website, www.digimarc.com, on the Company/Corporate-Governance page. The Digimarc Board has determined that all members of the Compensation and Talent Management Committee are “independent” as that term is defined in Nasdaq Listing Rules 5605(a)(2) and 5605(d)(2).
The committee has the authority and responsibility to:
|
● |
review, establish and approve, on an annual basis, the philosophy and strategy for the compensation of the executive officers and overall compensation strategy of the Company; |
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administer our annual and long-term compensation plans; |
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review and make recommendations to the Board with respect to director compensation; |
|
● |
review and discuss with management annual compensation matters, if applicable; |
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recommend to the Digimarc Board inclusion of a Compensation Discussion and Analysis in the annual report on Form 10-K and the proxy statement, if applicable; |
|
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create and approve a Compensation and Talent Management Committee Report; |
|
● |
review and approve compensation agreements and arrangements between us and our executive officers; |
|
● |
perform other duties and functions assigned by the Board from time to time that are consistent with the committee’s charter, the Digimarc Bylaws, and governing law; |
|
● |
review and oversee the Company’s human capital management, pay equity initiatives, policies, programs and processes relating to talent management, retirement plans, and similar policies and programs; |
|
● |
review and oversee succession planning for the executive leadership team; |
|
● |
provide oversight of an effective shareholder outreach program, in coordination with the Audit Committee and the Governance, Nominating, and Sustainability Committee, and participate in outreach to shareholders as appropriate; |
|
● |
provide oversight on matters such as stock ownership guidelines, compensation recoupment or claw-back provisions, and similar policies and programs; and |
|
● |
review and ensure the accuracy and completeness of the Compensation Discussion and Analysis and the say-on-pay materials in the Company’s proxy statement. |
The committee’s role includes a particular focus on the compensation of our executive officers and non-employee directors and the administration of our equity incentive plans and significant employee benefit programs. The committee may, under its charter, delegate any of its responsibilities to subcommittees of the committee as necessary and appropriate.
Governance, Nominating, and Sustainability Committee
We have a standing Governance, Nominating, and Sustainability Committee, consisting of Ms. Cheston (Chair), Ms. Anderson-Williams, Mr. Bajaj, Mr. Mcilwain, and Mr. Park. Mr. Bajaj was appointed to the Governance, Nominating, and Sustainability Committee in September 2025. The committee had four formal meetings in 2025. The Digimarc Board has adopted a written charter for the committee, a copy of which is posted on our website at www.digimarc.com, on the Company/Corporate-Governance page. The Digimarc Board has determined that all members of the committee are “independent” as that term is defined in Nasdaq Listing Rule 5605(a)(2).
The Digimarc Board has delegated to the committee the responsibility for:
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● |
the quality and integrity of our corporate governance practices and for optimizing the composition and competence of the Digimarc Board and its committees by searching for and recommending individuals for election to the Digimarc Board; |
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the review, monitoring, and general oversight of our policies and procedures involving corporate governance and compliance with significant legal, ethical, and regulatory requirements, which includes monitoring compliance with the Sarbanes-Oxley Act of 2002; |
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the review, monitoring, and general oversight of other governance laws and regulations, and the development, monitoring, and enforcement of the corporate governance principles applicable to the Company; |
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the structure of the Digimarc Board and its committees, and the oversight of annual evaluations of the Digimarc Board and the committees; |
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recruitment of individuals to become members of the Digimarc Board and evaluating their qualifications under the guidelines described under “Director Nomination Policy” below; |
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the Company’s sustainability efforts, including alignment of the Company’s policies and practices with the environmental, social, and governance guidelines of governmental and institutional investor constituencies, and the Company’s policies and programs involving human capital and shareholder outreach; and |
|
● |
the performance of other duties and functions as requested by the Digimarc Board from time to time consistent with the committee’s charter, the Digimarc Bylaws and governing law. |
Nomination Functions and Processes
Director Nomination Policy
The Governance, Nominating, and Sustainability Committee has a formal written policy addressing the nominating process, a copy of which is available on our website at www.digimarc.com, attached as an exhibit to the Governance, Nominating, and Sustainability Committee charter located on the Company/Corporate-Governance page of the site. Pursuant to its written policy addressing the nominating process:
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● |
The Governance, Nominating, and Sustainability Committee welcomes and encourages recommendations of director candidates from our shareholders and will consider any director candidates recommended by our shareholders, provided that the information regarding director candidates who are recommended is submitted to the committee in compliance with the terms of its policy. Director candidate recommendations from shareholders must be provided in writing, include prescribed information, and be sent to Digimarc’s Secretary at the address of our principal executive offices. |
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● |
In evaluating a potential candidate’s qualifications for nomination to the Board, the Governance, Nominating, and Sustainability Committee will consider the potential candidate’s experience, areas of expertise, and other factors relative to the overall composition of the Digimarc Board. Operational and leadership experiences in our strategic areas are important elements of the director search criteria. Although the Digimarc Board does not maintain a specific policy with respect to Digimarc Board diversity, the Digimarc Board believes that it should be a diverse body, and the Governance, Nominating, and Sustainability Committee will consider whether a potential candidate would contribute to a broad variety of opinions, perspectives, backgrounds, and personal and professional experiences on the Digimarc Board. |
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The Governance, Nominating, and Sustainability Committee also reviews annually the skills and characteristics necessary and appropriate for directors in the context of the current composition of the Digimarc Board. Directors are expected to devote sufficient time to carry out their duties and responsibilities effectively, ensure that other existing and planned future commitments do not materially interfere with their service as a director, and attend at least 75% of all Board and applicable committee meetings. |
Director Identification and Evaluation Process
The Governance, Nominating, and Sustainability Committee’s process for identifying and evaluating nominees for director, including nominees recommended by shareholders, involves an internal assessment of the qualifications and performance of incumbent members of the Digimarc Board, compiling names of potentially eligible candidates, vetting those candidates against the factors described above, conducting background and reference checks, conducting interviews with candidates, meeting to consider and approve final candidates, and, as appropriate, preparing and presenting to the Digimarc Board an analysis with regard to a candidate. The committee will identify director nominees who have the highest personal and professional integrity, have demonstrated exceptional ability and judgment, and, together with other director nominees and members, will effectively serve the shareholders’ long-term interests and contribute to our overall corporate goals.
There are no differences in the manner in which the Governance, Nominating, and Sustainability Committee evaluates nominees for director positions based on whether the nominee is recommended by a shareholder or identified by the Governance, Nominating, and Sustainability Committee. The committee may, from time to time, pay professional search firms to assist in the identification and evaluation of potential director nominees.
Sustainability Functions and Processes
Digimarc Board Oversight of Sustainability
Digimarc’s approach to sustainability is firmly embedded in our corporate strategy. We are committed to managing our impact on the world and the material sustainability risks and opportunities facing us as a business. Further, we recognize the potential of our technology to solve important sustainability challenges. The Governance, Nominating, and Sustainability Committee is the highest body within the organization with responsibility for this range of topics, reflecting the strategic importance of sustainability.
Ethical Supply Chain and Protection of Basic Human Rights
Digimarc has published a Vendor Code of Conduct designed to help ensure the ethical treatment of workers and the protection of basic human rights, including the right to collective bargaining, freedom from human trafficking, and livable wage and fair contracting provisions. We also perform a corporate values assessment in our analysis of a good supplier/partner relationship.
Pay Equity
A core priority for Digimarc is pay equity – ensuring employees are paid fairly, relative to their experiences and contributions, and that there are no material differences by gender or race/ethnicity. We continue to proactively review employee pay decisions across our geographies to ensure continued equity, and we provide pay transparency by publicly disclosing the compensation range for all new U.S.-based job listings.
Corporate Governance Functions and Processes
Obtaining and Considering Stakeholder Feedback
Each committee reviews its charter documents annually and considers potential updates. A key part of this continuous improvement is hearing from stakeholders regarding their views. The Digimarc Board solicits and encourages all forms of information to be provided to the Digimarc Board and/or its members. All such communications shall be in written form, addressed to the Digimarc Board or to one or more individual members of the Digimarc Board, and sent care of the Secretary of the Company, at the address of the Company’s principal executive offices or via fax to (503) 520-0407. The Secretary of the Company shall promptly provide all such communication to the applicable member(s) of the Digimarc Board or the entire Digimarc Board.
Officer and Director Stock Ownership Guidelines
The Digimarc Board believes that it is important for its members and executive officers to hold significant baseline amounts of Company stock to align their interests with those of long-term shareholders. In 2024, the Digimarc Board updated our stock ownership guidelines and established the following levels of required holdings:
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For non-employee directors: 6x their regular annual Digimarc Board service cash retainer; |
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For the Chief Executive Officer: 6x annual base pay; |
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For the Chief Financial Officer: 3x annual base pay; and |
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For the other named executive officers: 2x annual base pay. |
To calculate the number of shares necessary to satisfy our Stock Ownership Guidelines, we include the following shares: (1) shares owned directly (or indirectly through a 401(k) plan or Employee Stock Purchase Plan); and (2) unvested restricted stock awards, unvested RSUs that vest based solely on continued service, and PRSUs that have been earned based on performance but remain subject to time-based vesting. For converting the targeted value to a number of shares, we use the higher of the 20-day moving average price of Company Common Stock at the end of our most recent fiscal year or at the end of each fiscal quarter of the most recent fiscal year.
Non-employee directors, our Chief Executive Officer, and all named executive officers are required to retain 50% of net vested securities until the individual is in compliance with the guideline ownership requirement.
As of December 31, 2025, our Chief Executive Officer and four other named executive officers exceeded the enhanced guidelines. As of December 31, 2025, seven directors then serving exceeded the enhanced guidelines.
From time to time, the Compensation and Talent Management Committee will review and update (as appropriate) the rules and standards governing our Stock Ownership Guidelines, including the following:
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● |
which equity holdings count toward the ownership requirement; |
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the share price used to calculate the value of ownership for compliance purposes, including the duration of the measurement period; |
|
● |
holding and accumulation requirements; |
|
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the duration of any phase-in period for new officers and directors to come into compliance with the guidelines; |
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the nature and extent of any hardship provisions; |
|
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the frequency of compliance reporting; and |
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any remedial actions for non-compliance. |
Succession Planning
Succession planning for the executive leadership team is expressly delegated to the Compensation and Talent Management Committee for regular consideration. The Chief Executive Officer and the Digimarc Board discuss succession planning in executive session on at least an annual basis. In addition, every year, a more formal submission and report is provided by the management team, including the internal candidates to fill positions, and what is required to prepare them to succeed to more senior positions, or whether an outside candidate would be required.
Digimarc Board Performance Evaluations
The Chair of the Governance, Nominating, and Sustainability Committee leads a board assessment process annually. The assessments include an evaluation of the performance of the Board, its committees, and its individual members. The performance assessment and feedback for each director is shared with the director individually by the Chair of the Digimarc Board and/or the Chair of the Governance, Nominating, and Sustainability Committee. The overall review of the Digimarc Board is shared with the entire Digimarc Board, as is the feedback for each respective committee. Results from the assessment process help inform the Chair, committee Chairs, and directors of potential areas for improvement. The Digimarc Board does not believe that directors should expect to be re-nominated as a matter of course. The board assessment process is a determinative factor in decisions related to individual director tenure, committee leadership, and leadership of the Digimarc Board.
Resignation Requirement on Change of Employment
The Digimarc Board also has adopted a policy that requires any director who experiences a substantial change in principal employment responsibility to tender the director’s resignation from the Digimarc Board, unless the change was anticipated by the Governance, Nominating, and Sustainability Committee at the time of the director’s nomination or election to the Digimarc Board. Upon receipt of a resignation offered under these circumstances, the Governance, Nominating, and Sustainability Committee will review the director’s change in employment responsibilities to evaluate whether the director’s continued service is appropriate.
Resignation Requirement on Failure to Achieve a Majority Vote
In 2022, the Digimarc Board adopted amendments to its Corporate Governance Guidelines to require the resignation of any director who does not receive a majority vote in an uncontested election of directors (defined as an election where the number of persons properly nominated for election as directors at a meeting of shareholders does not exceed the number of directors to be elected at such meeting). Under this policy, any nominee for director who fails to receive a majority vote (meaning a nominee who receives a greater number of votes “WITHHELD” from their election than votes “FOR” such election) must promptly tender a resignation to the Digimarc Board following certification of the shareholder vote. Additional information on this requirement is set forth on page 50.
Corporate Governance Materials
In furtherance of our commitment to upholding the highest legal and ethical conduct in fulfilling our responsibilities, the Digimarc Board has adopted and published corporate governance guidelines and three codes of ethics and business conduct, two of which apply to our Chief Executive Officer, our Chief Financial Officer, our Controller, and other finance personnel. The primary governance materials include:
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Our Corporate Governance Guidelines, which can be found on the Company/Corporate-Governance page of our website at www.digimarc.com. These Corporate Governance Guidelines provide a framework for the Digimarc Board to assist in the governance and oversight of the affairs of Digimarc. |
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Our Code of Business Conduct, which can be found on the Company/Corporate-Governance page of our website at www.digimarc.com. The Code of Business Conduct applies to every officer, director, and employee of Digimarc and its subsidiaries, and their immediate family members, and sets forth internal policies and guidelines designed to support and encourage ethical conduct and compliance with the laws, rules and regulations that govern our business operations. |
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Our Code of Ethics for Financial Personnel, which can be found on the Company/Corporate-Governance page of our website at www.digimarc.com. This Code of Ethics applies to the principal executive officer and principal financial officer of Digimarc and its subsidiaries and every officer, director, and employee of Digimarc who performs or influences financial transactions and reporting on behalf of Digimarc, and their immediate family members. |
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Our Standards of Professional Conduct for Legal Personnel, which can be found on the Company/Corporate-Governance page of our website at www.digimarc.com. The guidelines are in addition to the codes described above and assist legal personnel in understanding the broader responsibilities that apply to the profession. |
Related Transactions
Our Governance, Nominating, and Sustainability Committee, in executing the responsibilities delegated to it, reviews and considers all transactions between Digimarc and our officers, directors, principal shareholders, and affiliates, and approves, rejects, or ratifies these transactions. The committee has determined that any transactions between Digimarc and its officers, directors, principal shareholders, and affiliates should be on terms no less favorable to us than could be obtained from unaffiliated third parties. Digimarc maintains written policies governing these transactions. Our Audit Committee also reviews any transactions with related parties. There were no related person transactions in 2025.
Shareholder Communications with the Board of Directors
The Digimarc Board encourages communication from all shareholders. All communications must be in written form, addressed to the Digimarc Board or to one or more individual members of the Digimarc Board, and sent care of the Secretary of Digimarc at the address of our principal executive offices (8500 S.W. Creekside Place, Beaverton, Oregon 97008) or via fax to (503) 520-0407. The Secretary will promptly provide all communications to the applicable member(s) of the Digimarc Board or the entire Digimarc Board, as specified by the shareholder.
DIRECTOR COMPENSATION
The Compensation and Talent Management Committee undertakes an annual review of director compensation and periodically makes adjustments. In 2024, the Committee’s compensation consultant benchmarked the compensation of the Company’s directors against the compensation paid to directors of Digimarc’s peer group. Based on the consultant’s recommendations, no changes to director compensation were made in 2025. The Digimarc Board also maintained the limit of $500,000 on the aggregate value of total annual cash and equity compensation for any non-employee director.
The Director Compensation Program
Cash Compensation
The Digimarc Board has approved an annual cash retainer for each non-employee director of $50,000 per annum. In addition, the Digimarc Board has approved an additional annual cash retainer in the amount of $40,000 for the Chair of the Digimarc Board and $15,000 for each of the Chairs of the Audit Committee, the Compensation and Talent Management Committee, and the Governance, Nominating, and Sustainability Committee.
Directors are not compensated for meeting attendance. These cash retainers are compensation for all committee, chair, and other roles undertaken by the respective director, including attendance at regular, special, and informational committee and Digimarc Board meetings. The cash retainers are paid quarterly in arrears.
Equity Compensation
In accordance with the Equity Compensation Program for Non-Employee Directors under the 2018 Incentive Plan, when a non-employee director is first elected or appointed to the Digimarc Board, the director is automatically granted shares of Company Restricted Stock having an aggregate value of approximately $200,000. These shares vest over the three-year period commencing on the date of grant, with 1/3 of the shares vesting on each of the first three anniversaries of the date of grant.
On the date of each Annual Meeting, each non-employee director automatically receives an annual grant of Company Restricted Stock having an aggregate value of approximately $100,000, unless the Compensation and Talent Management Committee exercises its power to make an alternative grant.
If a non-employee director is first elected or appointed to the Digimarc Board between annual meetings, the director will automatically receive a pro-rated annual grant of Company Restricted Stock on the date that the director is first elected or appointed to the Digimarc Board. Restrictions on this Company Restricted Stock lapse on the anniversary of the grant date, or immediately prior to the next annual meeting of shareholders that occurs prior to such first anniversary, but at least 50 weeks after the prior year’s annual meeting of shareholders.
Election to Receive Cash Retainer in Equity
Starting in 2023, the Digimarc Board updated the director compensation program to enable non-employee directors to elect to receive all or a portion of their cash retainer in equity. At the Digimarc Board meeting held in the first quarter of each year, each non-employee director may make a one-time, annual election to be paid 0%, 50%, or 100% of their annual cash retainer for that year in common shares of Digimarc stock (the “elected amount”), instead of cash. Starting in 2025, that election also applied to any applicable Digimarc Board or Committee Chair retainers. The Company will issue common shares under the 2018 Incentive Plan with a value equal to the elected amount on the same date as such quarterly payments are or would have been made in cash and forego the corresponding cash payments.
Other Compensation
All directors are also reimbursed for reasonable and necessary travel, communications, and other out-of-pocket business expenses incurred in connection with their attendance at meetings, while on corporate business, or for continuing education related to their Digimarc Board service. No other perquisites or benefits are paid to directors.
Summary of the Director Compensation Program
Following is a summary of the cash and equity compensation program for our non-employee directors:
|
Annual Cash Retainer |
$ | 50,000 | ||
|
Additional Annual Cash Retainer (Chair of the Digimarc Board) |
$ | 40,000 | ||
|
Additional Annual Cash Retainer (Chair of each of the Audit Committee, Compensation and Talent Management Committee, and Governance, Nominating, and Sustainability Committee) |
$ | 15,000 | ||
|
Annual Restricted Stock Grant (Continuing Director) |
$ |
100,000 value | ||
|
Initial Restricted Stock Grant (New Director) |
$ |
200,000 value |
Table of 2025 Non-Employee Director Compensation
The following table provides information on compensation of our non-employee directors for the year ended December 31, 2025. Directors who are also Digimarc employees receive no additional compensation for their services as directors. During 2025, Mr. McCormack was the only director who was an employee of Digimarc. Mr. McCormack’s compensation is discussed in this proxy statement under the heading “Executive Compensation.”
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2025 Non-Employee Director Compensation Table |
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|
Non-Employee Director |
Fees Earned or Paid in Cash (1) |
Stock Awards Value |
Total |
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|
LaShonda Anderson-Williams |
$ | 65,000 | $ | 100,001 | $ | 165,001 | ||||||
|
Rishi Bajaj (3) |
$ | 21,289 | $ | 277,290 | $ | 298,579 | ||||||
|
Sheila Cheston |
$ | 65,000 | $ | 100,001 | $ | 165,001 | ||||||
|
Sandeep Dadlani |
$ | 50,000 | $ | 100,001 | $ | 150,001 | ||||||
|
Katie Kool |
$ | 90,000 | $ | 100,001 | $ | 190,001 | ||||||
|
Dana Mcilwain |
$ | 65,000 | $ | 100,001 | $ | 165,001 | ||||||
|
Michael Park |
$ | 50,000 | $ | 100,001 | $ | 150,001 | ||||||
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(1) |
Non-employee directors of the Company receive a $50,000 annual cash retainer. The Digimarc Board Chair and the Committee Chairs receive an additional annual cash retainer in the amounts set forth in the Summary Table of Director Compensation above. All cash retainers are paid quarterly in arrears. In 2025, non-employee directors were allowed to receive part or all their annual $50,000 cash retainer in common stock. The following directors were paid a portion of this earned cash retainer in common stock. Ms. Anderson-Williams earned $32,479 in shares, Mr. Bajaj earned $21,280 in shares, Ms. Cheston earned $32,479 in shares, Mr. Dadlani earned $49,989 in shares, Mr. Mcilwain earned $32,479 in shares, and Mr. Park earned $49,989 in shares. |
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(2) |
On May 7, 2025, each of Mses. Anderson-Williams, Cheston, and Kool and Messrs. Dadlani, Mcilwain, and Park were granted shares of restricted stock, consisting of an annual grant of restricted stock with aggregate value of approximately $100,000. The number of restricted shares totaled 7,758 each. On July 29, 2025, Mr. Bajaj received an initial grant of 16,302 shares of restricted stock and a grant of 6,297 shares of restricted stock based on the pro-rated amount based on the number of days between his initial election and the prior annual meeting. These amounts represented the grant date fair value for the restricted stock granted to the indicated non-employee director in 2025, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 “Compensation—Stock Compensation,” excluding the effect of any estimated forfeiture. A summary of the assumptions we apply in calculating these amounts is set forth in the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. As of December 31, 2025, there were no outstanding stock options held by any non-employee director. As of December 31, 2025, the total number of unvested restricted shares held by each non-employee director serving during at least part of 2025, including the shares granted as described above, was as follows: Ms. Anderson-Williams, 9,965; Mr. Bajaj, 22,599, Ms. Cheston, 12,848; Mr. Dadlani, 7,758; Ms. Kool, 7,758; Mr. Mcilwain, 12,848; Mr. Park, 11,482. |
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(3) |
Mr. Bajaj was elected to the Board on July 27, 2025, and began service on July 29, 2025. |
PROPOSAL 2: ELECTION PROPOSAL
The Nomination and Election Process
The Digimarc Bylaws authorize the number of directors to be set by resolution of the Digimarc Board. The Digimarc Board has fixed the number of directors at eight. Eight directors have been nominated for election by the holders of Company Common Stock at the Annual Meeting. These eight directors would each serve a one-year term that will expire at the 2027 annual meeting of shareholders, or until a successor has been qualified and elected.
The Chair of the Digimarc Board works with outside counsel to conduct a board assessment process annually. The assessment includes an evaluation of the Digimarc Board, its committees, and its individual members. The performance and feedback for each director is shared with them individually by the Chair of the Digimarc Board. In addition, each committee Chair receives feedback for their respective committee from the Chair, and the overall review of the Digimarc Board is shared with the entire Digimarc Board. Results from the assessment process help inform the Chair, committee Chairs, and the other directors of potential areas for improvement. The Digimarc Board does not believe that directors should expect to be re-nominated as a matter of course. The board assessment process is a determinative factor in decisions related to individual director tenure, committee leadership, and leadership of the Digimarc Board.
The proxy holders named herein or their substitutes will vote the proxy at the Annual Meeting or any adjournment or postponement of the Annual Meeting for the election of the eight nominees as directors unless the shareholder of record instructs that their authority to vote is withheld. Shares held through a broker, bank or other nominee who is a New York Stock Exchange member organization will only be voted in favor of the director nominees if the shareholder provides specific voting instructions to the broker, bank or other nominee to vote the shares in favor of that proposal.
Resignation Requirement on Failure to Achieve a Majority Vote
In 2022, the Digimarc Board adopted amendments to its Corporate Governance Guidelines to require that any director tender the director’s resignation if the director does not receive a majority vote in an uncontested election of directors (defined as an election where the number of persons properly nominated for election as directors at a meeting of shareholders does not exceed the number of directors to be elected at such meeting). Under this policy, any nominee for director who fails to receive a majority vote (meaning a nominee who receives a greater number of votes “WITHHELD” from their election than votes “FOR” their election) must promptly tender a resignation to the Digimarc Board following certification of the shareholder vote. Such resignation will become effective if the Digimarc Board accepts it in accordance with the procedures set forth below.
The independent directors of the Digimarc Board will, no later than 90 days following certification of the shareholder vote, evaluate any such tendered resignation considering the best interests of the Company and its shareholders and determine whether to accept or reject the tendered resignation, or whether any other action should be taken. The independent directors may consider any factors and circumstances they consider appropriate and relevant when they decide whether to accept such tendered resignation. Any director who tenders their resignation pursuant to this policy may not participate in the Digimarc Board action regarding whether to accept the tendered resignation. Prior to voting, the Digimarc Board will allow the affected director an opportunity to provide any information or statement that the director deems relevant. If the independent directors determine not to accept the tendered resignation, the Company will publicly disclose (via press release or SEC filing) such determination and the factors considered by the independent directors in making such determination.
Digimarc Board Nominees
Each person listed below has been nominated by the Company to be elected to the Digimarc Board. TCM|Strategic is entitled to a Digimarc Board seat and membership on all committees under the terms of its Subscription Agreement with the Company, dated September 29, 2020. Mr. McCormack represents TCM|Strategic in this capacity but resigned from membership on Board committees upon becoming President and Chief Executive Officer of the Company on April 12, 2021. There are no other arrangements or understandings between any director and any other person pursuant to which the director is or was to be selected as a director, or pursuant to which the director receives compensation or any other payments from any third party for service as a director. There is no familial relationship between any director and any executive officer of Digimarc.
The following is information about the Digimarc Board’s nominees for election as a director as of March 12, 2026.
Candidates for the Digimarc Board
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Director Nominees |
Director Age |
Director Since |
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LaShonda Anderson-Williams |
52 | 2023 | ||||||
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Rishi Bajaj |
46 | 2025 | ||||||
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Sheila Cheston |
67 | 2024 | ||||||
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Sandeep Dadlani |
51 | 2021 | ||||||
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Katie Kool |
54 | 2022 | ||||||
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Riley McCormack |
50 | 2020 | ||||||
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Dana Mcilwain |
63 | 2024 | ||||||
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Michael Park |
57 | 2024 | ||||||
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LaShonda Anderson-Williams LaShonda is the Chief Customer & Commercial Officer of Salesforce Industries. With her, she brings over 27 years of experience creating and delivering successful revenue-generation strategies within Fortune 200 organizations. LaShonda is known as a results-driven leader who has led multiple organizations to achieve double-digit revenue growth and increased profitability through enhanced strategic planning and exceptional execution, all while building diverse high-performing teams. In her current role, LaShonda leads the commercialization for Salesforce’s Industry Clouds, focused on the realization of deep, tangible value of Industries products. LaShonda is focused on driving customer success and lifetime value that directly impacts customer opportunities and challenges. Her success is driven by decades of deep executive experience which enables her to deliver strong performance. This is due largely in part to her strong collaboration skills leading cross-functional teams with Sales, Technology & Product, Enablement, Marketing, Customer Success Groups, as well as Alliances & Channels. LaShonda is a seasoned business executive with a proven track record of driving customer acquisition and retention across multiple business segments including SMB, Channels & Alliances, Business Applications, and more. |
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Expertise that Ms. Anderson-Williams brings to the Digimarc Board |
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Ms. Anderson-Williams understands the importance of setting the right culture to drive success in an all-digital world. Her leadership philosophy emphasizes the importance of leadership development, employee engagement, and growth. Her inspirational leadership style has created world-class team cultures through balanced coaching and clarity on expectations and results. As a result, LaShonda has attracted top talent to join her teams across the largest technology companies such as IBM, Microsoft, and Salesforce. LaShonda currently serves on the Board of Directors of Digimarc where she is Chair of the Compensation and Talent Management Committee, and a member of the Governance, Nominating, and Sustainability Committee, and she serves on the board of Medical Informatics Corp. She also serves as an advisory board member for the UofH College of Technology & Engineering Board, as well as FlockJay. She has been honored among the 2024 Most Influential Executives in Corporate America by Savoy Network, named as one of the 2021 Top 50 Most Powerful Women in Technology by the National Diversity Leadership Conference, as well as one of the 2021 Top 25 Women Leaders by The Healthcare Technology Report. |
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Rishi Bajaj Rishi founded Altai Capital Management, L.P., a private investment firm, in 2009. He serves as its President and Chief Investment Officer, where he is responsible for the management and operations of the business.
Prior to founding Altai Capital, Mr. Bajaj served as a Senior Investment Analyst at Silver Point Capital, L.P., a private investment management firm, from 2003 to 2009, and as an M&A and Restructuring Analyst at Gleacher Partners, LLC, an M&A advisory firm, from 2001 to 2003.
Expertise that Mr. Bajaj brings to the Board
Mr. Bajaj previously served on the Board of Directors of MobileIron, Inc. (NASDAQ: MOBL, formerly), a cybersecurity company, in 2020, where he served on the Strategy Committee, and on the Board of Directors of ServiceSource International, Inc. (NASDAQ: SREV, formerly), a software and services company, from 2014 to 2016, where he served on the Compensation Committee.
Mr. Bajaj holds a B.S. in Economics with concentrations in Finance and Statistics from The Wharton School at the University of Pennsylvania.
Mr. Bajaj’s qualifications to serve as a director of the Corporation include his years of service on public company boards and his extensive investment management experience and operational expertise, particularly in the technology sector. Mr. Bajaj currently serves on the Digimarc Board where he is a member of the Audit and Governance, Nominating, and Sustainability Committees. |
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Sheila Cheston Sheila is an accomplished legal and business leader with over 30 years of experience across multinational corporations and the U.S. government. Most recently, she served as Corporate Vice President and General Counsel of Northrop Grumman Corporation, a global security leader, where she retired in December 2023 after 13 years of service. In this role, Sheila was responsible for overseeing the law department, and the offices of the Corporate Secretary and Chief Compliance Officer, while also advising on key areas such as global strategy, capital allocation, mergers and acquisitions, human capital management, investor relations, and government relations. During her tenure, she helped Northrop Grumman achieve substantial growth, delivering long-term value to shareholders with returns more than three times that of the S&P Index. Prior to joining Northrop Grumman, Sheila held senior positions at BAE Systems, Inc., including Executive Vice President and Board Director, where she led critical functions such as finance, strategy, and legal matters.
Expertise that Ms. Cheston brings to the Board
Ms. Cheston has extensive government experience, having served as General Counsel of the U.S. Air Force, acting Undersecretary of the Air Force, and Special Associate Counsel to the President of the United States. Sheila is actively involved in nonprofit and professional boards, including the Board of Directors of Digimarc, serving as Chair of the Governance, Nominating, and Sustainability Committee, and a member of the Audit and Compensation and Talent Management Committees. She serves on boards of Grameen Foundation, the National Partnership for Women and Families, and the Legal Aid Society. Ms. Cheston also teaches at Columbia University School of Law and Middlebury College. A graduate of Dartmouth College and Columbia Law School, she has been recognized for her leadership and mentorship, receiving numerous awards throughout her career, including Burton’s Legends in the Law Award. Sheila continues to be a respected leader in both the corporate and legal communities. |
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Sandeep Dadlani Sandeep was elected to our Board in March of 2021. Mr. Dadlani serves as a member of the Audit Committee. Mr. Dadlani was named Chief Executive Officer for Optum Insight, a subsidiary of UnitedHealth Group, in October 2025. Prior to that, he served as EVP, Chief Digital and Technology Officer for UnitedHealth Group from September 2022 until October 2025. Prior to UnitedHealth Group, Mr. Dadlani was the Global Chief Digital Officer at Mars, Incorporated, a $40 billion global conglomerate in the pet care, food and confectionary businesses, where part of his responsibilities focused on the digitalization of the supply chain. He worked with Mars’ global business segments to drive their digital growth, while delivering effectiveness and efficiency to existing business and technology platforms. Earlier in his career, Mr. Dadlani was with Infosys (NYSE: INFY) from 2001 to 2017, where he last held the position of President, Head of Americas and Global Head of Infosys’s Manufacturing, Retail, Consumer Packaged Goods, and Logistic Practices. He co-founded, and eventually ran as Chairman, Infosys Edgeverve, a new artificial intelligence company for Infosys, and Skava, a mobile commerce company. Prior to his employment with Infosys, he began his career in investment banking at Citibank. Mr. Dadlani has won several awards, including CIO of the Year in 2019 by Consumer Goods Technology, one of the top 150 business transformation leaders globally by Constellation Research, and Blue Yonder’s 50 most prominent AI thought leaders in 2021. Mr. Dadlani earned a Bachelor’s degree in Electrical Engineering from M.S. University, Baroda, India and a Master of Business Administration in Finance from JBIMS, Mumbai University, India. |
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Expertise that Mr. Dadlani brings to the Board |
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Mr. Dadlani brings product management, operations, digital and technology platforms, data management, artificial intelligence, mobile commerce, e-commerce, platform automation, supply chain digitalization, and international experience to Digimarc. Mr. Dadlani is accomplished across many disciplines with extraordinary leadership qualities. He has more than 25 years of experience in operations, consulting, business development and product management. He has been a contributor to the Harvard Business Review and Forbes and is a regular keynote speaker at industry forums. He has co-authored the UN Global report on supply chain sustainability. Additionally, he is on the World Economic Forum’s Global Agenda Council on the Future of Consumption and has participated for several years in the World Economic Forum Annual Meeting in Davos. His experience is particularly germane to Digimarc initiatives to drive digital transformation through product digitization, improve operational efficiencies, and achieve scale across global and industry business segments. |
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Katie Kool Katie was elected to our Board in March of 2022. She began Board service on July 1, upon her retirement from Procter & Gamble, contingent on her election by the shareholders. She was elected as Board Chair in June 2024. Ms. Kool is also a member of the Audit Committee and the Compensation and Talent Management Committee. Ms. Kool is a seasoned finance executive, who began her career with Procter & Gamble in 1995 and successfully transitioned to general management as a divisional CEO, with a proven history of delivering superior results across both Consumer Products and Services business models. She brings executive, financial, international, innovation, and investor relations experience to the Digimarc Board. Starting in January of 2019, she served as the CEO of Tide Cleaners, a wholly owned subsidiary of Procter & Gamble, which is a service-based retailer providing out of home dry cleaning and laundry services through franchise and corporate stores, lockers, home delivery, and college campuses. For the three and a half years prior to her CEO experience, Ms. Kool was the CFO for North America Fabric Care, which includes the Tide, Gain, Downy, and Bounce brands and has over $8 billion in retail sales. She was also CFO for the Global Procter & Gamble Professional business, where she developed a 5-year strategic plan, including a more focused operating model, profit and loss, and cash investments to deliver sustainable Operating Total Shareholder Return. In addition to her extensive business leadership experience, Katie was a key member of Procter & Gamble’s award-winning Investor Relations team for 5.5 years, during which she partnered with 3 CEO’s and led communications for the strategy renewal that spanned two $10 billion productivity programs and a more focused portfolio of strategic brands. |
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Expertise that Ms. Kool brings to the Board
Ms. Kool is also a Board Member at Aspen Aerogels (ASPN) and serves as Chair of the Audit Committee and is a member of the Nominating, Governance, and Risk Committee. In her personal time, Ms. Kool was Co-Founder & CEO of KW CrossFit. She is a Founder and President of Impact100 Genesee County, a nonprofit organization that empowers women to pool their funds and award significant grants to transform lives in their community. Ms. Kool is a Board Member and CFO for Sonje Ayiti, a nonprofit organization focused on providing tools for Haitians to help themselves via education, economic development, and health promotion, and she co-led the creation of the Cima School of Hope in Haiti, a government-licensed school with over 300 students in Pre-K through 11th grade and over 30 employees. Ms. Kool holds a Bachelor of Arts summa cum laude from Kalamazoo College and a Master’s degree in Business Administration from Washington University in St. Louis. |
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Riley McCormack Riley was elected to our Board of Directors in October 2020 and was appointed to be President and Chief Executive Officer in April 2021, prior to which he served as Lead Director and a member of the Audit Committee, Compensation Committee, Governance, Nominating, and Sustainability Committee, and Market Development Committee, and later the Chair of the Compensation Committee. Since 2015, Mr. McCormack has served as Managing Member and CEO of McCormack Family Investments and founded and has served as Managing Member and CEO of TCM|Strategic, a fund that invested $53.5 million in the Company in September 2020. Previously, Mr. McCormack was the founder, CEO, and PM of Tracer Capital Management, a $1.5 billion New York-based global technology, media, and telecommunication hedge fund. Prior to Tracer, he was a partner at Coatue Capital and a high-yield research analyst at Morgan Stanley, covering media and telecom companies. Mr. McCormack graduated summa cum laude from The Wharton School at the University of Pennsylvania, where he was a Benjamin Franklin Scholar and a Joseph Wharton Scholar.
Expertise that Mr. McCormack brings to the Board
Mr. McCormack brings executive leadership, strategic, financial, investment, operational and transactional expertise to the Board of Directors. He also brings the perspective of a longtime shareholder and major investor. He has extensive experience investing in, and providing advice to, a broad range of companies, with a specific focus on fast-growing global technology, media and telecommunication firms. His prior experience is particularly germane to strategic and financial oversight, attracting institutional investors to Digimarc, and ensuring the interests of all Digimarc shareholder-owners are well-represented. TCM|Strategic is entitled to a Board seat and membership on all committees under the terms of its Subscription Agreement with the Company, dated September 29, 2020, and Mr. McCormack was chosen to fill that Board seat. |
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Dana Mcilwain Dana is a seasoned executive with a proven track record of driving P&L growth and revenue expansion and leading successful technology transformations. As the former Chief Administrative Officer (CAO) and Network Operations Leader for PricewaterhouseCoopers (PwC), Dana oversaw a global network generating $52B+ in revenue, managing a $3B+ budget across 152 countries. He played a key role in guiding the firm through complex operational matters and large-scale technology transformations. Before his CAO role, Dana was PwC’s Vice Chairman and U.S. Services Leader, managing the U.S. profit and loss center across all U.S. service lines.
Expertise that Mr. Mcilwain brings to the Board
Mr. Mcilwain’s leadership in scaling the U.S. Advisory practice led to a remarkable triple revenue growth, including the successful execution of 12 acquisitions. Dana's leadership at PwC was marked by his strategic vision and expertise in managing critical operations, finance, investments, human capital, and digital transformation initiatives. He also chaired key management and governance committees. Recently retired from PwC after more than 35 years, Dana is on the Board of Directors of Digimarc serving as the Chair of the Audit Committee and a member of the Governance, Nominating, and Sustainability Committee. He previously served on the Board of Directors of the American Red Cross of Greater New York. Dana is a Certified Public Accountant with a Bachelor of Science in Management from Tulane University. |
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Michael Park Michael is SVP, Global Partnerships and Channels at ServiceNow, Inc. Michael was formerly CMO of ServiceNow where he revitalized ServiceNow’s marketing approach across the full marketing stack with a strong brand movement (The World Works with ServiceNow) and a data driven, solutions-oriented approach addressing customer’s most pressing digital transformation challenges. During his tenure as CMO, Forbes honored Michael as one of the world’s “50 Top Entrepreneurial CMOs.” As a strong advocate for diversity and inclusion, Michael serves as Executive Sponsor of the Asian and Pacific Islanders Group at ServiceNow and as a member of Gold House, a non-profit organization dedicated to enabling more authentic multi-cultural representation and societal equity.
Expertise that Mr. Park brings to the Board
Prior to ServiceNow, Michael led growth and transformation for over 25 years at the intersection of pivotal technology transitions, serving in key leadership positions across product, sales, and marketing roles at Microsoft, Oracle (Siebel) EagleView, HP, and SAP. Michael is also on the Board of Directors of Digimarc serving as a member of the Governance, Nominating, and Sustainability Committee, and of the Board’s Compensation and Talent Management Committees. He began his career at Procter & Gamble and holds a Master’s Degree from Harvard Graduate School of Business Administration and a Bachelor of Arts Degree in Economics and Finance from the University of Rochester. |
The Digimarc Board believes that our current directors provide the diversity of experience and skills necessary for a well-functioning board. All our directors have substantial senior executive level experience. The Digimarc Board highly values the ability of individual directors to contribute to a constructive board environment, and the Digimarc Board believes that the current board members standing for reelection perform in such a manner.
The Governance, Nominating, and Sustainability Committee reviews the skills and contributions of all Board members annually and reflects those findings in the Digimarc Board and Committee minutes and in a summary form in the director biographies in the proxy statement. Each of the directors brings unique skills and contributions to the Board and, in aggregate, the members have the skills necessary to help the management team execute Digimarc’s business strategy.
Digimarc Board Skills Matrix
The Digimarc Board consists of current and former C-Suite executives with extensive experience overseeing domestic and global operations and managing risk of companies throughout their respective careers. A skills matrix follows. Each director’s profile above also contains a more complete description of each director’s background, professional experiences, qualifications, and skills and contributions. Any public company board of directors upon which a director currently serves or has served during the past five years is set forth in the description above.
In addition to the following matrix, all our directors have experience in the following areas:
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C-Suite executive |
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Risk Management |
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Corporate Operations |
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● |
International/Global Operations |
A Balance of Director Skills, Experience, and Qualifications
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Experience or Expertise |
LaShonda Anderson- Williams |
Rishi Bajaj |
Sheila Cheston |
Sandeep Dadlani |
Katie |
Riley |
Dana Mcilwain |
Michael Park |
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Finance / Accounting |
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Legal / Governance |
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Human Capital / Talent Development |
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Technology, Data / Cyber Security |
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Government Affairs / Public Policy |
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Sustainability / Environmental & Social |
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Industry Knowledge |
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Culture / Diversity & Inclusion |
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Sales / Marketing |
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Determinations of Digimarc Board Member Independence
The Digimarc Board believes that maintaining a strong, independent group of directors is important for good governance, and all but one of our directors qualifies as independent. The Digimarc Board has determined that each of Ms. Anderson-Williams, Mr. Bajaj, Ms. Cheston, Mr. Dadlani, Ms. Kool, Mr. Mcilwain, and Mr. Park collectively representing all outside members and a majority of the Digimarc Board, is “independent” as that term is defined by Nasdaq Listing Rule 5605. There were no undisclosed transactions, relationships, or arrangements involving any of the independent directors of Digimarc that were considered by the Digimarc Board in connection with the determination of whether any particular director is independent.
Vote Required
If a quorum is present, the eight candidates receiving the highest number of affirmative votes cast on this proposal at the Annual Meeting will be elected to the Digimarc Board.
Recommendation
THE DIGIMARC BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE.
REPORT OF THE AUDIT COMMITTEE OF THE DIGIMARC BOARD
The Audit Committee reports as follows:
Review and Approval of Audited Financial Statements
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1. |
The Audit Committee has reviewed and discussed the audited financial statements and the internal controls over financial reporting with our management. |
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2. |
The Audit Committee has discussed with KPMG LLP, Digimarc’s independent registered public accounting firm, the matters required to be discussed under the standards of the Public Company Accounting Oversight Board (Communication with Audit Committees). |
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3. |
The Audit Committee has received the written disclosures and the letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with KPMG LLP its independence from Digimarc. |
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4. |
Based on the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee recommended to Digimarc’s Board, and the Board approved, the inclusion of the audited financial statements in Digimarc’s Annual Report on Form 10-K for the year ended December 31, 2025, for filing with the SEC. |
As described under the heading “Proposal 3: Ratification Proposal,” the Audit Committee has appointed KPMG LLP as Digimarc’s independent registered public accounting firm for the year ending December 31, 2026, and is seeking ratification of the appointment at the Annual Meeting.
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Submitted by the Audit Committee
Dana Mcilwain, Chair |
PROPOSAL 3: RATIFICATION PROPOSAL
Appointment of KPMG LLP
The Audit Committee of the Digimarc Board has appointed KPMG LLP as Digimarc’s independent registered public accounting firm to audit our financial statements for the year ending December 31, 2026. Although ratification by our shareholders is not required by law, the Digimarc Board has determined that it is desirable to request ratification of this appointment by the shareholders. Notwithstanding the appointment, the Audit Committee, in its discretion, may appoint a new independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of Digimarc and its shareholders.
If the shareholders do not ratify the appointment of KPMG LLP as our independent registered public accounting firm, the Audit Committee will reconsider the appointment. A representative of KPMG LLP is expected to be present at the Annual Meeting and will be available to respond to appropriate questions from shareholders and to make a statement if they desire to do so.
Audit and Other Fees Paid to KPMG LLP
The following table presents aggregate fees billed for audit and other professional services rendered by KPMG LLP for the years ended December 31, 2024, and December 31, 2025.
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Fiscal Year Ended December 31, |
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2024 |
2025 |
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Audit Fees (1) |
$ | 631,750 | $ | 618,375 | ||||
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Audit-Related Fees (2) |
— | — | ||||||
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Tax Fees (3) |
— | — | ||||||
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All Other Fees (4) |
— | — | ||||||
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Total Fees |
$ | 631,750 | $ | 618,375 | ||||
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(1) |
Audit Fees consist of fees for professional services rendered for the audit of our 2024 and 2025 annual financial statements, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by our independent auditors in connection with regulatory filings, including comfort letters and consents. |
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(2) |
Audit-Related Fees consist of fees billed for assurance and related services rendered that are reasonably related to the performance of the audit or review of our financial statements that are not reported under “Audit Fees.” No such fees were incurred in 2024 or 2025. |
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(3) |
Tax Fees consist of fees billed for professional services rendered for tax research and consulting services. No such fees were incurred in 2024 or 2025. |
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(4) |
All Other Fees consist of fees related to other services. No such fees were incurred in 2024 or 2025. |
Approval of Audit Fees and Pre-Approval Policy
The Audit Committee reviews and approves all fees paid to KPMG LLP. The Audit Committee pre-approves the Audit, Audit-Related, Tax, and All Other services performed by the independent registered public accounting firm. The Audit Committee has adopted a policy for the pre-approval of services provided by the independent registered public accounting firm that is reviewed and updated from time to time. Under the policy, the term of any pre-approval is generally twelve months from the date of pre-approval.
Pre-approval fee levels or budgeted amounts for all services to be provided by the independent registered public accounting firm and the specific services included within the pre-approvals are established annually by the Audit Committee and are reviewed as the Audit Committee deems appropriate. Any proposed services exceeding these levels, amounts, or type of services require specific pre-approval. No services were provided by the independent auditors under the categories of “Audit-Related Fees,” “Tax Fees” or “All Other Fees” in 2024 or 2025.
Vote Required
If a quorum is present, the appointment of KPMG LLP as our independent registered public accounting firm will be ratified if the votes cast in favor of this proposal exceed the votes cast opposing this proposal.
Recommendation
THE DIGIMARC BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2026.
MANAGEMENT TEAM
Executive Officers
The following table contains information regarding our executive officers as of March 12, 2026. There are no arrangements or understandings between any executive officer and any other person pursuant to which the executive officer is or was to be selected as an executive officer. Additionally, there is no family relationship between any director and any executive officer of Digimarc.
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Name |
Age |
Position |
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Riley McCormack |
50 |
Chief Executive Officer & President |
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Charles Beck |
48 |
Executive Vice President, Chief Financial Officer, Treasurer and Secretary |
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Carle Quinn |
50 |
Executive Vice President, Chief Operating Officer |
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Tony Rodriguez |
57 |
Executive Vice President, Chief Technology Officer |
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Ken Sickles |
55 |
Executive Vice President, Chief Product Officer |
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Riley McCormack was named our Chief Executive Officer and President on April 12, 2021. Since 2015, Mr. McCormack has served as Managing Member and Chief Executive Officer of McCormack Family Investments and founded and has served as Managing Member and Chief Executive Officer of TCM|Strategic, a fund that invested $53.5 million in the Company. Previously Mr. McCormack was the founder, Chief Executive Officer, and Portfolio Manager of Tracer Capital Management, a $1.5 billion New York-based global technology, media, and telecommunication hedge fund. Prior to Tracer, he was a Partner at Coatue Capital and a high-yield Research Analyst at Morgan Stanley, covering media and telecom companies. Mr. McCormack graduated summa cum laude from The Wharton School at the University of Pennsylvania, where he was a Benjamin Franklin Scholar and a Joseph Wharton Scholar. |
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Additional information concerning Mr. McCormack is set forth under “Proposal 2: Election Proposal” in this proxy statement/prospectus. |
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Charles Beck was named our Executive Vice President, Chief Financial Officer, and Treasurer on November 5, 2013, having served since May 2012 as our Controller, and was named our Secretary effective February 20, 2026. Mr. Beck also oversees information technology and facilities. Before joining Digimarc, Mr. Beck was a senior manager at KPMG LLP, which provides audit, tax and advisory services, where he served in various management roles since 2002. Mr. Beck is a CPA and holds an M.B.A. in Finance, and a B.A. in Accounting, having graduated summa cum laude from the University of Portland. Mr. Beck was also the recipient of the University of Portland Dean’s Award in 2000 and completed the Executive Program for Growing Companies from the Stanford University Graduate School of Business. |
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Carle Quinn was named our Executive Vice President and Chief Operating Officer (COO) on June 1, 2025. Ms. Quinn leads company-wide business operations, driving strategic alignment, go-to-market execution, and operational excellence across all functions. In her role as COO, Ms. Quinn partners with teams throughout the organization to accelerate scalable growth, optimize operational clarity, and deliver customer-centric results—ensuring Digimarc is positioned to achieve sustained success. |
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Ms. Quinn brings over two decades of leadership experience, scaling high-growth B2B SaaS organizations, accelerating go-to-market performance, and transforming operational structures. Her diverse background includes impactful roles at global companies such as SAP, Citrix, GE, IBM, and QVC, where she developed deep expertise in commercial strategy, customer value creation, and organizational effectiveness. Prior to joining Digimarc, Carle served as Chief People Officer at Workato, where she was instrumental in driving talent alignment, go-to-market execution, and operational maturity during a period of rapid growth.
Ms. Quinn holds a Bachelor’s degree in Global Business Administration with a specialization in Human Resources Management from Arizona State University. |
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Tony Rodriguez was named our Executive Vice President and Chief Technology Officer on April 29, 2019, having previously served as Chief Technology Officer and Vice President of Engineering and Research and Development since June 2008. Mr. Rodriguez joined Old Digimarc in September 1996 and has over 30 years of experience in computer science and image processing research and development. Prior to joining Digimarc, Mr. Rodriguez worked at the Intel Architecture Lab as a senior software engineer and held a variety of software development and engineering positions at Raytheon, the NASA Jet Propulsion Laboratory (JPL), and IBM. He holds a B.S. in electrical engineering from the University of Washington and completed the AeA/Stanford Executive Institute program from the Stanford Graduate School of Business. |
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Ken Sickles was named our Executive Vice President and Chief Product Officer on November 1, 2021. Mr. Sickles is responsible for developing, delivering, and supporting Digimarc’s world-class global technology platform that advances the reach and effectiveness of automatic identification of media across multiple industries. Mr. Sickles has built his expertise with product, technology and marketing over twenty-five years building software-as-a-service (SaaS) products in both the B2B and B2C space. He has helped build multi-sided SaaS platforms from the ground up and successfully bring them to market, as well as extend SaaS platforms currently in the market. He has a passion for using his experience to enable technology to make our world a better place. Mr. Sickles joined Digimarc from ThinkTank, where he was Chief Technology Officer/Chief Product Officer from 2017 through 2021 and was a key contributor in the acquisition of the company by Accenture in May 2021. His previous experience includes product leadership positions for companies like 1WorldSync (then a GS1 subsidiary), Dow Jones, and Cognos. |
EXECUTIVE COMPENSATION
Report of the Compensation and Talent Management Committee of the Digimarc Board
The Compensation and Talent Management Committee reports as follows:
Determination and Approval of Executive Compensation
The Compensation and Talent Management Committee (“Compensation Committee”), together with the Company’s independent outside compensation consultant, reviews assessments of executive compensation practices at least annually against comparative data and our compensation philosophy. In conjunction with the work of our independent outside compensation consultant, our President and Chief Executive Officer makes recommendations to the Compensation Committee for executives other than himself whose pay is reviewed by the Compensation Committee with the intent of keeping our executive officer compensation practices aligned with our compensation philosophy and corporate strategy. The Compensation Committee considers any recommended changes and then adopts and approves compensation packages for each of the executive officers before the Company can implement them.
Use of Compensation Advisors
The Compensation Committee has the authority to retain and terminate any compensation and benefits consultant and the authority to approve the related fees and other retention terms of the consultant. The Compensation Committee retained Farient Advisors until September 5, 2025, and F.W. Cook & Co. beginning September 6, 2025, each a nationally recognized independent consulting firm, to provide an independent review of our executive compensation program, assist in identifying a peer group, examine our pay practices relative to the market, and assist in the design of compensation programs. The consultant provides, or provided, as applicable, the Compensation Committee information on market compensation classifications and trends from time to time but otherwise does, or did, as applicable, not have a material additional relationship with the Company.
Inclusion of a Compensation Discussion and Analysis
Although as a smaller reporting company Digimarc is exempt from the requirement to provide a Compensation Discussion and Analysis (the “CD&A”) as part of its proxy statement, we have elected to include the CD&A again this year, as we did for fiscal years 2022, 2023 and 2024. The CD&A is designed to provide an overview and understanding of the Company’s compensation for its named executive officers. It also provides detail on several items such as our compensation philosophy, the actions we have taken in response to prior advisory votes, the selection of our peer group, instances that can lead to forfeiture of equity compensation, the prohibition of speculative transactions involving Company stock (including hedging and pledging), the absence of problematic pay practices, cash and stock “claw-back” provisions, equity vesting periods and the role they play in retention and performance-based compensation, and the increasing shift to “at risk” short-term and long-term incentive compensation.
The Compensation Committee reviewed and discussed with Digimarc’s management the CD&A. Based on the review and discussions, the Compensation Committee recommended to the Digimarc Board that the CD&A be included in this proxy statement and incorporated by reference into the Digimarc’s Annual Report on Form 10-K for the year ended December 31, 2025.
Increased “At-Risk” Compensation
While this topic is addressed in more detail in the CD&A, the Compensation Committee emphasizes that all officers have significant portions of their bonus and equity compensation pay at risk, with payment tied to rigorous targets. See the CD&A for more detail from the Compensation Committee.
Investor Feedback
The Compensation Committee solicits additional feedback from our investors.
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You may write to the Compensation Committee c/o the Secretary at Digimarc. All such communications shall be in written form, addressed to the Compensation Committee, and sent care of the Secretary of the Company, at the address of the Company’s principal executive offices or via fax to (503) 520-0407. The Secretary will ensure that all communications get to the right member or members of the Board or the Compensation Committee. |
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Compensation Committee members are also available for telephonic meetings. |
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You can also vote on the annual “say-on-pay” proposal. |
Information in this proxy statement describes the compensation paid to members of the Board and the named executive officers of the Company. We have provided summaries of the types and amounts of compensation, and how each is determined, in paragraphs and tables below.
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Submitted by the Compensation and Talent Management Committee of the Board of Directors
LaShonda Anderson-Williams, Chair |
Compensation Discussion and Analysis
This CD&A provides an overview and understanding of the Company’s compensation for its named executive officers. Biographical information relating to all of our officers is set forth on pages 59-60. Our named executive officers (“NEOs”) are the following officers:
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Riley McCormack, President and Chief Executive Officer |
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Charles Beck, Executive Vice President, Chief Financial Officer, Treasurer and Secretary |
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Carle Quinn, Executive Vice President, Chief Operating Officer |
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George Karamanos, Former Executive Vice President, Chief Legal Officer and Secretary |
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Tony Rodriguez, Executive Vice President, Chief Technology Officer |
Executive Summary
Our Strategy
After purposeful strategic transformation, Digimarc has bolstered the depth and broad perspectives of our executive leadership, the Digimarc Board, and employees; focused and streamlined our solutions while expanding their capabilities; and increased our commitment to being a trusted, responsible enterprise partner to the world’s leading businesses and governments.
Digimarc is building the trust layer for the modern world. As AI accelerates how people produce, share, and interact with the world, the risks of fraud, counterfeiting, and misinformation are growing exponentially. The impacts of these threats are evidenced by:
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Consumers demanding more transparency into how, where, and by whom products are made. |
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Brands and creators facing rampant counterfeiting and IP theft. |
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Retailers losing hundreds of billions of dollars annually to shrink and theft. |
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Enterprises experiencing an increase in information leaks and digital manipulation. |
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AI-generated content blurring reality, sowing confusion and mistrust. |
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Regulators increasing pressure on companies to prove product authenticity and data integrity. |
Our innovative, highly scalable, and ultra-secure solutions make it possible for consumers, businesses, and intelligent systems to instantly verify what’s real, protect what matters, and transact with confidence. Our solutions for retail loss prevention, product authentication, and digital trust and integrity are built to counter the speed and sophistication of today’s AI-enabled threats. Trusted by the Central Banks to deter the counterfeiting of global currency, we exist to protect the truth in every interaction, spanning both the physical and digital worlds.
Our commercial solutions run on the Illuminate® platform—a high-performance, hyper-scalable, and ultra-secure SaaS cloud-based platform for digital connectivity. Tested and trusted by the most highly demanding and mission-critical ecosystems in the world, the Illuminate platform provides the tools for the application of advanced digital watermarks and dynamic QR codes, APIs that allow for direct integration into other mission critical systems, AI-assisted authentication workflows, and a centralized repository for capturing insights about digital interactions as well as automating activities based on that information.
The foundational digital watermarking technology used in our commercial solutions is backed by decades of innovation and inventions. It is also the same technology we use to deter digital counterfeiting of global currencies as part of our almost 30-year relationship with the Central Banks. This relationship was the first commercially successful large-scale use of our technologies and today protects hundreds of billions of banknotes in circulation around the world.
Aligning Strategy and Pay
To reinforce Digimarc’s strategic shift, the Company continues to review its executive compensation program to ensure alignment with Digimarc’s growth strategy and shareholder value creation by:
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Focusing on both short and long-term performance for executives with our annual and long-term performance-based incentive program |
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Maintaining an annual performance-based plan focused on key financial and strategic drivers of success |
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Expanding our performance-based long-term incentive equity plan tied to long-term financial and relative external market metrics |
2025 Incentive Plan Results and Other Notable Pay Actions
In 2025, our pay and performance were aligned as follows:
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2025 Annual Incentive Payout = 112% of Target. Our significant financial and strategic achievements for the year were reflected in our annual incentive plan payout that was above target, particularly, our achievement of Non-GAAP net income in the fourth quarter of 2025. |
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2023-25 Performance Restricted Stock Units (PRSUs) Payout = 0% of Target. Our PRSUs paid out at 0% as we did not achieve our three-year subscription revenue growth and total shareholder return goals from 2023 to 2025, which also demonstrated strong alignment with shareholders over that same time period. |
In addition to our regular program, we granted supplemental RSUs in 2025 equal to roughly 50% of salary for the purpose of retaining certain non-CEO executives because of the leadership required to execute the strategy while stabilizing the organization after the significant reduction in force in February 2025. We also granted a promotional equity award to the Chief Operating Officer upon her appointment to the role.
Finally, in December 2025, and in connection with the adoption of our aggressive strategic plan, the Compensation Committee and Digimarc Board structured a new equity award that will be granted to the CEO in 2026, which contains significant stock price goals ranging from $20 to $55 per share, and is expected to serve as all of the CEO’s equity compensation for at least the next three years.
Details on the above programs are provided below.
Shareholder Engagement and Say-on-Pay (“SOP”) Results
At our 2025 annual meeting of shareholders, shareholders approved our SOP advisory proposal with over 83% of the votes cast by our shareholders voting in favor of the proposal. This result is directly linked to the major changes the Compensation Committee made to the pay program in recent years, which better links executive pay with shareholder interests. The Compensation Committee made many of these changes based on shareholder feedback. The Company continues to further develop these plans and programs focused on driving Company success and stakeholder value.
Shareholder feedback has been and will continue to be an important component of the Company’s executive pay program. During the past several years, the Company has engaged with several of its top shareholders on topics ranging from business strategy and executive compensation to sustainability.
Compensation and Governance Practices
The Compensation Committee regularly reviews best practices in executive compensation and governance. A summary of “What We Do” and “What We Don’t Do” is listed below.
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What We Do |
What We Don’t Do |
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● Pay-for-Performance philosophy and culture ● Strong emphasis on performance-based incentive awards ● Performance-based long-term equity awards focused on growth and shareholder value ● Robust stock ownership and retention guidelines ● Claw-back policies that cover short- and long-term incentive awards in the event of financial restatement as well as executive misconduct causing financial or reputational harm ● Restrictions on short-term or speculative securities transactions ● Double trigger change of control vesting provisions ● Independent Board committee oversight ● Independent compensation consultant |
● No hedging and pledging of Digimarc stock ● No perquisites ● No excise tax gross ups |
Our Compensation Process
Compensation Philosophy
Digimarc’s goals for its executive compensation program are to: (1) attract, retain, motivate, and appropriately reward the Company’s executive officers; and (2) align the interests of the Company’s executive officers with those of Digimarc shareholders. Digimarc seeks to accomplish these goals in a way that rewards performance and is aligned with its shareholders’ long-term interests. For 2025, the Company’s primary objectives for the plan evolved further to:
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Provide a competitive compensation opportunity |
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Align the interest of the Company’s executive officers with those of Digimarc shareholders, with a reward for long-term value creation |
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Reward short-term and long-term performance in line with creating shareholder value |
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Create a collaborative focus for the executive team |
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Ensure compensation provides attractive fixed compensation, with an increased focus on performance |
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Create a greater pay-for-performance alignment, providing upside leverage for greater performance and wealth creation |
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Align with standards of good governance |
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Keep the program as simple as possible and yet achieve desired objectives |
The Role of the Compensation and Talent Management Committee, Management, and Compensation Consultant
Independent Compensation and Talent Management Committee: Executive compensation is reviewed and established by the Compensation Committee of the Board, which consists solely of independent directors. The Compensation Committee periodically meets in executive session or working group meetings, without the executive officers present, to discuss and determine the annual named executive officers’ compensation. The Compensation Committee receives data, analysis, and input from an independent compensation consultant that does not perform any additional services for Digimarc’s management and works solely for the Compensation Committee. The Compensation Committee and management also solicit and value the comments and recommendations of our investors.
Management: The Chief Executive Officer reports regularly to the Board of Directors and the Compensation Committee information regarding the individual and collective performance of the executive officers and makes recommendations, in consultation with the independent compensation consultant, on all components of each executive officer’s total compensation package. The Compensation Committee considers these recommendations as one set of data in making their decisions.
Independent Compensation Consultant: The Compensation Committee retained Farient Advisors until September 5, 2025, and retained F.W. Cook & Co. (“FW Cook”) beginning September 6, 2025, to assist in designing a market competitive, performance-based compensation program for all executives, tied to financial, strategic and market metrics. The Compensation Committee relies on its independent compensation consultant to provide relevant market data, and to make recommendations for appropriate types and allocations of cash and equity compensation relative to the peer group and business objectives. The Compensation Committee requires all committee advisors and consultants to provide an annual independence assessment to the Compensation Committee.
Approach to Benchmarking
Our primary data source for evaluating all elements of compensation for our Chief Executive Officer is data compiled by our independent compensation consultant. For 2025, the Chief Executive Officer’s compensation was based on the Company’s peer group and the Radford Global Technology Survey, for relevant size groupings. For our other NEOs, our primary data source is the Radford Global Technology Survey.
In setting executive compensation, the Compensation Committee uses compensation data about other companies in our designated peer group as a reference point to provide a framework for its compensation decisions.
Digimarc’s approach to peer screening is focused on information technology and software companies with a similar customer base, business model, and product focus; performance, revenue and market capitalization; and good governance. The Compensation Committee approved the following group of 12 companies:
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Aware, Inc. |
Identiv, Inc. |
Logility Supply Chain Solutions, Inc. |
PDF Solutions, Inc. |
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Ceva, Inc. |
Immersion Corporation |
Mitek Systems, Inc. |
Rekor Systems, Inc. |
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eGain Corporation |
Intellicheck, Inc. |
NVE Corporation |
ReposiTrak, Inc. |
Our Compensation Program
Compensation Elements and Pay Determination
There are three primary components of the executive compensation program: (1) base salary, (2) annual short-term incentive in the form of a cash bonus, and (3) a long-term incentive that is comprised of time-based RSUs and PRSUs. The Compensation Committee believes that a material portion of all officers’ compensation must be “at risk,” so all officers have an annual short-term incentive element (a performance bonus) included in their compensation packages. “At risk” also means that the Company must meet a threshold performance level before any bonus is paid, and once that threshold is met, there should be an escalating scale which encourages exceeding the targets. The same principle applies to performance-based equity grants.
Compensation Program for 2025
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Pay Element |
Form |
Description |
Rationale |
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Salary |
Cash |
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Fixed component of pay targeted at the median of the market |
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Designed to be market-competitive and attract and retain talent |
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Reviewed annually, taking into consideration executive’s level of responsibility, experience, knowledge, future potential, and competitive market data |
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Annual Incentive Plan |
Cash |
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Variable compensation component linked to Company financial and strategic goals |
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Incentivizes executives to focus on top line growth balanced with improving cash flow for future investments and growth |
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Tied to Ending Annual Recurring Revenue (1) (“ARR”) as a leading indicator of growth and improved Adjusted Non-GAAP Net Income (2) as an indicator of future cash flow |
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Reinforces key priorities of the organization Enhances employee engagement across the organization |
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Tied to achieving New ARR in strategic focus areas(3) |
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Tied to engagement survey results |
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All executives tied to the same goals |
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Executives could earn 0% to 200% of their target award based on achievement of pre-established targets |
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Long-term Incentive Plan |
RSUs/PRSUs(4) |
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Variable compensation component linked to Company financial and stock performance |
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Intended to motivate and reward executive contribution to achieve Company’s long-term growth objectives and increase shareholder value |
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PRSUs – cliff-vest in three years tied to growth |
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Serves as retention mechanism |
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Subscription Revenue (50%) |
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rTSR vs. the constituents of the S&P US Small Cap Software and Services Index (50%) |
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Executives could earn 0% to 200% of their target award based on achievement of pre-established absolute and relative targets |
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RSUs – vest quarterly over three years |
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(1) |
Ending ARR is a Company performance metric calculated as the aggregation of annualized subscription fees from all of our commercial contracts as of the measurement date. |
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(2) |
Adjusted Non-GAAP Net Income reflects Non-GAAP Net Income, which excludes non-cash and non-recurring items, adjusted for cash incentive compensation. |
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(3) |
New ARR reflects the total additions to Ending ARR in strategic focus areas during the fiscal year. |
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The Chief Executive Officer received his 2025 long-term equity incentive 100% in PRSUs, requiring the Company to meet performance thresholds to receive any compensation. |
Digimarc believes that its 2025 executive compensation program, which emphasized long-term time and performance-based equity awards and annual short-term performance-based bonuses, is strongly aligned with the long-term interests of its shareholders.
Base Salary
The Compensation Committee’s approach to compensation is to offer a base salary that is competitive with an identified benchmarking peer group of companies and incentive opportunities that are performance-oriented and linked to the interests of shareholders. Base salary is determined by market-median data for the executives’ positions, individual performance, and competitive pay positioning. For 2025, the Compensation Committee kept salaries for the Chief Executive Officer and executives other than Ms. Quinn the same as from the prior year. Ms. Quinn’s salary effective for the beginning of 2025 was $350,000 and was raised to $375,000 effective June 1, 2025 in connection with her promotion to Chief Operating Officer.
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Executive |
Salary |
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Riley McCormack |
$ | 415,000 | ||
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Charles Beck |
$ | 375,000 | ||
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Carle Quinn(1) |
$ | 375,000 | ||
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George Karamanos |
$ | 375,000 | ||
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Tony Rodriguez |
$ | 325,000 | ||
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Ms. Quinn was promoted to Chief Operating Officer effective June 1, 2025. Her annual salary was raised from $350,000 to $375,000 effective that date. |
Annual Incentive Plan
The annual incentive plan is meant to reward executives for achieving short-term goals that are key to the Company’s success. For 2025, the Chief Executive Officer had a target bonus of 80% and each executive had a target bonus of 40% of such executive’s base salary in effect at the end of 2025. Executives have an opportunity to receive 0% to 200% of their target based on performance versus pre-determined goals. Achievement of threshold performance would yield an incentive payout of 50% of target, while achieving stretch goals could yield up to 200% of target.
For 2025, the Compensation Committee set financial and strategic goals for the annual incentive plan focused on Net ARR growth as a leading indicator of subscription revenue growth, Q4 Adjusted Non-GAAP Net Income, and two strategic metrics: (i) new ARR in strategic focus areas and (ii) employee engagement survey results. The Compensation Committee tied all executives to the same goals to emphasize the importance of collaboration and teamwork in driving this success.
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Category |
Performance Measures |
How Calculated |
Reason for Use |
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Financial |
Net ARR Growth |
Measures the percentage growth in Net ARR from 12/31/2024 to 12/31/2025 |
Net ARR growth provides a leading indicator of future subscription revenue |
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Q4 Adjusted Non-GAAP Net Income |
Measures Non-GAAP Net Income for the 4th quarter of 2025 excluding cash incentive compensation |
Adjusted Non-GAAP Net Income is a proxy for normalized cash flow used in operations |
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Strategic |
Strategic New ARR |
Measures the total additions to Ending ARR during the fiscal year, as a percentage of Ending ARR as of 12/31/2024. Includes total additions to Ending ARR from four particular strategic areas - Gift Cards, Leak Detection, Digital Asset Protection, and Security Solutions |
Strategic New ARR drives focus on specific (and normally nascent) market opportunities deemed to be strategically important to future growth |
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Employee Engagement |
Measures employee engagement based on average employee engagement survey score across the organization |
Digimarc’s success will be heavily driven by employee engagement and collaboration, operating as One Company that is agile, resilient, and adaptive |
The financial metrics ranged from a payout opportunity of 50% at threshold, 100% at target and 200% at maximum.
The Company paid out 112% of the annual incentive plan target for 2025 based on the metrics set forth below.
2025 Annual Incentive Plan Measures, Goals, and Payouts
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Threshold |
Target |
Maximum |
Actual |
Payout |
Weighted |
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Financial Metrics |
Wtg. |
50 | % | 100 | % | 200 | % | |||||||||||||||||||||
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Net ARR Growth |
30 | % | 5 | % | 10 | % | 20 | % | (27 | %) | 0 | % | 0 | % | ||||||||||||||
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Q4 Adjusted Non-GAAP Net Income (1) |
45 | % | $ | (0.5 | ) | $ | 0.0 | $ | 0.5 | $ | 1.3 | 200 | % | 90 | % | |||||||||||||
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Strategic Metrics |
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Strategic New ARR |
15 | % | 5 | % | 10 | % | 15 | % | 9 | % | 94 | % | 14 | % | ||||||||||||||
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Employee Engagement |
10 | % | 62 | 66 | 70 | 64 | 75 | % | 8 | % | ||||||||||||||||||
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Total Payout % (as % of Target) |
112 | % | ||||||||||||||||||||||||||
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(1) |
Dollars in millions. |
Long-Term Incentive (“LTI”) Plan
For 2025, Digimarc continued to award performance-based long-term equity for all executive officers, similar to the plans for 2023 and 2024. The plan provides for performance-based equity awards to be earned from 0% to 200% of the target amount tied to measures of subscription revenue growth and relative total shareholder return (vs. the S&P US Small Cap Software & Services Index), which will cliff-vest in three years based on the Company’s performance on both metrics (split 50/50). The subscription revenue growth metric is fiscal year 2027 subscription revenue, measured using a compound annual growth rate (“CAGR”) relative to the fiscal year 2024 subscription revenue. The relative total shareholder return (“rTSR”) metric is calculated as the cumulative TSR for Digimarc vs. the constituents in the S&P US Small Cap Software and Services Index. The results of the subscription revenue and rTSR goals are weighted 50% each and combined for potential payout of 50% at threshold, up to 200% at the maximum level of performance. Awards are zero if below the threshold and linearly interpolated between threshold and target and target and maximum performance levels. The measurement period starts as of April 1st consistent with our compensation period.
Generally, the recipient of equity awards granted by Digimarc will forfeit the awards if the recipient does not perform as anticipated. The most obvious circumstances involve the PRSUs, where the recipient forfeits the award if the recipient does not achieve the preconditions to vesting, as well as if the employee does not remain employed until the end of the applicable performance period. We may also suspend continued vesting under certain circumstances.
The CEO continues to receive 100% of his LTI value in PRSUs tied to the same metrics as all executives. Non-CEO executives continue to receive 50% of their LTI in the form of time-based RSUs, which vest ratably over three years.
For the LTI period, 2023-2025, there were two equally weighted metrics: (1) Subscription Revenue Growth; and (2) rTSR rank versus Peers in S&P Small Cap Software and Services Index. Neither metric was achieved for the 2023-2025 period so there was no vesting of PRSUs for such period.
Subscription Revenue Growth and rTSR rank versus Peers in S&P Small Cap Software and Services Index continue to be two equally weighted metrics for LTI granted in 2024 and 2025 as set forth below:
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Executive |
2024 Targe t LTI Value (2) |
2025 Target LTI Value (2) |
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Riley McCormack (1) |
$ | 1,050,000 | $ | 1,250,000 | ||||
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Charles Beck |
$ | 375,000 | $ | 525,000 | ||||
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Carle Quinn(3) |
$ | 350,000 | $ | 525,000 | ||||
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George Karamanos |
$ | 350,000 | $ | 425,000 | ||||
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Tony Rodriguez |
$ | 350,000 | $ | 445,000 | ||||
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(1) |
Mr. McCormack’s LTI was awarded 100% in PRSUs. |
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(2) |
For the other named executive officers, the portion of LTI in the form of PRSUs was 50%. |
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(3) |
Ms. Quinn’s 2025 Target LTI Value was comprised of $350,000 received at the same time as other named executive officers and $175,000 received in connection with her promotion to Chief Operating Officer. |
Also, in connection with her promotion to Chief Operating Officer, Ms. Quinn received an additional grant of 113,860 time-vesting RSUs which vest quarterly over a four-year period commencing August 15, 2025.
In addition to the regular PRSUs, the Compensation Committee determined that retention grants were necessary for executives other than the CEO because of the leadership required to execute the strategy while stabilizing the organization after the significant reduction in force in February 2025. These retention grants were provided to executives with a value of approximately 50% of their base salary. The retention grant vested based on continued employment through December 31, 2025, with settlement of such awards effective February 15, 2026. There was a potential for vesting in an additional 20% of the target award if Q4 Non-GAAP Net Income excluding cash incentive compensation met certain metrics, which was achieved.
In December 2025, the Compensation Committee and Digimarc Board thought it was important to better ensure Mr. McCormack’s incentive compensation was tied to performance and shareholder interests by structuring an arrangement whereby Mr. McCormack could receive an award heavily weighted towards share price appreciation in lieu of equity LTI for at least three years. 65% of the grant (the “Performance Grant Portion”) would vest incrementally upon the stock price reaching certain goals from $20 to $55 over a four-year period. The Performance Grant Portion vests based on stock price in the following manner: 20% at $20; additional 30% at $30; additional 30% at $42.50 and additional 20% at $55 The remaining 35% of such grant would vest in twelve equal quarterly installments on each consecutive calendar quarter-end with vesting upon issuance retroactive to December 31, 2025 as the first quarterly vesting installment resulting in full vesting of the time-vesting component on September 30, 2028. The estimated accounting fair value of the grant (calculated as of December 31, 2025) would be approximately $4,570,000. If the Reorganization Proposal is approved, such grant will be made as Equity Units. If the Reorganization is not approved, such grant will be made as RSUs. For a discussion of the value to shareholders of this equity incentive arrangement allowed for by the Reorganization, please refer to the section titled “Proposal 1: The Reorganization Proposal—Reasons for the Reorganization.” For a discussion of termination protection provided to Mr. McCormack under the equity arrangement, please refer to the section “Potential Payments upon Termination or Change-in-Control” beginning on page 77. Digimarc LLC may also permit Mr. McCormack and other key executives from time to time to make direct purchases of common units in Digimarc LLC in exchange for cash contributions equal to the fair market value of such common units at the time of purchase. Mr. McCormack expects to purchase $50,000 of common units in Digimarc LLC following the Reorganization.
The Compensation Committee believes that equity compensation is the primary tool that aligns the interests of Company executives with the shareholders. The bulk of many of Digimarc’s officers’ net worth is in Digimarc shares, driving increased incentive to meet or exceed deliverables and key performance indicators. Executives are provided an increasing return if the market price of our common stock appreciates, creating an incentive to increase shareholder value, and executives feel the pain that the shareholders feel if the stock price decreases. All executives have robust stock ownership requirements (as described under “Other Compensation Practices and Policies—Stock Ownership Guidelines”).
Benefits
No Perquisites. We do not provide perquisites or other personal benefits to our named executive officers, other than those benefits provided to all other employees. The Company does not engage in lending, gross-ups, or other questionable compensation practices.
Other Compensation Practices and Policies
Stock Ownership Guidelines
Our directors and named executive officers are subject to robust stock ownership guidelines. Under our guidelines, we require named executive officers and directors to own Company stock as a means of supporting alignment with the interests of our long-term shareholders. Our stock ownership guidelines are described in the section entitled “Officer and Director Stock Ownership Guidelines” beginning on page 45.
Insider Trading Policies
We have
Anti-Hedging and Anti-Pledging Provisions
We expressly prohibit hedging and pledging of Company stock by all officers, directors, and employees. Moreover, we prohibit short-term and speculative transactions (expressly including hedging or pledging of Company stock) for all officers, directors, and employees under Digimarc’s insider trading policy. The Company has determined that there is a substantial likelihood for the appearance of improper conduct by Company personnel if they engage in short-term or speculative securities transactions. Therefore, we prohibit Company officers, directors, and employees from engaging in any of the following activities involving the Company’s shares:
|
● |
Purchasing the Company’s securities on margin |
|
● |
Short sales |
|
● |
Buying or selling puts or calls |
|
● |
Trading in options (other than those granted by the Company) |
|
● |
Pledging Company securities as collateral for a loan |
|
● |
Any hedging or monetization transaction, such as zero-cost collars and forward sale contracts |
Claw-back Policies
The Company has implemented an Incentive Compensation Recovery policy for executive officers in compliance with Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 10D-1 promulgated under the Exchange Act and Nasdaq Listing Rule 5608, which requires the Company to recoup incentive compensation from executive officers in the event of a financial restatement. Pursuant to the Corporate Governance Guidelines, the Company’s Claw-back Policy also applies to all officers and employees. Under the revised guidelines, if any officer or employee of the Company engages in any of the following:
|
● |
Fraud or intentional misconduct that causes the Company to restate its financial statements, |
|
● |
Sexual harassment, or |
|
● |
Detrimental conduct by such officer or employee that causes material financial or reputational harm, |
then the Company will have the discretion, at the direction of the Compensation Committee after it has considered the costs and benefits of doing so, and to the extent permitted by applicable law, to take any or all of the following actions, as determined by the Compensation Committee in its discretion, regarding any incentive compensation (including any equity compensation) awarded or paid to such officer or employee:
|
● |
Require such officer or employee to reimburse the Company for all or a portion of such incentive compensation, |
|
● |
Cancel all or a portion of such incentive compensation, or |
|
● |
Take other remedial and recovery action. |
Post-Employment Compensation/Change-in-Control
The Company has entered into Executive Retention Agreements (the “Executive Retention Agreements”) with each of the executive officers that offer compensation and benefits in the event of qualifying terminations as described in more detail in the “Executive Agreements” section below.
Compensation Paid to Named Executive Officers in 2025 and its Components
2025 SUMMARY COMPENSATION TABLE
The following table contains information in summary form concerning the compensation earned by our named executive officers for the years ended December 31, 2023, 2024, and 2025.
|
Name and Principal Position |
Year |
Salary ($) |
Non-Equity Incentive Compensation ($) |
Stock Awards ($) (1) |
All Other Compensation ($) (2) |
Total ($) |
||||||||||||||||
|
Riley McCormack |
2025 |
$ | 415,000 | $ | 371,840 | $ | 1,662,931 | $ | — | $ | 2,449,771 | |||||||||||
|
Chief Executive Officer & President |
2024 |
$ | 415,000 | $ | 318,720 | $ | 1,393,981 | $ | 96 | $ | 2,127,797 | |||||||||||
|
2023 |
$ | 375,000 | $ | 600,000 | $ | 1,375,518 | $ | 100 | $ | 2,350,618 | ||||||||||||
|
Charles Beck |
2025 |
$ | 375,000 | $ | 168,000 | $ | 810,485 | $ | 11,909 | $ | 1,365,394 | |||||||||||
|
Executive Vice President, |
2024 |
$ | 375,000 | $ | 144,000 | $ | 436,675 | $ | 14,375 | $ | 970,050 | |||||||||||
|
Chief Financial Officer, Treasurer and Secretary |
2023 |
$ | 355,000 | $ | 284,000 | $ | 433,274 | $ | 14,175 | $ | 1,086,449 | |||||||||||
|
Carle Quinn(3) |
2025 |
$ | 364,583 | $ | 168,000 | $ | 2,356,131 | $ | 8,036 | $ | 2,896,750 | |||||||||||
|
Chief Operating Officer |
||||||||||||||||||||||
|
George Karamanos (4) |
2025 |
$ | 375,000 | $ | 168,000 | $ | 692,803 | $ | 49,850 | $ | 1,285,653 | |||||||||||
|
Former Executive Vice President, |
2024 |
$ | 317,500 | $ | 105,527 | $ | 757,605 | $ | 126,895 | $ | 1,307,527 | |||||||||||
|
Chief Legal Officer and Secretary |
||||||||||||||||||||||
|
Tony Rodriguez |
2025 |
$ | 325,000 | $ | 145,600 | $ | 690,653 | $ | — | $ | 1,161,253 | |||||||||||
|
Executive Vice President, |
2024 |
$ | 325,000 | $ | 124,800 | $ | 407,683 | $ | 14,211 | $ | 871,694 | |||||||||||
|
Chief Technology Officer |
2023 |
$ | 310,000 | $ | 248,000 | $ | 404,305 | $ | 100 | $ | 962,405 | |||||||||||
|
(1) |
These amounts do not reflect compensation actually received by the named executive officer, unless otherwise indicated. These amounts represent the aggregate grant date fair value of the awards calculated in accordance with FASB ASC 718. A summary of the assumptions we applied in calculating these estimates is set forth in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the respective fiscal years. The amounts with respect to performance-vesting awards included in 2025 represent the grant date fair value assuming achievement of 100% performance for such awards. The grant date fair value of all stock awards with the PRSU component assuming maximum performance is as follows: Mr. McCormack, $3,325,861; Mr. Beck, $1,198,140; Mrs. Quinn, $2,738,425; Mr. Karamanos, $1,013,944; and Mr. Rodriguez, $1,019,972. The awards for which the aggregate grant date fair value is shown in this column include awards described in the 2025 Grants of Plan-Based Awards Table and 2025 Outstanding Equity Awards at Fiscal Year-End Table. |
|
(2) |
These amounts generally consist of matching contributions to our 401(k) plan in the following amounts: Mr. McCormack, $0; Mr. Beck, $11,909; Mrs. Quinn, $8,036; Mr. Karamanos, $12,350; and Mr. Rodriguez, $0. It also included a sign-on bonus for Mr. Karamanos which was paid in quarterly installments for a total of $37,500 in 2025 and $112,500 in 2024. |
|
(3) |
Ms. Quinn was promoted to Chief Operating Officer on June 1, 2025. |
|
(4) |
Mr. Karamanos began service as Chief Legal Officer on April 9, 2024 and resigned as an executive officer effective February 20, 2026. Mr. Karamanos will continue to serve the Company in an advisory capacity. |
2025 GRANTS OF PLAN-BASED AWARDS TABLE
The following table sets forth certain information with respect to awards granted during the year ended December 31, 2025, to each of the named executive officers.
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts |
||||||||||||||||||||||||||||||||||
|
Name |
Type of Award |
Grant Date |
Approval Date |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#)(2) |
Maximum (#) |
All Other Stock Awards: Number of Shares of Stock or Units (#) |
Grant Date Fair Value of Stock and Option Awards (1) |
||||||||||||||||||||||||
|
Riley McCormack |
Non-Equity Incentive Plan Award |
$ | — | $ | 332,000 | $ | 664,000 | ||||||||||||||||||||||||||||
|
Performance Unit Award |
4/2/2025 |
4/2/2025 |
— | 97,504 | 195,008 | $ | 1,662,931 | ||||||||||||||||||||||||||||
|
Charles Beck |
Non-Equity Incentive Plan Award |
$ | — | $ | 150,000 | $ | 300,000 | ||||||||||||||||||||||||||||
|
Retention Award |
4/2/2025 |
4/2/2025 |
14,626 | 14,626 | 17,551 | $ | 192,186 | ||||||||||||||||||||||||||||
|
Performance Unit Award |
4/2/2025 |
4/2/2025 |
— | 20,476 | 40,952 | $ | 349,218 | ||||||||||||||||||||||||||||
|
Restricted Stock Award |
4/2/2025 |
4/2/2025 |
20,478 | $ | 269,081 | ||||||||||||||||||||||||||||||
|
Carle Quinn |
Non-Equity Incentive Plan Award |
$ | — | $ | 150,000 | $ | 300,000 | ||||||||||||||||||||||||||||
|
Retention Award |
4/2/2025 |
4/2/2025 |
13,651 | 13,651 | 16,381 | $ | 179,374 | ||||||||||||||||||||||||||||
|
Performance Unit Award |
4/2/2025 |
4/2/2025 |
— | 13,652 | 27,304 | $ | 232,835 | ||||||||||||||||||||||||||||
|
Restricted Stock Award |
4/2/2025 |
4/2/2025 |
13,652 | $ | 179,387 | ||||||||||||||||||||||||||||||
|
Promotion Performance Unit Award |
6/3/2025 |
6/3/2025 |
— | 6,374 | 12,748 | $ | 113,585 | ||||||||||||||||||||||||||||
|
Promotion Restricted Stock Award |
6/3/2025 |
6/3/2025 |
120,244 | $ | 1,650,950 | ||||||||||||||||||||||||||||||
|
George Karamanos |
Non-Equity Incentive Plan Award |
$ | — | $ | 150,000 | $ | 300,000 | ||||||||||||||||||||||||||||
|
Retention Award |
4/2/2025 |
4/2/2025 |
14,626 | 14,626 | 17,551 | $ | 192,186 | ||||||||||||||||||||||||||||
|
Performance Unit Award |
4/2/2025 |
4/2/2025 |
— | 16,576 | 33,152 | $ | 282,704 | ||||||||||||||||||||||||||||
|
Restricted Stock Award |
4/2/2025 |
4/2/2025 |
16,584 | $ | 217,914 | ||||||||||||||||||||||||||||||
|
Tony Rodriguez |
Non-Equity Incentive Plan Award |
$ | — | $ | 130,000 | $ | 260,000 | ||||||||||||||||||||||||||||
|
Retention Award |
4/2/2025 |
4/2/2025 |
12,676 | 12,676 | 15,211 | $ | 166,563 | ||||||||||||||||||||||||||||
|
Performance Unit Award |
4/2/2025 |
4/2/2025 |
— | 17,356 | 34,712 | $ | 296,007 | ||||||||||||||||||||||||||||
|
Restricted Stock Award |
4/2/2025 |
4/2/2025 |
17,358 | $ | 228,084 | ||||||||||||||||||||||||||||||
|
(1) |
These amounts represent the aggregate grant date fair value of the awards calculated in accordance with FASB ASC 718 presuming 100% achievement of performance. A summary of the assumptions we applied in calculating these estimates is set forth in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. |
|
(2) |
These amounts represent equity incentive awards assuming achievement of 100% performance. |
The awards in the 2025 Grants of Plan-Based Awards Table include awards that are also described in the 2025 Summary Compensation Table.
NARRATIVE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE
Equity Compensation
Equity awards are made to our named executive officers in accordance with the provisions of the 2018 Incentive Plan. Annual RSUs granted to our named executive officers generally vest quarterly over a three-year period, following the date of grant, contingent upon the executive officer’s continued employment with us while retention grants generally vest at the end of the calendar year. PRSUs cliff-vest after a three-year performance period, subject to attaining performance goals.
Salary in Proportion to Total Compensation
In 2025, our named executive officers received the following percentage of their total compensation reported in the Summary Compensation Table in the form of base salary:
|
● |
Mr. McCormack: 17% |
|
● |
Mr. Beck: 27% |
|
● |
Ms. Quinn: 13% |
|
● |
Mr. Karamanos: 29% |
|
● |
Mr. Rodriguez: 28% |
2025 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table provides summary information, as to the named executive officers, concerning outstanding equity awards as of December 31, 2025.
|
Stock Awards |
||||||||||||||||||
|
Grant |
Equity Incentive Plan Awards: Number of Shares or Units of Stock That Have Not(1) |
Equity Incentive Plan Awards: Market Value Shares or Units of Stock That Have Not |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not |
Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not |
||||||||||||||
|
Name |
Date |
(#) Vested |
($) Vested |
(#) Vested |
($) Vested |
|||||||||||||
|
Riley McCormack |
4/2/2025 |
— | $ | — | 97,504 |
(2) |
$ | 639,626 | ||||||||||
|
2/15/2024 |
— | $ | — | 26,590 |
(3) |
$ | 174,430 | |||||||||||
|
Charles Beck |
4/2/2025 |
16,410 | $ | 107,650 | 20,476 |
(2) |
$ | 134,323 | ||||||||||
|
2/15/2024 |
1,980 | $ | 12,989 | 4,750 |
(3) |
$ | 31,160 | |||||||||||
|
2/15/2023 |
700 | $ | 4,592 | — | $ | — | ||||||||||||
|
Carle Quinn |
6/3/2025 |
104,948 | $ | 688,459 | 6,374 |
(2) |
$ | 41,813 | ||||||||||
|
4/2/2025 |
10,940 | $ | 71,766 | 13,652 |
(2) |
$ | 89,557 | |||||||||||
|
5/15/2024 |
3,450 | $ | 22,632 | 6,894 |
(3) |
$ | 45,225 | |||||||||||
|
George Karamanos |
4/2/2025 |
13,290 | $ | 87,182 | 16,576 |
(2) |
$ | 108,739 | ||||||||||
|
5/15/2024 |
10,344 | $ | 67,857 | 6,894 |
(3) |
$ | 45,225 | |||||||||||
|
Tony Rodriguez |
4/2/2025 |
13,910 | $ | 91,250 | 17,356 |
(2) |
$ | 113,855 | ||||||||||
|
2/15/2024 |
1,850 | $ | 12,136 | 4,432 |
(3) |
$ | 29,074 | |||||||||||
|
2/15/2023 |
653 | $ | 4,284 | — | $ | — | ||||||||||||
|
(1) |
RSU awards generally vest quarterly over a three-year period. Ms. Quinn’s RSU awards in connection with her promotion (6/3/2025 grant) vest over a four-year period commencing August 15, 2025. |
|
(2) |
Amount includes PRSUs measured at 100% attainment, which would vest in 2028. |
|
(3) |
Amount includes PRSUs measured at 100% attainment, which would vest in 2027. |
PRSUs which would otherwise have vested in 2026 but because of performance as of December 31, 2025 will not vest are not included in the 2025 Outstanding Equity Awards Table. Retention PRSUs which vested as of December 31, 2025 and settled effective February 15, 2026 are also not included in the 2025 Outstanding Equity Awards Table.
The awards in the 2025 Outstanding Equity Awards at Fiscal Year-End Table include awards that are also described in the 2025 Summary Compensation Table and 2025 Grants of Plan-Based Awards Table.
Equity Value Realized by Officers in 2025
2025 STOCK VESTED TABLE
The following table provides summary information for each of the named executive officers who had stock awards that vested and settled in 2025.
|
Stock Awards(1) |
||||||||
|
Name |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) |
||||||
|
Riley McCormack |
35,135 | $ | 1,233,590 | |||||
|
Charles Beck |
12,249 | $ | 238,914 | |||||
|
Carle Quinn |
20,308 | $ | 187,014 | |||||
|
George Karamanos |
12,487 | $ | 145,947 | |||||
|
Tony Rodriguez |
11,022 | $ | 217,897 | |||||
|
(1) |
Table does not include any RSUs that vested in 2025 but were not settled in 2025. |
Potential Payments upon Termination or Change-in-Control
There are several scenarios wherein payments can be made to executives upon termination or change-in-control of the Company. These scenarios include payments made pursuant to Executive Retention Agreements, the normal operation of the 2018 Incentive Plan, and severance or separation agreements. A table at the end of this section sets forth the potential payments under these scenarios.
Executive Agreements
The Compensation Committee approved effective for employment terminations after January 1, 2025 a form of Executive Retention Agreement for each of the named executive officers. Such agreements provide certain severance benefits in the event of termination of the executive officer without cause by Digimarc, or termination by the executive officer for good reason. The severance benefits payable upon such a termination include 18 months’ salary for Mr. McCormack and 12 months’ salary for the other executive officers and up to 18 months’ premiums necessary to continue the executive’s health insurance coverage under our health insurance plan. If such termination of employment occurs within three months before or twelve months after a change of control, the executive officer would also be entitled to a pro rata target bonus and vesting of equity awards.
In consideration for the post-termination payments described above, the named executive officer must execute and not revoke a settlement agreement and general release related to employment and termination.
Stock Options, Restricted Stock Awards and RSUs
The 2018 Incentive Plan provides that, unless the Compensation Committee otherwise determines in the grant document, an employment agreement, or other agreement between the plan participant and the Company, all outstanding awards that are not performance shares or performance units will fully vest and become exercisable or payable immediately prior to a change in control (as defined in the 2018 Incentive Plan). In the event of a change in control which constitutes a company transaction (as defined in the 2018 Incentive Plan), all outstanding awards that vest solely based on continued service will become fully vested and immediately exercisable or payable only if and to the extent that the awards are not assumed or replaced by the successor company; if and to the extent that the awards are assumed or replaced by the successor company, such awards will become fully vested and immediately exercisable or payable if the named executive officer’s employment is terminated other than voluntarily without good reason within one year following the change in control. Notwithstanding the foregoing, the Compensation Committee has discretionary authority to determine the terms and conditions of any award granted under the 2018 Incentive Plan. In the event a named executive officer’s employment terminates as a result of their death or disability, the executive’s RSU awards will generally fully vest and become payable.
Pursuant to Mr. McCormack’s December 2025 equity arrangement, if his employment is terminated without Cause or for Good Reason or a Change of Control occurs before such equity grant is made, he will be granted immediately before such termination of employment or Change of Control vested RSUs with respect to the full grant, which had an estimated accounting fair value (calculated as of December 31, 2025) of approximately $4,570,000. Mr. McCormack’s December 2025 equity arrangement also provides for certain vesting after the equity grant is made if there is a Change of Control or if he dies, becomes disabled or his employment is terminated without Cause or for Good Reason.
Table of Potential Payments upon Termination or Change-in-Control
The following table summarizes potential payments upon termination of employment or a change in control to each of the named executive officers employed on the last day of our most recently completed fiscal year. The amounts set forth in the table assume that the triggering event occurred on the last business day of our last completed fiscal year and that our stock price was the closing market price per share on that date and do not include any amounts to which the named executive officers were already entitled to.
|
Name |
Benefit |
After Change in Control Termination without Cause or for Good Reason (1) |
Termination Upon Death or Disability (2) |
Termination Without Cause or Good Reason (3) |
Change in Control if Awards not Assumed (4) |
|||||||||||||
|
Riley McCormack |
December 2025 Equity Promise |
$ | — | $ | 6,923,303 | $ | 6,923,303 | $ | 6,923,303 | |||||||||
|
Performance RSU Vesting acceleration |
639,626 | 639,626 | — | 639,626 | ||||||||||||||
|
Salary Continuation |
662,500 | — | — | — | ||||||||||||||
|
Non-Equity Incentive Compensation |
371,840 | — | — | — | ||||||||||||||
|
Benefits Continuation |
17,768 | — | — | — | ||||||||||||||
|
Total Value |
$ | 1,651,734 | $ | 7,562,929 | $ | 6,923,303 | $ | 7,562,929 | ||||||||||
|
Charles Beck |
RSU Vesting Acceleration |
$ | 125,230 | $ | 125,230 | $ | — | $ | 125,230 | |||||||||
|
Performance RSU Vesting acceleration |
134,323 | 134,323 | — | 134,323 | ||||||||||||||
|
Salary Continuation |
375,000 | — | — | — | ||||||||||||||
|
Non-Equity Incentive Compensation |
168,000 | — | — | — | ||||||||||||||
|
Benefits Continuation |
17,768 | — | — | — | ||||||||||||||
|
Total Value |
$ | 820,321 | $ | 259,553 | $ | — | $ | 259,553 | ||||||||||
|
Carle Quinn |
RSU Vesting Acceleration |
$ | 782,857 | $ | 782,857 | $ | — | $ | 782,857 | |||||||||
|
Performance RSU Vesting acceleration |
131,371 | 131,371 | — | 131,371 | ||||||||||||||
|
Salary Continuation |
375,000 | — | — | |||||||||||||||
|
Non-Equity Incentive Compensation |
168,000 | — | — | — | ||||||||||||||
|
Benefits Continuation |
17,768 | — | — | — | ||||||||||||||
|
Total Value |
$ | 1,474,996 | $ | 914,228 | $ | — | $ | 914,228 | ||||||||||
|
George Karamanos(5) |
RSU Vesting Acceleration |
$ | 155,039 | $ | 155,039 | $ | — | $ | 155,039 | |||||||||
|
Performance RSU Vesting acceleration |
108,739 | 108,739 | — | 108,739 | ||||||||||||||
|
Salary Continuation |
375,000 | — | — | — | ||||||||||||||
|
Non-Equity Incentive Compensation |
168,000 | — | — | — | ||||||||||||||
|
Benefits Continuation |
17,768 | — | — | — | ||||||||||||||
|
Total Value |
$ | 824,545 | $ | 263,778 | $ | — | $ | 263,778 | ||||||||||
|
Tony Rodriguez |
RSU Vesting Acceleration |
$ | 107,669 | $ | 107,669 | $ | — | $ | 107,669 | |||||||||
|
Performance RSU Vesting acceleration |
113,855 | 113,855 | — | 113,855 | ||||||||||||||
|
Salary Continuation |
325,000 | — | — | — | ||||||||||||||
|
Non-Equity Incentive Compensation |
145,600 | — | — | — | ||||||||||||||
|
Benefits Continuation |
17,768 | — | — | — | ||||||||||||||
|
Total Value |
$ | 709,892 | $ | 221,525 | $ | — | $ | 221,525 | ||||||||||
|
(1) |
This column reflects potential vesting acceleration at 100% for performance RSUs granted in 2025 and 0% for performance RSUs granted in 2024 under the 2018 Incentive Plan and applicable award agreements. It also shows payments under the executives’ Executive Retention Agreements. |
|
(2) |
This column reflects potential vesting acceleration at 100% for performance RSUs granted in 2025 and 0% for performance RSUs granted in 2024 under the 2018 Incentive Plan and applicable Company RSU Award agreements. Also reflects Mr. McCormack’s potential vesting acceleration under Mr. McCormack’s December 2025 special equity arrangement. |
|
(3) |
This column reflects potential vesting acceleration under Mr. McCormack’s December 2025 special equity arrangement. |
|
(4) |
This column reflects potential vesting acceleration at 100% for performance RSUs granted in 2025 and 0% for performance RSUs granted in 2024 under the 2018 Incentive Plan, in the case where there is a Change in Control that is not a Company Transaction or if the awards are not assumed. Also reflects Mr. McCormack’s potential vesting acceleration under Mr. McCormack’s December 2025 special equity arrangement. |
|
(5) |
Mr. Karamanos resigned as the Company’s Executive Vice President, Chief Legal Officer and Secretary, effective February 20, 2026. Mr. Karamanos continues to serve the Company in an advisory capacity. |
Pay Ratio
We are providing the following information about the relationship of the annual total compensation of Mr. McCormack, our President and Chief Executive Officer, and the annual total compensation of our employees. For 2025, our last completed fiscal year: (i) the total annual compensation of our Chief Executive Officer was $2,449,771, and (ii) the median of the annual total compensation of all employees of our Company (other than our Chief Executive Officer) was $210,175. Based on this information, for 2025, the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all employees was 11.7 to 1.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the median employee, the methodology and the material assumptions, adjustments, and estimates that we used were as follows. We determined that as of December 31, 2025, our employee population consisted of 110 individuals working at the Company and its consolidated subsidiaries, with 87% of these individuals located in the United States and 13% located in Europe. We selected December 31, 2025, as the date upon which we would identify the median employee because it enabled us to make such identification in a reasonably efficient and economical manner and allowed us to exclude from our calculation the few seasonal workers who assist us during the summer.
To identify the median employee from our employee population, we calculated each employee’s target annual compensation for 2025 based on information from the Company’s human resources and payroll records, which included the annual base salary for salaried employees, annualized for employees hired during 2025; the hourly rate multiplied by standard weekly hours worked for hourly employees, annualized for employees hired during 2025; any annual corporate bonus or other compensation at target; and the grant date fair value of equity incentives granted during 2025. All compensation elements for non-U.S. employees were converted to U.S. dollars using December 31, 2025, currency exchange rates. We did not make any cost-of-living adjustments in identifying the median employee. Using this methodology, we determined that the median employee was a full-time, salaried employee located in one of our U.S. locations, with total target compensation for 2025 in the amount of $210,175.
With respect to the annual total compensation of the median employee, we identified and calculated the elements of such employee’s compensation for 2025 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K of the Securities Act, resulting in annual total compensation of $210,175, which included base pay, any overtime pay, stock, bonuses, and any other cash paid under the Company’s policy. With respect to the annual total compensation of our President and Chief Executive Officer, we used the amount reported in the “Total” column of our 2025 Summary Compensation Table included in this proxy statement/prospectus.
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio formulas reported by other companies may not be comparable to the pay ratio formula reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.
Pay Versus Performance
We strive for alignment between executive compensation, company performance and value creation. The Company remains in a period of strategic transformation, which is reflected in the compensation program updates we have made in recent years. Since the arrival of our new President and Chief Executive Officer, Riley McCormack, in 2021, we have increased the program’s focus on both short- and long-term performance through the introduction of new annual and long-term performance incentive plans, which tie to key financial, strategic and market drivers.
We believe that over the long-term, our investments in the Company, our unique technology and product offerings, and our overall strategy will serve to deliver value to all our stakeholders, including shareholders. Similarly, long-term executive pay outcomes will align with our performance and value creation. For further information concerning the Company’s performance-based approach to executive compensation and how the Company aligns executive compensation with the Company’s performance, refer to the Executive Compensation section of this proxy statement.
Pay versus Performance Table
As required by section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and item 402(v) of Regulation S-K under the Securities Act, we are providing the following information about the relationship between “compensation actually paid,” herein referred to as “CAP” to our Chief Executive Officer and our other named executive officers (“NEOs”) as compared to the Company’s total shareholder return and our GAAP net income. As we are a Smaller Reporting Company, the following table provides compensation and performance information for the past three fiscal years.
2025 Pay Versus Performance Table
|
Fiscal Year |
Summary Compensation Table Total for CEO |
Compensation Actually Paid to CEO (2) |
Average Summary Compensation Table Total for Non-CEO NEOs (1) |
Average Compensation Actually Paid to Non-CEO NEOs (1)(2) |
Total Shareholder Return (Value of Initial Fixed $100 Investment) (3) |
Net Income (Loss) (4) |
||||||||||||||||||
|
2025 |
$ | $ | ( |
) | $ | $ | $ | $ | ( |
) | ||||||||||||||
|
2024 |
$ | $ | $ | $ | $ | $ | ( |
) | ||||||||||||||||
|
2023 |
$ | $ | $ | $ | $ | $ | ( |
) | ||||||||||||||||
|
(1) |
The non-CEO NEOs for each applicable year are as follows: |
-2025: Charles Beck, Carle Quinn, George Karamanos, and Tony Rodriguez
-2024: Charles Beck, Tom Benton, George Karamanos, and Tony Rodriguez
-2023: Charles Beck, Joel Meyer, Tony Rodriguez, and Ken Sickles
|
(2) |
The SEC rules require that certain adjustments be made to the Summary Compensation Table (“SCT”) totals to determine CAP, as reported in the Pay versus Performance table above. The table below details the applicable adjustments that were made to determine CAP. |
|
(3) |
Cumulative indexed TSR is measured using the closing price as of a base date of December 31, 2022. |
|
(4) |
Net Income (Loss) reflects GAAP net income (loss), as disclosed in our financial statements. |
Adjustments to Calculate CAP from SCT Pay
|
Equity Awards |
||||||||||||||||||||||||||||||||||
|
Fiscal Year |
Executives |
SCT Total Pay |
Deduct SCT Stock & Option Awards |
Add Year-End Value of Unvested Equity Granted in Year |
Add Change in Value of Unvested Awards Granted in Prior Years |
Add Change in Value of Vested Equity Granted in Year |
Add Change in Value of Vested Equity Granted in Prior Years |
Add Change in Value of Awards Not Meeting Vesting Conditions |
Total CAP |
|||||||||||||||||||||||||
|
2025 |
CEO |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||||
|
Other NEOs (avg) |
$ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
2024 |
CEO |
$ | $ | ( |
) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
|
Other NEOs (avg) |
$ | $ | ( |
) | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||
|
2023 |
CEO |
$ | $ | ( |
) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
|
Other NEOs (avg) |
$ | $ | ( |
) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Relationship Between Compensation Actually Paid and Performance Measures
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information regarding our compensation plans under which our equity securities are authorized for issuance to our employees or non-employees, including directors, as of December 31, 2025:
|
Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) |
Weighted-average exercise price of outstanding options, warrants, and rights (2) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (3) |
|||||||||
|
(a) |
(b) |
(c) |
||||||||||
|
Equity compensation plans approved by security holders |
1,116,875 | $ | 23.14 | 2,470,725 | ||||||||
|
Equity compensation plans not approved by security holders |
— | — | — | |||||||||
|
Total |
1,116,875 | $ | 23.14 | 2,470,725 | ||||||||
|
(1) |
This amount is comprised of 407 shares to be issued upon exercise of options (with a weighted average exercise price of $23.14), 583,739 shares to be issued pursuant to RSUs, and 532,739 shares to be issued pursuant to PRSUs (assuming target performance). Additionally, there were 85,258 outstanding shares subject to Company Restricted Stock awards, for a total of 1,202,133 shares issued or to be issued. |
|
(2) |
Weighted-average exercise price in column (b) does not take into account shares to be issued pursuant to RSUs or PRSUs. |
|
(3) |
Consists of shares of Company Common Stock issuable pursuant to awards granted under the 2018 Incentive Plan and the Employee Stock Purchase Plan. |
Shares available for issuance under our 2018 Incentive Plan may be granted pursuant to stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance shares, performance units and cash-based awards, which may be granted to officers, directors, employees, consultants, agents, advisors, and independent contractors who provide services to us and our affiliated companies.
Our non-employee directors receive restricted stock under our Equity Compensation Program for Non-Employee Directors adopted by the Digimarc Board and administered under the 2018 Incentive Plan. Each non-employee director receives an initial grant of Company Restricted Stock having an aggregate value of approximately $200,000. The restrictions lapse in equal installments on each of the first three anniversaries of the grant. Each non-employee director receives an annual grant of Company Restricted Stock having an aggregate value of approximately $100,000 on the date of each annual meeting of shareholders. If elected between annual meetings, new non-employee directors receive an annual grant Company Restricted Stock having an aggregate value of a pro-rated portion of $100,000 for their service until the next annual meeting. The restrictions lapse on the one-year anniversary date of the grant, or immediately prior to the next annual meeting of shareholders that occurs prior to such first anniversary, but at least 50 weeks after the prior year’s annual meeting of shareholders.
PROPOSAL 4: COMPENSATION PROPOSAL
The Purpose of the Say-on-Pay Vote
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) enables Digimarc shareholders to vote to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement/prospectus. This advisory vote on executive compensation is referred to as a “say-on-pay vote.” Digimarc offers shareholders a say-on-pay vote every year.
How to Learn More About Digimarc’s Executive Compensation Program
We encourage shareholders to read the “Executive Compensation” and “Compensation Discussion and Analysis” sections of this proxy statement/prospectus for a more detailed discussion of our compensation program and policies, the compensation and governance-related actions taken in recent years, and the compensation awarded to our named executive officers.
Riley McCormack is now entering his fifth full year as Chief Executive Officer of the Company. His compensation for 2025, and the changes made from 2024, are summarized in the CD&A. The other executive officers of the Company are also compensated in a manner consistent with the processes and philosophy set forth below.
Digimarc’s Process to Determine Fair Compensation and Conduct Shareholder Outreach
In recent years, the Company conducted outreach to inform shareholders of changes to our executive compensation program, seek their advice and counsel regarding the changes, and bring that information into the process. Our shareholders favored placing a significant portion of each named executive officer’s compensation “at risk” by having more performance-based elements of compensation with both financial and operational elements. Several shareholders also recommended governance changes discussed in the Corporate Governance Functions and Processes section of this proxy statement/prospectus.
Responding to this feedback, the Compensation and Talent Management Committee has made significant changes to the Company’s executive compensation practices. The Company has (1) retained a new outside independent compensation consultant to help determine the Chief Executive Officer’s and other executives’ compensation program, (2) included material performance-based incentive plans (annual and long-term) to the compensation plan for all named executive officers representing a significant majority of executive compensation being at-risk, and (3) expanded the performance-based features of plans, driving a focus on key financial, strategic, and relative market goals.
Effect of the “Advisory Vote” Relating to Say-on-Pay
Digimarc requests shareholder approval of the compensation of its named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure includes the compensation tables and the narrative disclosures that accompany the compensation tables).
Although this vote is advisory and non-binding on the Compensation and Talent Management Committee, the Digimarc Board, or the Company, the Digimarc Board and the Compensation and Talent Management Committee, which are responsible for designing and administering Digimarc’s executive compensation program, value the opinions expressed by shareholders in their vote on this proposal and will continue to consider the outcome of the vote when making future compensation policies and decisions for named executive officers.
Vote Required
Assuming that a quorum is present, the compensation of Digimarc’s named executive officers will be approved on a non-binding basis if the votes cast in favor of this proposal exceed the votes cast opposing this proposal.
Digimarc believes the compensation program for the named executive officers is instrumental in helping Digimarc achieve its strategic objectives and long-term financial goals. We ask for your support with a positive vote for the say-on-pay proposal.
Recommendation
THE DIGIMARC BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON A NON-BINDING BASIS, OF THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION FOR THE YEAR ENDED DECEMBER 31, 2025.
PROPOSAL 5: ADJOURNMENT PROPOSAL
Purpose of the Adjournment Proposal
Shareholders are being asked to approve a proposal that will give the Digimarc Board authority to adjourn the Annual Meeting one or more times if necessary to solicit additional proxies if there are insufficient votes to approve the Reorganization Proposal at the time of the Annual Meeting, or any adjournment or postponement thereof. If Digimarc shareholders approve the Adjournment Proposal, Digimarc could adjourn the Annual Meeting and use the additional time to solicit additional proxies, including soliciting proxies from Digimarc shareholders that have previously returned properly executed proxies voting against the Reorganization Proposal. Among other things, approval of the Adjournment Proposal could mean that, even if Digimarc had received proxies representing a sufficient number of votes against the Reorganization Proposal such that the Reorganization Proposal would be defeated, Digimarc could adjourn the Annual Meeting without a vote on the Reorganization Proposal and seek to convince the holders of Company Common Stock to change their votes to votes in favor of the Reorganization Proposal. Additionally, Digimarc may seek to adjourn the Annual Meeting if a quorum is not present at the Annual Meeting.
Vote Required
Assuming that a quorum is present, the Adjournment Proposal will be approved if the votes cast in favor of this proposal exceed the votes cast opposing this proposal.
Recommendation
THE DIGIMARC BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ADJOURNMENT PROPOSAL.
INFORMATION ABOUT DIGIMARC AND HOLDINGS
In the event the Reorganization is approved and consummated, Holdings’ business, consolidated financial condition, and assets and liabilities will be the same as Digimarc’s. As permitted under the rules of the SEC, this proxy statement/prospectus incorporates important business and financial information about us that is contained in documents filed with the SEC that are not included in or delivered with this proxy statement/prospectus. You may obtain copies of these documents, including copies of financial statements and management’s discussion and analysis, without charge, from the website maintained by the SEC at www.sec.gov, as well as other sources. Accordingly, this information regarding Digimarc will become applicable to Holdings. Therefore, we have not included separate information regarding Holdings.
Following completion of the Reorganization, Holdings will be subject to the reporting requirements of the SEC as the successor issuer to Digimarc. Holdings will report consolidated financial results in accordance with U.S. GAAP and will file reports on Forms 10-K, 10-Q and 8-K with the SEC and comply with the proxy rules under the Exchange Act.
Available Information
Additional information about Digimarc and its business and operations is included in its Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 11, 2026, and its Current Report on Form 8-K, filed with the SEC on February 12, 2026, each of which are incorporated by reference herein. Digimarc’s consolidated balance sheet as of December 31, 2025 and 2024 and the related consolidated statements of operations and comprehensive loss, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2025 are contained in Digimarc’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 11, 2026, which are incorporated by reference into this proxy statement/prospectus. See “Where You Can Find Additional Information” beginning on page 96.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Digimarc routinely publishes as part of its proxy the list of any shareholders that hold a beneficial interest of more than five percent of the outstanding shares of the corporation. These shareholders also provide filings of their ownership interest. The following table contains the list of the beneficial ownership of Company Common Stock as of March 6, 2026, by:
|
● |
each person or entity known by us to own beneficially more than five percent of Company Common Stock; |
|
● |
our chief executive officer, our chief financial officer, our other named executive officers, and each of our directors; and |
|
● |
all our executive officers and directors as a group. |
The beneficial ownership percentage is calculated based on 22,093,287 shares of Company Common Stock outstanding as of March 6, 2026.
Unless otherwise indicated, each person named in the table has sole voting power and investment power, or shares voting and investment power with their spouse under applicable community property laws, with respect to all shares of capital stock listed as owned by that person. The address of each of the executive officers and directors is care of Digimarc Corporation, 8500 S.W. Creekside Place, Beaverton, Oregon 97008.
|
Name and Address of Beneficial Owner |
Number of Shares Beneficially Owned |
Percentage of Shares Beneficially Owned |
||||||
|
Altai Capital Management, L.P. (1) |
2,769,346 |
12.5 |
% |
|||||
|
4675 MacArthur Court, Suite 1500 |
||||||||
|
Newport Beach, California 92660 |
||||||||
|
TCM|Strategic Partners L.P. (2) |
2,355,093 |
10.7 |
% |
|||||
|
c/o Riley McCormack 8500 S.W. Creekside Place |
||||||||
|
Beaverton, Oregon 97008 |
||||||||
|
Vincent C Smith (3) |
2,225,672 |
10.1 |
% |
|||||
|
33 New Montgomery Suite 1500 |
||||||||
|
San Francisco, CA 94105 |
||||||||
|
The Vanguard Group, Inc. (4) |
1,150,516 |
5.2 |
% |
|||||
|
100 Vanguard Boulevard |
||||||||
|
Malvern, PA 19355 |
||||||||
|
Ocho Investments LLC (5) |
1,115,000 |
5.0 |
% |
|||||
|
1401 Lavaca Street, Unit 40912 |
||||||||
|
Austin, TX 78701 |
||||||||
|
Named Executive Officers: |
||||||||
|
Riley McCormack (6) |
2,451,833 |
11.1 |
% |
|||||
|
Carle Quinn |
138,768 |
* |
||||||
|
Charles Beck |
87,424 |
* |
||||||
|
Tony Rodriguez |
63,298 |
* |
||||||
|
George Karamanos |
44,542 |
* |
||||||
|
Directors: |
||||||||
|
Rishi Bajaj(7) |
2,794,749 |
12.6 |
% |
|||||
|
Sandeep Dadlani |
40,186 |
* |
||||||
|
Kathleen Kool |
32,696 |
* |
||||||
|
LaShonda Anderson-Williams |
25,666 |
* |
||||||
|
Michael Park |
23,758 |
* |
||||||
|
Dana Mcilwain |
21,480 |
* |
||||||
|
Sheila Cheston |
21,314 |
* |
||||||
|
All executive officers and directors as a group (12 persons) |
5,745,714 |
26.0 |
% |
|||||
* Less than 1%
|
(1) |
This information is based solely on the Schedule 13D filed jointly with the SEC on August 4, 2025, by Altai Capital Management, L.P. (“Altai L.P.”), Altai Capital Management, LLC (“Altai LLC” and, together with Altai L.P., “Altai”) and Rishi Bajaj, the President and Chief Investment Officer of Altai L.P. and Managing Member of Altai LLC. Each of Altai L.P., Altai LLC and Mr. Bajaj has shared voting power and shared dispositive power over the 2,769,346 shares of Company Common Stock. |
|
(2) |
This information is based solely on the Amendment No. 2 to Schedule 13D filed jointly with the SEC on March 19, 2025, by TCM Strategic Partners L.P. (“TCM LP”), TCM Strategic GP LLC (“TCM GP” and, together with TCM LP, “TCM”), and Riley McCormack, the Manager of TCM GP, which is the General Partner of TCM LP. Each of TCM LP, TCM GP, and Mr. McCormack has shared voting power and shared dispositive power over the 2,355,093 shares of Company Common Stock. |
|
(3) |
This information is based solely on the Amendment No. 3 to Schedule 13G filed jointly with the SEC on February 8, 2024, by Red Beard Holdings, LLC (“Red Beard”), VCS Master Holdings GP (“VCS”), LB 2, LLC (“LB 2”), and Vincent Smith, the Manager of each of Red Beard and LB2 and the Grantor of all the trusts that are the partners of VCS. Red Beard has shared voting power and shared dispositive power over 1,250,822 shares of Company Common Stock. VCS has shared voting power and shared dispositive power over 152,102 shares of Company Common Stock. LB 2 has shared voting power and shared dispositive power over 20,000 shares of Company Common Stock. Mr. Smith has sole voting power and sole dispositive power over 802,748 Company Common Stock and shared voting power and shared dispositive power over 1,422,924 shares of Company Common Stock. |
|
(4) |
This information is based solely on the Amendment No. 1 to Schedule 13G filed with the SEC on February 13, 2024 by The Vanguard Group (“Vanguard”). Vanguard has shared voting power over 28,137 shares of Company Common Stock, sole dispositive power over 1,109,721 shares of Company Common Stock, and shared dispositive power over 40,795 shares of Company Common Stock. |
|
(5) |
This information is based solely on the Amendment No. 1 to Schedule 13D filed jointly with the SEC on April 15, 2025 by Ocho Investments LLC (“Ocho”) and Andris Upitis, the Manager of Ocho. Each of Ocho and Mr. Upitis has shared voting power and shared dispositive power over the 1,115,000 shares of Company Common Stock. |
|
(6) |
Mr. McCormack’s shares include the shares of Company Common Stock held by TCM Strategic Partners L.P. |
|
(7) |
Mr. Bajaj’s shares include the shares of Company Common Stock held by Altai Capital Management, L.P. |
DESCRIPTION OF HOLDINGS’ SECURITIES
The following is a summary of the terms of the securities of Holdings following the Reorganization. This summary does not purport to be complete nor does it represent all information which you might find to be important for understanding Holdings’ capital stock and may not contain all the information you should consider before voting on the Reorganization Proposal. This description is summarized from, and qualified in its entirety by reference to, the Holdings Articles of Incorporation and the Holdings Bylaws, copies of the forms of which are included with this proxy statement/prospectus as Annexes C and D.
Capital Stock
Holdings’ authorized capital stock consists of:
|
● |
50,000,000 shares of Holdings Common Stock, $0.001 par value per share; and |
|
● |
2,500,000 shares of Holdings Preferred Stock, $0.001 par value per share. |
Common Stock
Listing. Holdings Common Stock is expected to be listed on Nasdaq under the symbol “DMRC.”
Dividend Rights. Subject to preferences that may be granted to any then outstanding preferred stock, holders of Holdings Common Stock are entitled to receive ratably those dividends as may be declared by the Holdings Board out of funds legally available for such purpose, as well as any distributions to Holdings shareholders
Voting Rights. Holders of the Holdings Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of Holdings shareholders, including the election of directors.
No Preemptive or Similar Rights. Holders of Holdings Common Stock have no preemptive or other subscription or conversion rights, and there are no redemption or sinking fund provisions applicable to the Holdings Common Stock.
Rights to Receive Liquidation Distributions. In the event of Holdings’ liquidation, dissolution or winding up, holders of Holdings Common Stock are entitled to share ratably in all of Holdings’ assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock.
No Liability for Further Assessment. All outstanding shares of Holdings Common Stock are fully paid and non-assessable.
Transfer Agent
The transfer agent and registrar for Holdings Common Stock is Broadridge Corporate Issuer Solutions. The transfer agent and registrar’s address is 51 Mercedes Way, Edgewood, New York 11717.
Dividends
The decision to pay dividends is made by the Holdings Board and is dependent on Holdings’ earnings, management’s assessment of future capital needs, and other factors. Holdings does not expect to pay any cash dividends on Holdings Common Stock in the foreseeable future.
Oregon Control Share Act and Oregon Business Combination Act
Holdings is subject to provisions of Oregon law that may restrict the ability of its significant shareholders to exercise voting rights. The Oregon Control Share Act generally applies to a person who acquires voting stock of an Oregon corporation in a transaction that results in that person holding more than one-fifth, one-third or one-half of the total voting power of the voting shares of the corporation. If such a transaction occurs, the person cannot vote the shares acquired in the acquisition unless voting rights are restored to those shares by a vote of:
|
● |
the holders of a majority of the outstanding voting shares of each voting group entitled to vote; and |
|
● |
the holders of a majority of the outstanding voting shares, excluding the acquired shares and shares held by the corporation’s officers and inside directors. |
The restricted shareholder may, but is not required to, submit to the corporation a statement setting forth information about itself and its plans with respect to the corporation. The statement may request that the corporation call a special meeting of shareholders to determine whether voting rights will be granted to the shares acquired. If a special meeting of shareholders is not requested, the issue of voting rights of the acquired shares will be considered at the next annual or special meeting of shareholders that is held more than 60 days after the date the shares are acquired.
Holdings is also subject to provisions of Oregon law that govern business combinations between corporations and interested shareholders. The Oregon Business Combination Act generally prohibits a corporation from entering into a business combination transaction with a person, or an affiliate of that person, for a period of three years following the date the person acquires 15% or more of the outstanding voting stock of the corporation. For the purposes of this law, the prohibition generally applies to the following business combination transactions:
|
● |
a merger or plan of share exchange, |
|
● |
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more of the aggregate market value of all of the assets of the corporation or the aggregate market value of all the outstanding stock of the corporation, and |
|
● |
transactions that result in the issuance or transfer of capital stock of the corporation to the 15% shareholder. |
However, the general prohibition does not apply if:
|
● |
the 15% shareholder, as a result of the transaction in which the person became a 15% shareholder, owns at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding shares owned by directors who are also officers, and certain employee benefit plans), |
|
● |
the board of directors approves either (i) the business combination or (ii) the transaction that resulted in the person becoming an interested shareholder before the transaction by which the shareholder acquires 15% or more of the corporation’s outstanding voting stock occurs, or |
|
● |
the board of directors and the holders of at least 66 2/3% of the outstanding voting stock of the corporation, excluding shares owned by the 15% shareholder, approve the transaction at an annual or special meeting on or after the date the shareholder acquires 15% or more of the corporation’s voting stock. |
Preferred Stock
Holdings’ authorized capital stock includes 2,500,000 shares of Holdings Preferred Stock, of which 10,000 shares of Series A Redeemable Nonvoting Preferred Stock will be issued and outstanding on the effective date of the Reorganization. The Holdings Board is authorized to divide the undesignated Holdings Preferred Stock into series and, with respect to each series, to fix the number of shares constituting such series and determine the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof, including the voting rights, dividend rights, redemption rights and terms, liquidation preferences, and conversion or exchange rights. The Holdings Board could, without shareholder approval, issue Holdings Preferred Stock with voting and other rights that could adversely affect the voting power of the holders of Holdings Common Stock and which could have certain anti-takeover effects. Subject to the rights of the holders of any series of Holdings Preferred Stock, the number of authorized shares of any series of Holdings Preferred Stock may be increased (but not above the number of authorized shares) or decreased (but not below the number of shares thereof then outstanding) by resolution adopted by the Holdings Board.
COMPARISON OF SHAREHOLDER RIGHTS BEFORE AND AFTER THE REORGANIZATION
Digimarc and Holdings are both incorporated under the laws of the State of Oregon and, accordingly, the rights of the shareholders of each are governed by the OBCA, the Digimarc Articles of Incorporation and the Digimarc Bylaws, and the Holdings Articles of Incorporation and the Holdings Bylaws, as applicable. If the Reorganization is consummated, Digimarc shareholders will receive Holdings Common Stock in exchange for their shares of Company Common Stock (including options to purchase Company Common Stock, shares of Company Restricted Stock, RSUs to be settled in shares of Company Common Stock and PRSUs to be settled in shares of Company Common Stock) and become Holdings shareholders, and their rights will be governed by the OBCA and the Holdings Articles of Incorporation and the Holdings Bylaws.
The table below summarizes the material differences between the rights of Digimarc shareholders under the Digimarc Articles of Incorporation and the Digimarc Bylaws and the rights of Holdings shareholders to be provided under the Holdings Articles of Incorporation and the Holdings Bylaws. The full text of the forms of the Holdings Articles of Incorporation and the Holdings Bylaws to be in effect at the time of the Reorganization and prior to the issuance of shares thereunder are attached as Annexes C and D, respectively, to this proxy statement/prospectus. Any discussion of the Holdings Articles of Incorporation and the Holdings Bylaws contained in this proxy statement/prospectus, including the discussion below, is qualified in its entirety by reference to the complete text of each of these documents. The discussion in this section generally does not include a description of the rights of holders of Company Common Stock that will not materially change as a result of the Reorganization.
The following summary tables may not contain all of the information that is important to you. These summaries are not intended to be a complete discussion of the respective rights of Digimarc and Holdings shareholders and are qualified in their entirety by reference to the OBCA and the various documents of Digimarc and Holdings that are referred to in the summaries. You should carefully read this entire proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus for a more complete understanding of the differences between being a shareholder of Digimarc and a shareholder of Holdings. Digimarc has filed copies of the Digimarc Articles of Incorporation and the Digimarc Bylaws with the SEC and will send copies of the documents referred to in this proxy statement/prospectus to you upon your request. Copies of the forms of the Holdings Articles of Incorporation and the Holdings Bylaws have been filed as exhibits to the registration statement of which this proxy statement/prospectus forms a part. See “Where You Can Find Additional Information.”
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Provision |
Digimarc |
Holdings |
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Authorized Capital Stock |
Digimarc is authorized to issue a total of 52,500,000 shares, consisting of (i) 50,000,000 shares of common stock, $0.001 par value per share and
10,000 shares of Digimarc’s preferred stock are designated as Series A Redeemable Nonvoting Preferred Stock.
16,970 shares of Digimarc’s preferred stock are designated as Series B Convertible Preferred Stock. No shares of Series B Convertible Preferred Stock are currently issued or outstanding.
500,000 shares of Digimarc’s preferred stock are designated as Series R Participating Cumulative Preferred Stock. |
Holdings will be authorized to issue the same number of shares of common stock, preferred stock and Series R Participating Cumulative Preferred Stock. Holdings will not have any shares of Series B Convertible Preferred Stock authorized. |
| Provision | Digimarc | Holdings | ||
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Voting |
Holders of Digimarc’s common stock are entitled to one vote per share on any matter submitted to the shareholders.
Holders of Digimarc’s Series A Redeemable Nonvoting Preferred Stock have no voting rights, other than such rights as may be required by law.
Holders of Digimarc’s Series B Convertible Preferred Stock vote as a single class with the holders of the common stock and the holders of any other class or series of Digimarc’s capital stock then entitled to vote with the common stock on all matters submitted to a vote of the holders of common stock (and, if applicable, holders of any other class or series of capital stock), subject to certain limitations and restrictions set forth in Digimarc’s Articles of Incorporation.
Holders of Digimarc’s Series R Participating Cumulative Preferred Stock are entitled to a number of votes equal to the Formula Number then in effect for each share of Series R Preferred Stock held of record on each matter on which holders of Digimarc’s common stock or Digimarc’s shareholders generally are entitled to vote, multiplied by the maximum number of votes per share that any holders of the common stock or shareholders generally then have with respect to such matter (assuming any holding period or other requirement to vote a greater number of shares is satisfied). The “Formula Number” is 100, subject to certain adjustments as set forth in Digimarc’s Articles of Incorporation. |
Holders of Holdings’ common stock, Series A Redeemable Nonvoting Preferred Stock and Series R Participating Cumulative Preferred Stock will have the same voting rights as the Digimarc common stock, Series A Redeemable Nonvoting Preferred Stock and Series R Participating Cumulative Preferred Stock. |
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Conversion Rights |
Digimarc’s Series A Redeemable Nonvoting Preferred Stock and Series R Participating Cumulative Preferred Stock do not have conversion rights.
The shares of Digimarc’s Series B Convertible Preferred Stock are convertible into shares of Digimarc common stock pursuant to the terms of Digimarc’s Articles of Incorporation and the Subscription Agreement, dated September 29, 2020, by and between Digimarc and TCM Strategic Partners L.P., a Delaware limited partnership (the “Subscription Agreement”). |
None of Holdings’ Series A Redeemable Nonvoting Preferred Stock and Series R Participating Cumulative Preferred Stock will have conversion rights. |
| Provision | Digimarc | Holdings | ||
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Redemption Rights |
Since June 18, 2013, Digimarc has had the right, at its sole option, to redeem the Series A Redeemable Nonvoting Preferred, in whole or in part, upon the terms and conditions which shall have been fixed and determined by the Board of Directors. The Series A Redeemable Nonvoting Preferred is redeemable at $5.00 per share.
Digimarc is required to redeem any outstanding shares of Series B Convertible Preferred Stock upon the occurrence of certain change of control events.
The shares of Digimarc’s Series R Preferred Stock shall not be subject to redemption by Digimarc or at the option of any holder of Series R Preferred Stock. |
Holdings’ Series A Redeemable Nonvoting Preferred will be redeemable at any time at $5.00 per share. The shares of Holdings’ Series R Preferred Stock will not be subject to redemption by Holdings or at the option of any holder of Series R Preferred Stock. |
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Preemptive Rights |
Digimarc’s Series A Redeemable Nonvoting Preferred Stock and Series R Participating Cumulative Preferred Stock do not have preemptive rights.
The vote or consent of the holders of at least a majority of the shares of any Series B Convertible Preferred Stock outstanding, voting together as a separate class, will be necessary for effecting or validating certain corporate actions, including amending or repealing Digimarc’s Articles of Incorporation or Bylaws in a manner which would adversely affect the rights, preferences, privileges or voting power of the Series B Convertible Preferred Stock, creating or increasing the number of shares of stock which ranks senior to or on par with the Series B Convertible Preferred Stock, and approving certain transactions, including related party transactions and change of control transactions. |
Neither of Holdings’ Series A Redeemable Nonvoting Preferred Stock and Series R Participating Cumulative Preferred Stock will have preemptive rights. |
| Provision | Digimarc | Holdings | ||
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Transfer Restrictions |
None of Digimarc’s common stock, Series A Redeemable Nonvoting Preferred Stock or Series R Participating Cumulative Preferred Stock are subject to transfer restrictions.
Digimarc’s Series B Convertible Preferred Stock is subject to certain transfer restrictions as set forth in Digimarc’s Articles of Incorporation and the Subscription Agreement. |
None of Holdings’ common stock, Series A Redeemable Nonvoting Preferred Stock or Series R Participating Cumulative Preferred Stock will be subject to transfer restrictions. |
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Liquidation Preferences |
The Series B Convertible Preferred Stock ranks senior to Digimarc’s common stock and each other class or series of Digimarc’s capital stock, including, without limitation, the Series A Redeemable Nonvoting Preferred Stock and the Series R Participating Cumulative Preferred Stock. |
Holdings’ Series A Redeemable Nonvoting Preferred Stock and Series R Participating Cumulative Preferred Stock will rank senior to Holdings’ common stock. |
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Declaration and Payment of Dividends |
No dividends shall be declared or paid on Digimarc’s Series A Redeemable Nonvoting Preferred. Each of Digimarc’s common stock, Series B Convertible Preferred Stock and Series R Participating Cumulative Preferred Stock are entitled to dividends pursuant to Digimarc’s Articles of Incorporation. |
No dividends shall be declared or paid on Holdings’ Series A Redeemable Nonvoting Preferred. Each of Holdings’ common stock and Series R Participating Cumulative Preferred Stock will be entitled to dividends pursuant to Holdings’ Articles of Incorporation. |
LEGAL MATTERS
The legality of the shares of Holdings Common Stock to be issued pursuant to the Reorganization were passed upon for Holdings by Perkins Coie LLP, and certain tax matters were passed upon for Holdings by Perkins Coie LLP.
EXPERTS
The consolidated financial statements of Digimarc Corporation as of December 31, 2025 and 2024, and for each of the years in the two-year period ended December 31, 2025, have been incorporated by reference herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
Requirements for Shareholder Proposals to be Brought Before an Annual Meeting
Pursuant to the Digimarc Bylaws, a shareholder nomination of one or more persons for election to the Digimarc Board and the proposal of other business to be considered by shareholders must be timely noticed to the Secretary of Digimarc to be considered properly brought before an annual meeting by a shareholder. To be timely for the 2027 Annual Meeting of Shareholders, a shareholder’s notice must be delivered to or mailed and received by our Secretary at our principal executive offices no earlier than , 2026, and no later than , 2027.
In addition to satisfying the foregoing requirements under the Digimarc Bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than Digimarc’s nominees at the 2027 Annual Meeting of Shareholders must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than , 2027.
Requirements for Shareholder Proposals to be Considered for Inclusion in our Proxy Materials
Shareholder proposals submitted pursuant to Rule 14a-8 of the Exchange Act and intended to be presented at our 2027 Annual Meeting of Shareholders must be received by us not later than , 2026, in order to be considered for inclusion in our proxy materials for that meeting.
ANNUAL MEETING MATERIALS
Single and Multiple Mailings
If you requested a print version of our proxy materials and share an address with another shareholder, you may receive only one set of proxy materials (including our annual report to shareholders and proxy statement) unless you have provided contrary instructions. If you wish to receive a separate set of our proxy materials now or in the future, we will promptly deliver a separate copy of these materials to you upon written or oral request made to us at: Digimarc Corporation, Attn: Investor Relations, 8500 S.W. Creekside Place, Beaverton, Oregon 97008, Phone: (503) 469-4800, Fax: (503) 520-0407. Similarly, if you share an address with another shareholder and have received multiple copies of our proxy materials, you may write to us at the above address or fax number to request delivery of a single copy of these materials. We ask you to consider the environment in deciding the necessity of these requests.
Form 10-K
Every year, Digimarc prepares and files with the SEC our Annual Report on Form 10-K for that fiscal year. We will provide, without charge, upon the written request of any beneficial owner of shares of our common stock entitled to vote at the Annual Meeting, a copy of our Annual Report on Form 10-K for the year ended December 31, 2025, as we have filed with the SEC. Written requests should be mailed to Charles Beck, Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Digimarc Corporation, 8500 S.W. Creekside Place, Beaverton, Oregon 97008. We ask you to consider the environment in deciding the necessity of these requests.
Other Materials
All materials filed by us with the SEC can be obtained through the SEC’s website at www.sec.gov.
OTHER BUSINESS
As of the date of this proxy statement/prospectus, we know of no matters that will be presented for consideration at the Annual Meeting other than as described in this proxy statement/prospectus. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Digimarc files annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy statements and other information regarding issuers, including Digimarc, who file electronically with the SEC. The address of that site is www.sec.gov. The information contained on the SEC’s website is expressly not incorporated by reference into this proxy statement/prospectus.
Holdings has filed a registration statement on Form S-4, including the exhibits and annexes thereto, with the SEC under the Securities Act, to register the Holdings Common Stock that Digimarc shareholders will receive in connection with the Reorganization. This proxy statement/prospectus, which is part of the registration statement as well as a proxy statement with respect to the Annual Meeting, does not contain all of the information set forth in the registration statement and the exhibits to the registration statement, and some parts have been omitted in accordance with the rules and regulations of the SEC. Holdings may also file amendments to the registration statement. For further information, you are referred to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, you are referred to the copy of the document that has been filed. Each statement in this proxy statement/prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit.
Holdings has supplied all information contained in this proxy statement/prospectus relating to Holdings, and Digimarc has supplied all information contained in this proxy statement/prospectus relating to Digimarc.
Digimarc is incorporating by reference specified documents that Digimarc files with the SEC, which means that Digimarc can disclose important information to you by referring to those documents that are considered part of this proxy statement/prospectus. This information is considered to be a part of this proxy statement/prospectus, except for any information that is superseded by information included directly in this proxy statement/prospectus or incorporated by reference subsequent to the filing of this proxy statement/prospectus as described below. Digimarc has filed with the SEC, and incorporates by reference in this proxy statement/prospectus:
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its Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 11, 2026; and |
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its Current Report on Form 8-K filed with the SEC on February 12, 2026. |
To the extent that any information contained in any report on Form 8-K, or any exhibit thereto, was furnished to, rather than filed with, the SEC, such information or exhibit is specifically not incorporated by reference.
In addition, all documents filed by Digimarc pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (i) after the date of this proxy statement/prospectus and before the date of the Annual Meeting or (ii) after the date of the initial registration statement and prior to effectiveness of the registration statement (excluding in each case any current reports on Form 8-K to the extent disclosure is furnished and not filed) will be deemed to be incorporated by reference into this proxy statement/prospectus.
You can obtain any of the documents incorporated by reference into this proxy statement/prospectus without charge by requesting them in writing or by telephone as follows:
For information related to Digimarc:
Digimarc Corporation
8500 SW Creekside Place
Beaverton, Oregon 97008
United States of America
Telephone: (503) 469-4800
or
D.F. King & Co., Inc.
28 Liberty Street
53rd Floor
New York, New York 10005
Shareholders may call toll-free: (877) 674-6273
Email: digimarc@dfking.com
To receive timely delivery of the documents in advance of the Annual Meeting, you should make your request no later than , 2026, which is five business days before the Annual Meeting.
In addition, you may obtain copies of documents filed by Digimarc with the SEC on Digimarc’s website at www.digimarc.com/company/investors.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE YOUR SHARES AT THE ANNUAL MEETING. THE PARTIES HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS.
THIS PROXY STATEMENT/PROSPECTUS IS DATED , 2026. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
AGREEMENT AND PLAN OF
REORGANIZATION BY AND AMONG
DIGIMARC CORPORATION, DESCHUTES PARENT, INC. AND
DESCHUTES MERGER SUB, INC.
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”), dated as of March 12, 2026, is by and among Digimarc Corporation, an Oregon corporation (the “Company”), Deschutes Parent, Inc., an Oregon corporation (“Holdings”), and Deschutes Merger Sub, Inc., an Oregon corporation (“Merger Sub”).
WITNESSETH:
WHEREAS, the Company has an authorized capital stock of 52,500,000 shares, consisting of (i) 50,000,000 shares of common stock, $0.001 par value per share (the “Company Common Stock”), of which 22,093,287 shares are issued and outstanding as of the date hereof, and (ii) 2,500,000 shares of preferred stock, $0.001 par value per share (the “Company Preferred Stock” and, together with the Company Common Stock, the “Company Securities”), of which 10,000 shares of Redeemable Nonvoting Preferred Stock are issued and outstanding on the date hereof (the “Company Redeemable Preferred Stock”);
WHEREAS, Holdings has an authorized capital stock of 52,500,000 shares, consisting of (i) 50,000,000 shares of common stock, $0.001 par value per share (the “Holdings Common Stock”), of which one share is issued and outstanding and is held by the Company as of the date hereof, and (ii) 2,500,000 shares of preferred stock, $0.001 par value per share (the “Holdings Preferred Stock” and, together with the Holdings Common Stock, the “Holdings Securities”), of which one share is issued and outstanding and is held by the Company as of the date hereof;
WHEREAS, Merger Sub has an authorized capital stock consisting of 100 shares of common stock, par value $0.001 per share, (the “Merger Sub Common Stock”), of which one share is issued and outstanding and is held by Holdings on the date hereof;
WHEREAS, the Company, Holdings and Merger Sub desire to effect a reorganization of the Company into a holding company structure by means of the Merger (as defined below), followed by the Conversion (as defined below), pursuant to which the Company will become a wholly owned subsidiary of Holdings and shareholders of the Company will exchange their Company Securities for Holdings Securities (the “Reorganization”);
WHEREAS, the boards of directors of the Company, Holdings and Merger Sub each desire that, to facilitate the Reorganization, (i) Merger Sub merge with and into the Company (the “Merger”) pursuant to Section 60.487 of the Oregon Revised Statutes (the “ORS”) on the terms set forth in this Agreement, which is intended to constitute, inter alia, an agreement of merger for the purposes of the ORS, and (ii) effective on the day immediately following the effective date of the Merger, the Company will be converted from an Oregon corporation to an Oregon limited liability company (the “Conversion”) pursuant to Section 60.472 of the ORS on the terms set forth in this Agreement, and the boards of directors of the Company, Holdings and Merger Sub have each adopted this Agreement and authorized the Company, Holdings and Merger Sub, respectively, to join and be bound by it; and
WHEREAS, the board of directors of the Company has directed that this Agreement be submitted to a vote of the Company’s shareholders at its annual meeting of shareholders (the “Annual Meeting”).
NOW, THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties hereto agree as follows.
ARTICLE ONE
THE MERGER
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1.1 |
The Merger; Effect of Merger; Conversion. At the Effective Time (as defined in Section 1.2 below), Merger Sub shall be merged with and into the Company pursuant to Section 60.487 of the ORS, the separate existence of Merger Sub shall cease, and the Company, as the surviving corporation, shall continue its corporate existence under the laws of the State of Oregon, all with the effect provided in the ORS, all as more fully described in the Agreement and Plan of Merger attached as Annex A hereto. The Company, as the surviving corporation, shall succeed, insofar as permitted by law, to all rights, assets, liabilities and obligations of Merger Sub in accordance with the ORS. At the Effective Time of the Conversion (as defined in Section 1.2 below), the Company, as the surviving corporation, shall be converted from an Oregon corporation to an Oregon limited liability company and continue as a wholly owned subsidiary of Holdings. |
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1.2 |
Effective Time. The Effective Time (as defined below) shall be the Pacific Time at which a duly executed copy of Articles of Merger with respect to the Merger is filed in the office of the Secretary of State of Oregon in accordance with the provisions of the ORS, or at such later Pacific Time as is agreed to by the parties to this Agreement and specified in the Articles of Merger (the “Effective Time,” and the date during which the Effective Time occurs, the “Effective Date”). The effective time of the Conversion will be 12:01 A.M. Pacific Time of the day immediately following the Effective Date of the Merger (the “Effective Time of the Conversion”). |
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1.3 |
Company Articles of Incorporation. The articles of incorporation of the Company, as in effect immediately prior to the Effective Time, shall, from and after the Effective Time, continue to be the articles of incorporation of the Company and shall thereafter continue in full force and effect as the articles of incorporation of the surviving corporation until such articles of incorporation shall thereafter be amended as provided by law or, if earlier, until the Effective Time of the Conversion, upon which the limited liability company will be governed by its articles of formation. |
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1.4 |
Company Bylaws. The bylaws of the Company, as in effect immediately prior to the Effective Time, shall, from and after the Effective Time, continue to be the bylaws of the Company and shall thereafter continue in full force and effect as the bylaws of the surviving corporation until such bylaws shall thereafter be amended as provided by law or, if earlier, until the Effective Time of the Conversion, upon which the limited liability company will be governed by its limited liability company agreement. |
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1.5 |
Company’s and Holdings’ Directors and Officers. The directors and officers, respectively, of the Company immediately prior to the Effective Time shall continue as the directors and officers, respectively, of Holdings following the Effective Time, to hold office until their successors have been duly elected and qualified in accordance with the articles of incorporation and bylaws of Holdings. |
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1.6 |
Holdings Articles of Incorporation and Bylaws. Prior to the Effective Time, Holdings and the Company shall take all action reasonably necessary to cause Holdings’ articles of incorporation and bylaws to read in their entirety substantially as set forth in Annex B and Annex C, attached hereto, respectively. |
ARTICLE TWO
CONVERSION OF SHARES
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2.1 |
Company Common Stock. At the Effective Time, automatically by virtue of the Merger and without any further action by any of the parties hereto or any other person, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive one duly issued, fully paid and nonassessable share of Holdings Common Stock upon compliance with the procedures specified in Article Three of this Agreement. No shares of Company Common Stock shall be issued or outstanding after the Effective Time, except as set forth in Section 2.2 below. |
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2.2 |
Company Preferred Stock. At the Effective Time, automatically by virtue of the Merger and without any further action by any of the parties hereto or any other person, each share of Company Redeemable Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive one duly issued, fully paid and nonassessable share of Redeemable Nonvoting Preferred Stock of Holdings (“Holdings Redeemable Preferred Stock”) upon compliance with the procedures specified in Article Three of this Agreement. No shares of Company Redeemable Preferred Stock shall be issued or outstanding after the Effective Time. |
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2.3 |
Merger Sub Common Stock. At the Effective Time, automatically by virtue of the Merger and without any further action by any of the parties hereto or any other person, each share of Merger Sub Common Stock outstanding immediately prior to the Effective Time shall be converted into one share of Company Common Stock and, as a result thereof, Holdings shall become the sole shareholder of the Company. At the Effective Time of the Conversion, all of the outstanding shares of Company Common Stock will be converted to limited liability interests pursuant to the Conversion, whereupon Holdings will own all of the limited liability interests in the Company. |
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2.4 |
Holdings Common Stock. At the Effective Time, automatically by virtue of the Merger and without any further action by any of the parties hereto or any other person, each share of Holdings Common Stock issued and outstanding and held by the Company immediately prior to the Effective Time shall be cancelled and cease to be issued or outstanding. |
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2.5 |
Holdings Preferred Stock. At the Effective Time, automatically by virtue of the Merger and without any further action by any of the parties hereto or any other person, each share of Holdings Preferred Stock issued and outstanding and held by the Company immediately prior to the Effective Time shall be cancelled and cease to be issued or outstanding. |
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2.6 |
Stock Plans. At the Effective Time, Holdings shall assume and continue the Company’s obligations under the Digimarc Corporation 2008 Incentive Plan, as amended (the “2008 Incentive Plan”), and continue the Company’s obligations under the Digimarc Corporation 2018 Incentive Plan, as amended (the “2018 Incentive Plan” and, together with the 2008 Incentive Plan, the “Plans” and each individually, a “Plan”) and shall be substituted as the “Company” under the terms and provisions of each of the Plans and assume all rights and obligations of the Company under each Plan as theretofore in effect and all stock options, restricted stock, restricted stock units, performance-based restricted stock units and other awards outstanding thereunder (the “Outstanding Awards”). The Plans and the Outstanding Awards shall, pursuant to their terms, thereafter, apply to shares of Holdings Common Stock in the same manner as they theretofore applied to shares of Company Common Stock. Prior to the Effective Time, the Company shall take such action with respect to each Plan as is appropriate to facilitate performance of the foregoing provisions of this Section 2.6. |
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2.7 |
Name Change. As promptly as practicable after the Effective Time, Holdings shall take such action as is necessary to effect a name change of Holdings from “Deschutes Parent, Inc.,” as such name may be amended from time to time, to “Digimarc Corporation.” |
ARTICLE THREE
EXCHANGE OF STOCK CERTIFICATES
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3.1 |
Appointment of Exchange Agent. At or prior to the Effective Time, Holdings shall appoint an exchange agent (“Exchange Agent”) for the purpose of facilitating the exchange of Company Securities for Holdings Securities including certificates evidencing shares of Company Common Stock or Company Preferred Stock (“Company Certificates”) for book-entry shares evidencing such shares of Holdings Common Stock or Holdings Preferred Stock. |
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3.2 |
Exchange Procedures for Certificated Shares. As promptly as reasonably practicable after the Effective Time, Holdings and the Company shall cause the Exchange Agent to mail to each person who was, at the Effective Time, a holder of record of certificated shares of Company Securities: (i) a letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such shares of Company Certificates shall pass, only upon proper delivery of the Company Certificates to the Exchange Agent) and (ii) instructions for use in effecting the surrender of the Company Certificates pursuant to such letter of transmittal. Upon surrender to the Exchange Agent of a Company Certificate for cancellation, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Company Certificate shall be entitled to receive in exchange therefor, as applicable: book-entry shares representing that number of shares of Holdings Common Stock or Holdings Redeemable Preferred Stock, as applicable, as the number of shares of Company Common Stock or Company Redeemable Preferred Stock, as applicable, represented by the surrendered Company Certificate and any dividends or other distributions to which such holder is entitled pursuant to Section 3.3, and the Company Certificates so surrendered shall forthwith be cancelled. In addition, each outstanding book-entry that, immediately prior to the Effective Time, evidenced shares of Company Common Stock or Company Redeemable Preferred Stock, as applicable, shall, from and after the Effective Time, be deemed and treated for all corporate purposes to evidence the ownership of the same number of shares of Holdings Common Stock or Holdings Redeemable Preferred Stock, as applicable. |
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3.3 |
Restriction on Payment of Dividends and Distributions. No dividends or other distributions declared after the Effective Time with respect to Holdings Common Stock or Holdings Redeemable Preferred Stock, as applicable, shall be paid to the holder of any unsurrendered Company Certificate until the holder thereof shall surrender such Company Certificate in accordance with Section 3.2. After the surrender of a Company Certificate in accordance with Section 3.2, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of Holdings Common Stock or Holdings Redeemable Preferred Stock, as applicable, represented by such Company Certificate. Notwithstanding the foregoing, to the fullest extent permitted by law, none of Holdings, the Company, the Exchange Agent or any other person shall be liable to any former holder of shares of Company Common Stock or Holdings Redeemable Preferred Stock, as applicable, or for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. |
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3.4 |
Issuance of Holdings Securities in a Different Name. If any Holdings Securities are to be issued pursuant to Section 3.2 in a name other than that in which the Company Certificate surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Company Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of any book-entry shares of Holdings Common Stock in any name other than that of the registered holder of the Company Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. |
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3.5 |
No Transfers of Company Common Stock or Company Preferred Stock After the Effective Time. After the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Company Common Stock or shares of Company Redeemable Preferred Stock, which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Company Certificates representing such shares are presented for transfer, no transfer shall be effected on the stock transfer books of Holdings with respect to such shares and no book-entry shares of Holdings Common Stock shall be issued in exchange for such shares of Company Common Stock or Company Redeemable Preferred Stock, as applicable, unless and until such Company Certificate is delivered to the Exchange Agent together with properly completed and duly executed copies of all documents required by Section 3.2 (or such other documents as are satisfactory to Holdings and the Exchange Agent in their sole discretion). |
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Lost Certificates. In the event any Company Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Company Certificate to be lost, stolen or destroyed and, if required by Holdings, the posting by such person of a bond in such amount as Holdings may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Company Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Company Certificate book-entry shares representing the shares of Holdings Common Stock or Holdings Redeemable Preferred Stock, as applicable, to which the holder thereof is entitled pursuant to Section 2.1 or Section 2.4, as applicable, and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 3.3. |
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Uncertificated Shares. In the case of each share of Company Common Stock or Company Redeemable Preferred Stock, as applicable, that is not represented by a certificate, the Exchange Agent shall issue at the Effective Time one book-entry share of Holdings Common Stock or Holdings Redeemable Preferred Stock, as applicable, to the holders of such security without any action by such holder, and in the case of Company Common Stock or Company Redeemable Preferred Stock, as applicable, such holder shall be deemed to have surrendered Company Certificates in accordance with Section 3.2. |
ARTICLE FOUR
CONDITIONS TO REORGANIZATION
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4.1 |
Conditions to Reorganization. The consummation of the Reorganization is subject to the satisfaction, or (to the extent permitted by law) waiver by the Company, of the following conditions prior to the Effective Time: |
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Consents. Any consents, approvals or authorizations that the Company deems necessary or appropriate to be obtained in connection with the consummation of the Reorganization shall have been obtained; |
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Company Shareholder Approval. This Agreement shall have been adopted and approved by holders of shares of Company Common Stock representing a majority of all the votes entitled to be cast, in accordance with the ORS; |
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Holdings Board and Shareholder Approval. This Agreement shall have been adopted and approved by the board of directors and sole shareholder of Holdings; |
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Merger Sub Board and Shareholder Approval. This Agreement shall have been adopted and approved by the board of directors and sole shareholder of Merger Sub; and |
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Listing. The listing of Holdings Common Stock on The Nasdaq Stock Market LLC (“Nasdaq”) shall have been determined to be treated as a substitution listing event in connection with the Reorganization or, in the alternative, Holdings Common Stock to be issued and reserved for issuance in connection with the Reorganization shall have been approved for listing by Nasdaq. |
ARTICLE FIVE
AMENDMENT, DEFERRAL AND TERMINATION
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5.1 |
Amendment. The parties hereto, by mutual consent of their respective boards of directors, may amend this Agreement prior to the filing of the Articles of Merger with the Secretary of State of Oregon. |
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5.2 |
Deferral. Consummation of the Reorganization may be deferred by the board of directors of the Company or any authorized officer of the Company following the Annual Meeting if said board of directors or authorized officer determines that such deferral would be advisable and in the best interests of the Company and its shareholders. |
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5.3 |
Termination. This Agreement may be terminated and the Reorganization abandoned at any time prior to the filing of the Articles of Merger with the Secretary of State of Oregon, whether before or after approval of this Agreement by the shareholders of the Company or, by action of the board of directors of the Company, if the board of directors of the Company determines that the consummation of the Reorganization would not, for any reason, be advisable and in the best interests of the Company and its shareholders. |
ARTICLE SIX
MISCELLANEOUS
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6.1 |
Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Oregon. |
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6.2 |
Further Assurances. From time to time on and after the Effective Time, each party hereto agrees that it will execute and deliver or cause to be executed and delivered all such further assignments, assurances or other instruments, and shall take or cause to be taken all such further actions, as may be necessary or desirable to consummate the Reorganization. Merger Sub hereby authorizes and empowers the Company, as the surviving corporation, to execute and deliver all such assignments, assurances and other instruments and to take all such further actions in the name of Merger Sub following the Effective Time. |
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6.3 |
Counterparts. This Agreement may be executed in one or more counterparts and each such counterpart hereof shall be deemed to be an original instrument but all such counterparts together shall constitute but one agreement. |
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6.4 |
Description of Headings. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement on the date first written above.
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DIGIMARC CORPORATION |
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By: |
/s/ Charles Beck |
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Name: Charles Beck Title: Executive Vice President, Chief Financial Officer, Treasurer and Secretary |
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DESCHUTES PARENT, INC. |
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By: |
/s/ Charles Beck |
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Name: Charles Beck Title: Treasurer and Secretary |
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DESCHUTES MERGER SUB, INC. |
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By: |
/s/ Charles Beck |
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Name: Charles Beck Title: Treasurer and Secretary |
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ANNEX A
AGREEMENT AND PLAN OF MERGER
ANNEX B
ARTICLES OF INCORPORATION OF HOLDINGS
ANNEX C
BYLAWS OF HOLDINGS
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the “Merger Agreement”) is entered into as of March 12, 2026, by and among Digimarc Corporation, an Oregon corporation (the “Company”), Deschutes Parent, Inc., an Oregon corporation (“Holdings”), and Deschutes Merger Sub, Inc., an Oregon corporation (“Merger Sub”).
RECITALS
A. Holdings is an Oregon corporation and a wholly owned subsidiary of the Company on the date hereof.
B. Merger Sub is an Oregon corporation and a wholly owned subsidiary of Holdings on the date hereof.
C. The Company is an Oregon corporation. All of the shares of stock in Holdings issued and outstanding on the date hereof are held by the Company.
D. Each of the Company, Holdings and Merger Sub desire that Merger Sub merge with and into the Company (the “Merger”) as authorized by the laws of the State of Oregon.
AGREEMENT
In consideration of the foregoing recitals and of the following covenants and agreements set forth in this Agreement, and for the purpose of prescribing the terms and conditions of the Merger, the parties agree as follows:
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1. |
Merger; Effectiveness. |
1.1 Merger Sub shall be merged with and into the Company pursuant to Section 60.487 of the Oregon Revised Statutes (“ORS”) and in accordance with the terms and conditions of this Merger Agreement, the separate existence of Merger Sub shall cease, and the Company, as the surviving corporation, shall continue its corporate existence under the laws of the State of Oregon, all with the effect provided in the ORS, as a wholly owned subsidiary of Holdings.
1.2 Upon completion of the following events:
(i) the adoption of the plan of merger as stated herein by the Board of Directors of the Company;
(ii) the adoption of the plan of merger as stated herein by the Board of Directors of Holdings;
(iii) the adoption of the plan of merger as stated herein by the Board of Directors of Merger Sub;
(iv) the approval of the plan of merger as stated herein by the holders of common stock, $0.001 par value per share, of the Company;
(v) the approval of the plan of merger as stated herein by the holder of common stock, $0.001 par value per share, of Holdings;
(vi) the approval of the plan of merger as stated herein by the holder of common stock, $0.001 par value per share, of Merger Sub; and
(vii) the execution by the Company of the Articles of Merger and the filing of such Articles of Merger with the State of Oregon;
the Merger shall become effective at 11:59 p.m. Pacific Time on the date on which a duly executed copy of Articles of Merger with respect to the Merger is filed in the office of the Secretary of State of Oregon in accordance with the provisions of the ORS (such date and time, the “Effective Time”).
2. Articles of Incorporation. The articles of incorporation of the Company, as in effect immediately prior to the Effective Time, shall, from and after the Effective Time, continue to be the articles of incorporation of the Company and shall thereafter continue in full force and effect as the articles of incorporation of the Company until such articles of incorporation shall thereafter be amended as provided by law.
3. Bylaws. The bylaws of the Company, as in effect immediately prior to the Effective Time, shall, from and after the Effective Time, continue to be the bylaws of the Company and shall thereafter continue in full force and effect as the bylaws of the Company until such bylaws shall thereafter be amended as provided by law.
4. Directors and Officers. The directors and officers of the Company in office immediately prior to the Effective Time shall continue as the directors and officers, respectively, of the Company following the Effective Time, to hold office until their successors have been duly elected and qualified in accordance with the articles of incorporation and bylaws of the Company.
5. Treatment of Company Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of stock of the Company or any shares of stock of Merger Sub, all issued and outstanding shares of stock of Merger Sub, all of which are owned by Holdings, shall be cancelled, and no consideration shall be delivered in exchange therefor.
6. Rights, Duties, Powers, Liabilities, Etc. At the Effective Time, the separate existence of Merger Sub shall cease, and Merger Sub shall be merged in accordance with the provisions of this Merger Agreement with and into the Company, which shall possess all the properties and assets, and all the rights, privileges, powers, immunities and franchises, of whatever nature and description, and shall be subject to all restrictions, duties and liabilities of the Company and Merger Sub; and all such things shall be taken and deemed to be transferred to and vested in the Company without further act or deed; and the title to any real estate, or any interest therein, vested by deed or otherwise in either the Company or Merger Sub, shall be vested in the Company without reversion or impairment. Any claim existing or action or proceeding, whether civil, criminal or administrative, pending by or against either the Company or Merger Sub, may be prosecuted to judgment or decree as if the Merger had not taken place, and the Company may be substituted in any such action or proceeding.
7. Implementation. Each of the Company and Merger Sub shall take, or cause to be taken, all action or do, or cause to be done, all things necessary, proper or advisable under the laws of the State of Oregon to consummate and make effective the Merger, and shall execute and deliver such additional documents, instruments and conveyances, and take such other actions and do such other things, as may be necessary, proper or advisable to effect the transactions contemplated by this Merger Agreement.
8. Termination. This Merger Agreement may be terminated for any reason at any time before the filing of Articles of Merger with the State of Oregon (whether before or after adoption by the Board of Directors of each of the Company, Holdings, and Merger Sub) by resolution of the Board of Directors of the Company.
9. Amendment. This Agreement may, to the extent permitted by law, be amended, supplemented or interpreted at any time by action taken by the Board of Directors of the Company.
IN WITNESS WHEREOF, the undersigned have executed this Agreement and Plan of Merger as of the date first written above.
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DIGIMARC CORPORATION |
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By: |
/s/ Charles Beck |
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Name: Charles Beck Title: Executive Vice President, Chief Financial Officer, Treasurer and Secretary |
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DESCHUTES PARENT, INC. |
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By: |
/s/ Charles Beck |
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Name: Charles Beck Title: Treasurer and Secretary |
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DESCHUTES MERGER SUB, INC. |
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By: |
/s/ Charles Beck |
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Name: Charles Beck Title: Treasurer and Secretary |
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ARTICLES OF INCORPORATION
OF
DESCHUTES PARENT, INC.
ARTICLE I
NAME
The name of this Corporation (which is hereinafter referred to as the “Corporation”) is Deschutes Parent, Inc.
ARTICLE II
PURPOSE
The Corporation shall have the power to engage in any lawful activity for which corporations may be organized under the Oregon Business Corporation Act as amended from time to time (the “Act”).
ARTICLE III
STOCK
Section 1. Authorization. The aggregate number of shares which the Corporation shall have authority to issue is 52,500,000 shares, consisting of (i) 50,000,000 shares of common stock, $0.001 par value per share (the “Common Stock”); and (ii) 2,500,000 shares of preferred stock (“Preferred Stock”), $0.001 par value per share.
Section 2. Common Stock. Holders of Common Stock are entitled to one vote per share on any matter submitted to the shareholders. Subject to the rights of the holders of any series of Preferred Stock, holders of Common Stock shall be entitled to receive such dividends and distributions (whether payable in cash or otherwise) as may be declared by the Board of Directors of the Corporation from time to time out of assets or funds of the Corporation legally available therefor. On dissolution of the Corporation, after any preferential amount with respect to Preferred Stock has been paid or set aside, the holders of Common Stock and the holders of any series of Preferred Stock entitled to participate in the distribution of assets are entitled to receive the net assets of the Corporation. Holders of the Common Stock shall not have preemptive rights.
Section 3. Series of Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed by the Act, and by the provisions of this Article III, to provide for the issuance of the shares of Preferred Stock in series, to establish from time to time the number of shares to be included in each series and to determine the designation, relative rights, preferences and limitations of the shares of each series. The authority of the Board of Directors with respect to each series shall include determination of the following:
(a) The number of shares in and the distinguishing designation of that series;
(b) Whether shares of that series shall have full, special, conditional, limited or no voting rights, except to the extent otherwise provided by the Act;
(c) Whether shares of that series shall be convertible and the terms and conditions of the conversion, including provision for adjustment of the conversion rate in circumstances determined by the Board of Directors;
(d) Whether shares of that series shall be redeemable and the terms and conditions of redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions or at different redemption dates;
(e) The dividend rate, if any, on shares of that series, the manner of calculating any dividends and the preferences of any dividends;
(f) The rights of shares of that series in the event of voluntary or involuntary dissolution of the Corporation and the rights of priority of that series relative to the Common Stock and any other series of Preferred Stock on the distribution of assets on dissolution; and
(g) Any other relative rights, preferences and limitations of the series that are permitted by law to vary.
Section 4. Series A Redeemable Nonvoting Preferred Stock. Ten Thousand (10,000) shares of Preferred Stock of the Corporation are hereby designated as Series A Redeemable Nonvoting Preferred Stock (the “Series A Redeemable Nonvoting Preferred”) with the following powers, designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof:
(a) Certain Definitions. Unless the context otherwise requires, the terms defined in this paragraph shall have, for the purposes of this Section 4, the meanings herein specified.
(i) Issue Date. The term “Issue Date” shall mean the date that shares of Series A Redeemable Nonvoting Preferred are first issued by the Corporation.
(ii) Junior Stock. The term “Junior Stock” shall mean the Common Stock and any class or series of shares of the Corporation issued after the Issue Date not entitled to receive any assets upon the liquidation, dissolution or winding up of the affairs of the Corporation until the shares of Series A Redeemable Nonvoting Preferred shall have received the Stated Value of all outstanding shares of Series A Redeemable Nonvoting Preferred as of the date of such liquidation, dissolution or winding up, plus any accrued and unpaid dividends to such date.
(iii) Parity Stock. The term “Parity Stock” shall mean, for purposes of this Section 4, any class or series of shares of the Corporation issued after the Issue Date entitled to receive assets upon the liquidation, dissolution or winding up of the affairs of the Corporation on a parity with the Series A Redeemable Nonvoting Preferred.
(iv) Senior Stock. The term “Senior Stock” shall mean any class or series of shares of the Corporation issued after the Issue Date ranking senior to the Series A Redeemable Nonvoting Preferred in respect of the right to receive dividends, or assets upon the liquidation, dissolution or winding up of the affairs of the Corporation.
(v) Stated Value. The term “Stated Value” when used in reference to the Series A Redeemable Nonvoting Preferred shall mean $5.00 per share of Series A Redeemable Nonvoting Preferred.
(b) Dividend Rate; Payment. No dividends shall be declared or paid on the Series A Redeemable Nonvoting Preferred.
(c) Liquidation, Dissolution or Other Winding Up of the Corporation. In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or other winding up of the Corporation, subject to the prior preferences and other rights of any shares of Senior Stock, but before any distribution or payment shall be made to the holders of Junior Stock, the holders of the shares of Series A Redeemable Nonvoting Preferred shall be entitled to be paid the Stated Value of all outstanding shares of Series A Redeemable Nonvoting Preferred as of the date of such liquidation or dissolution or such other winding up, in cash or in property taken at its fair value as determined by the Board of Directors, or both, at the election of the Board of Directors. If such payment shall have been made in full to the holders of the Series A Redeemable Nonvoting Preferred, and if payment shall have been made in full to the holders of any Senior Stock and Parity Stock of all amounts to which such holders shall have a preference, then the remaining assets and funds of the Corporation shall be distributed pro rata, on a share-for-share basis, among the holders of shares of Junior Stock. If, upon any such liquidation, dissolution or other winding up of the affairs of the Corporation, the net assets of the Corporation distributable among the holders of all outstanding shares of Series A Redeemable Nonvoting Preferred and of any shares of Parity Stock shall be insufficient to permit the payment in full to such holders of the preferential amounts to which they are entitled, then the entire net assets of the Corporation remaining after the distributions to holders of any shares of Senior Stock of the full amounts to which they may be entitled shall be distributed among the holders of the shares of Series A Redeemable Nonvoting Preferred and of any Parity Stock ratably in proportion to the full amounts to which they would otherwise be respectively entitled. For purposes of this Section 4(c), neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more other corporations shall be deemed to be a liquidation, dissolution, distribution of assets or winding-up of the Corporation, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a dissolution or winding-up of the business of the Corporation.
(d) Voting Rights. The Series A Redeemable Nonvoting Preferred shall have no voting rights other than such rights as may be required by law.
(e) Redemption. The Corporation at its sole option shall have the right to redeem out of funds lawfully available therefor the Series A Redeemable Nonvoting Preferred, in whole or in part, at any time or from time to time, upon the terms and conditions which shall have been fixed and determined by the Board with respect thereto. The Corporation shall effect redemption by paying cash in an amount per share equal to the Stated Value.
Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of record of the Series A Redeemable Nonvoting Preferred to be redeemed at the address shown in the records of the Corporation; provided that, if the Series A Redeemable Nonvoting Preferred is held in book-entry form through DTC, the Corporation may give notice in any manner permitted by DTC. Each notice will state, as appropriate: (i) the redemption date; (ii) the number of shares of Series A Redeemable Nonvoting Preferred to be redeemed; (iii) the redemption price; (iv) the place or places where certificates for such shares of Series A Redeemable Nonvoting Preferred are to be surrendered for payment of the redemption price if any such certificates are outstanding; and (v) the CUSIP, ISIN or similar identification number or numbers of the Series A Redeemable Nonvoting Preferred to be redeemed. If fewer than all shares of Series A Redeemable Nonvoting Preferred are to be redeemed, the Board of Directors shall select, in such manner as in its sole discretion it deems appropriate, the Series A Redeemable Nonvoting Preferred to be redeemed, and the notice provided to each such holder thereof will specify the number of shares of Series A Redeemable Nonvoting Preferred to be redeemed from such holder. If notice of redemption of any Series A Redeemable Nonvoting Preferred has been given and if the funds necessary for such redemption have been set apart by the Corporation in trust for the benefit of holders of the Series A Redeemable Nonvoting Preferred so called for redemption, then from and after the redemption date, the Series A Redeemable Nonvoting Preferred will no longer be deemed to be outstanding and all rights of holders of such shares will terminate, except the right to receive the redemption price.
(f) Other Terms. Except as may otherwise be provided in this Section 4 or as required by law, the terms of the Series A Redeemable Nonvoting Preferred shall be identical to those of the Common Stock.
Section 5. Series R Participating Cumulative Preferred Stock. An initial Five Hundred Thousand (500,000) shares of Preferred Stock of the Corporation are hereby designated as Series R Participating Cumulative Preferred Stock (the “Series R Preferred Stock”). Such number of shares may be decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares of Series R Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series R Preferred Stock. The Series R Preferred Stock shall have the following powers, designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof:
(a) Dividends and Distributions. Subject to the prior and superior rights of the holders of shares of any other series of Preferred Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of Series R Preferred Stock with respect to dividends, the holders of shares of Series R Preferred Stock shall be entitled to receive, when, as, and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, quarterly dividends payable in cash on the last day of each fiscal quarter in each year, or such other dates as the Corporation’s Board of Directors shall approve (each such date being referred to in this Section 5 as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or a fraction of a share of Series R Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $0.001 and (ii) the Formula Number (as hereinafter defined) then in effect times the cash dividends then to be paid on each share of Common Stock. In addition, if the Corporation shall pay any dividend or make any distribution on the Common Stock payable in assets, securities or other forms of noncash consideration (other than dividends or distributions solely in shares of Common Stock), then, in each such case, the Corporation shall simultaneously pay or make on each outstanding whole share of Series R Preferred Stock a dividend or distribution in like kind equal to the Formula Number then in effect times such dividend or distribution on each share of Common Stock. As used in this Section 5, the “Formula Number” shall be 100; provided, however, that if the Corporation shall (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock or make any distribution on the Common Stock in shares of Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding shares of Common Stock into a larger number of shares of Common Stock, or (iii) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then in each such event the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event (and rounding the result to the nearest whole number); and provided further, that if the Corporation shall issue any shares of its capital stock in a merger, reclassification or change of the outstanding shares of Common Stock, then in each such event the Formula Number shall be appropriately adjusted to reflect such merger, reclassification or change so that each share of Preferred Stock continues to be the economic equivalent of a Formula Number of shares of Common Stock prior to such merger, reclassification or change.
The Corporation shall declare a dividend or distribution on the Series R Preferred Stock as provided in Section 5(a) immediately prior to or at the same time it declares a dividend or distribution on the Common Stock (other than a dividend or distribution solely in shares of Common Stock); provided, however, that in the event no dividend or distribution (other than a dividend or distribution in shares of Common Stock) shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.001 per share on the Series R Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The Corporation’s Board of Directors may fix a record date for the determination of holders of shares of Series R Preferred Stock entitled to receive a dividend or distribution declared thereon, which record date shall be the same as the record date for any corresponding dividend or distribution on the Common Stock and which shall not be more than 60 days prior to the date fixed for payment thereof.
Dividends shall begin to accrue and be cumulative on outstanding shares of Series R Preferred Stock from and after the Quarterly Dividend Payment Date next preceding the date of original issue of such shares of Series R Preferred Stock; provided, however, that dividends on such shares that are originally issued after the record date for the determination of holders of shares of Series R Preferred Stock entitled to receive a quarterly dividend on or prior to the next succeeding Quarterly Dividend Payment Date shall begin to accrue and be cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends on shares of Series R Preferred Stock that are originally issued prior to the record date for the determination of holders of shares of Series R Preferred Stock entitled to receive a quarterly dividend on or prior to the first Quarterly Dividend Payment Date shall be calculated as if cumulative from and after the last day of the fiscal quarter (or such other Quarterly Dividend Payment Date as the Corporation’s Board of Directors shall approve) next preceding the date of original issuance of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series R Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.
So long as any shares of Series R Preferred Stock are outstanding, no dividends or other distributions shall be declared, paid or distributed, or set aside for payment or distribution, on the Common Stock unless, in each case, the dividend required by this Section 5(a) to be declared on the Series R Preferred Stock shall have been declared.
The holders of shares of Series R Preferred Stock shall not be entitled to receive any dividends or other distributions except as provided in this Section 5.
(b) Voting Rights. The holders of shares of Series R Preferred Stock shall have the following voting rights:
(i) Each holder of Series R Preferred Stock shall be entitled to a number of votes equal to the Formula Number then in effect for each share of Series R Preferred Stock held of record on each matter on which holders of the Common Stock or shareholders generally are entitled to vote, multiplied by the maximum number of votes per share that any holders of the Common Stock or shareholders generally then have with respect to such matter (assuming any holding period or other requirement to vote a greater number of shares is satisfied).
(ii) Except as otherwise provided in this Section 5 or by applicable law, the holders of shares of Series R Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class for the election of directors of the Corporation and on all other matters submitted to a vote of shareholders of the Corporation.
(iii) Except as provided in this Section 5 or by applicable law, holders of Series R Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth in these Articles) for authorizing or taking any corporate action.
(c) Certain Restrictions.
(i) Whenever quarterly dividends or other dividends or distributions payable on the Series R Preferred Stock as provided in Section 5(a) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series R Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(1) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series R Preferred Stock;
(2) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series R Preferred Stock, except dividends paid ratably on the Series R Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(3) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) with the Series R Preferred Stock; provided, however, that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series R Preferred Stock; or
(4) redeem or purchase or otherwise acquire for consideration any shares of Series R Preferred Stock, or any shares of stock ranking on a parity with the Series R Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Corporation’s Board of Directors) to all holders of such shares upon such terms as the Corporation’s Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective Preferred Stock classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(ii) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (i) of this Section 5(c), purchase or otherwise acquire such shares at such time and in such manner.
(d) Liquidation Rights. Upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, no distribution shall be made to (a) the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series R Preferred Stock unless, prior thereto, the holders of shares of Series R Preferred Stock shall have received an amount equal to the greater of (i) $0.001 per share and (ii) the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an aggregate amount per share equal to the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock or (b) the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series R Preferred Stock, except distributions made ratably on the Series R Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.
(e) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the then outstanding shares of Series R Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share equal to the Formula Number then in effect times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is exchanged or changed. In the event both this Section 5(e) and Section 5(a) appear to apply to a transaction, this Section 5(e) will control.
(f) No Redemption; No Sinking Fund.
(i) The shares of Series R Preferred Stock shall not be subject to redemption by the Corporation or at the option of any holder of Series R Preferred Stock; provided, however, that the Corporation may purchase or otherwise acquire outstanding shares of Series R Preferred Stock in the open market or by offer to any holder or holders of shares of Series R Preferred Stock.
(ii) The shares of Series R Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund.
(g) Ranking. The Series R Preferred Stock shall rank junior to all other series of Preferred Stock of the Corporation, unless the Corporation’s Board of Directors shall specifically determine otherwise in fixing the powers, preferences and relative, participating, optional and other special rights of the shares of such Preferred Stock and the qualifications, limitations and restrictions thereof.
(h) Fractional Shares. The Series R Preferred Stock shall be issuable in whole shares or in any fractional share that is one one-hundredth (1/100th) of a share or any integral multiple of such fraction, and shall entitle the holder, in proportion to such holder’s fractional shares, to receive dividends, exercise voting rights, participate in distributions and have the benefit of all other rights of holders of Series R Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fractional share of Series R Preferred Stock, may elect to (a) make a cash payment for a fractional share other than one one-hundredth (1/100th) of a share or any integral multiple thereof or (b) issue depository receipts evidencing such authorized fractional share of Series R Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; provided, however, that such agreement shall provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Series R Preferred Stock.
(i) Reacquired Shares. Any shares of Series R Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular Series by the Corporation’s Board of Directors pursuant to the provisions of this Article III.
(j) Amendment. None of the powers, preferences and relative, participating, optional and other special rights of the Series R Preferred Stock as provided in this Section 5 shall be amended in any manner that would alter or change the powers, preferences, rights or privileges of the holders of Series R Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series R Preferred Stock, voting as a separate class.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Number of Directors. Except as otherwise provided by the resolution or resolutions adopted by the Board of Directors designating the rights, powers and preferences of any series of Preferred Stock, the number of directors of the Corporation shall be fixed, and may be increased or decreased from time to time, exclusively by resolution of the Board of Directors.
Section 2. Quorum and Manner of Acting. Unless otherwise provided by applicable law, the presence of a majority of the total number of directors constituting the whole Board (including vacancies and unfilled newly-created directorships) shall be necessary to constitute a quorum for the transaction of business. At all meetings of the Board at which a quorum is present, all matters shall be decided by the affirmative vote of the majority of the directors present, except as otherwise required by law.
Section 3. Removal. Except as otherwise provided by the resolution or resolutions adopted by the Board of Directors designating the rights, powers and preferences of any series of Preferred Stock, any director, or the entire Board of Directors, may be removed from office at any time, with or without cause but only by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote for the election of directors.
Section 4. Vacancies and Newly Created Directorships. Except as otherwise provided by law or by the resolution or resolutions adopted by the Board of Directors designating the rights, powers and preferences of any series of Preferred Stock or unless the Board of Directors determines by resolution that any vacancy or newly created directorship shall be filled by the shareholders, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by the sole remaining director. Any director so chosen shall hold office until the next annual meeting of shareholders and until such director’s successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director.
ARTICLE V
AMENDING THE BYLAWS
In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized and empowered to adopt, amend and repeal the Bylaws of the Corporation at any regular or special meeting of the Board of Directors or by written consent, subject to the power of the shareholders of the Corporation to adopt, amend or repeal any Bylaws. The foregoing notwithstanding, the shareholders of the Corporation shall have no power to adopt, amend or repeal any Bylaws unless such adoption, amendment or repeal is approved by the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes of this Article V as a single class.
ARTICLE VI
AMENDING THE ARTICLES OF INCORPORATION
The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in these Articles of Incorporation, and any other provisions authorized by the laws of the State of Oregon at the time in force may be added or inserted, in the manner now or hereafter prescribed by law. All rights, preferences and privileges of whatsoever nature conferred upon shareholders, directors or any other persons whomsoever by and pursuant to these Articles of Incorporation in their present form or as hereafter amended are granted subject to the right reserved in this Article. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws (and notwithstanding that a lesser percentage may be specified by law), the provisions of Article IV, Article V, Article VII, and this Article VI hereof may not be altered, amended or repealed unless such alteration, amendment or repeal is approved by the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes of this Article VI as a single class.
ARTICLE VII
SHAREHOLDER MEETINGS
Section 1. Written Action. Any action required or permitted to be taken at any annual or special meeting of the shareholders of the Corporation may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the Corporation for inclusion in the minutes for filing with the corporate records.
Section 2. Special Meetings. Except as otherwise required by law or provided by the resolution or resolutions adopted by the Board of Directors designating the rights, powers and preferences of any series of Preferred Stock, special meetings of shareholders of the Corporation may be called only by (a) the Chairman of the Board of Directors, or (b) the Board of Directors pursuant to a resolution approved by a majority of the total number of directors that the Corporation would have if there were no vacancies or unfilled newly created directorships, and any power of shareholders to call a special meeting is specifically denied.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify to the fullest extent not prohibited by law any current or former officer or director who is made, or threatened to be made, a party to an action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including an action, suit or proceeding by or in the right of the Corporation) by reason of the fact that the person is or was acting as a director, officer or agent of the Corporation or as a fiduciary within the meaning of the Employee Retirement Income Security Act of 1974 with respect to any employee benefit plan of the Corporation, or serves or served at the request of the Corporation as a director or officer, or as a fiduciary of an employee benefit plan, of another corporation, partnership, joint venture, trust or other enterprise. The Corporation shall pay for or reimburse the reasonable expenses incurred by any such current or former director, officer or employee in any such proceeding in advance of the final disposition of the proceeding if the officer or director sets forth in writing (i) the person’s good faith belief that the person is entitled to indemnification under this Article VIII and (ii) the person’s agreement to repay all advances if it is ultimately determined that the person is not entitled to indemnification under this Article VIII. The indemnification and advancement of expenses specifically provided hereby shall not be deemed exclusive of any other rights to which such person may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in the official capacity of the person indemnified and as to action in another capacity while holding office.
The rights to indemnification and advancement of expenses conferred upon any current or former director or officer of the Corporation pursuant to this Article VIII (whether by reason of the fact that such person is or was acting as a director, officer or agent of the Corporation or as a fiduciary within the meaning of the Employee Retirement Income Security Act of 1974 with respect to any employee benefit plan of the Corporation, or serves or served at the request of the Corporation as a director or officer, or as a fiduciary of an employee benefit plan, of another corporation, partnership, joint venture, trust or other enterprise) shall be contract rights, shall vest when such person becomes a director or officer of the Corporation, and shall continue as vested contract rights even if such person ceases to be a director or officer of the Corporation. Any amendment, repeal, or modification of, or adoption of any provision inconsistent with, this Article VIII (or any provision hereof) shall not adversely affect any right to indemnification or advancement of expenses granted to any person pursuant hereto with respect to any act or omission of such person occurring prior to the time of such amendment, repeal, modification, or adoption (regardless of whether the proceeding relating to such acts or omissions, or any proceeding relating to such person’s rights to indemnification or to advancement of expenses, is commenced before or after the time of such amendment, repeal, modification, or adoption), and any such amendment, repeal, modification, or adoption that would adversely affect such person’s rights to indemnification or advancement of expenses hereunder shall be ineffective as to such person, except with respect to any threatened, pending, or completed proceeding that relates to or arises from (and only to the extent such proceeding relates to or arises from) any act or omission of such person occurring after the effective time of such amendment, repeal, modification, or adoption.
ARTICLE IX
DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for conduct as a director; provided that this Article IX shall not eliminate the liability of a director for any act or omission for which such elimination of liability is not permitted under the Act. Any repeal or modification of this Article IX by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. If the Act is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors, then the personal liability of the directors to the Corporation or its shareholders shall be limited to the full extent permitted by the Act, as so amended from time to time. No amendment, modification or repeal of this Article, adoption of any provision in these Articles of Incorporation, or change in the law or interpretation of the law shall adversely affect any right or protection of a director or officer of the Corporation under this Article IX with respect to any act or omission that occurred prior to the time of such amendment, modification, repeal, adoption or change.
ARTICLE X
REGISTERED OFFICE AND AGENT
The name of the initial registered agent of the corporation and the address of its registered office are as follows:
Corporation Service Company
1127 Broadway Street NE, Suite 310
Salem, OR 97301
ARTICLE XI
INCORPORATOR
The name and address of the incorporator are:
Charles Beck
8500 SW Creekside Place
Beaverton, Oregon 97008
ARTICLE XII
NOTICES
The address where the State of Oregon Corporation Division may mail notices to the corporation is:
8500 SW Creekside Place
Beaverton, Oregon 97008
ARTICLE XIII
STREET ADDRESS OF PRINCIPAL OFFICE
The initial physical street address of the corporation is:
8500 SW Creekside Place
Beaverton, Oregon 97008
ARTICLE XIV
INDIVIDUAL WITH DIRECT KNOWLEDGE
The name and address of an authorized representative of the corporation are:
Riley McCormack
8500 SW Creekside Place
Beaverton, Oregon 97008
[Signature Page Follows]
I declare as an authorized signer, under penalty of perjury, that this document does not fraudulently conceal, fraudulently obscure, fraudulently alter or otherwise misrepresent the identity of the person or any officers, directors, employees or agents of the Corporation. This filing has been examined by me and is, to the best of my knowledge and belief, true, correct, and complete. Making false statements in this document is against the law and may be penalized by fines, imprisonment or both.
/s/ Charles Beck
Charles Beck, Incorporator
BYLAWS
OF
DESCHUTES PARENT, INC.
Incorporated under the Laws of the State of Oregon
ARTICLE I
SHAREHOLDERS
Section 1.1 Annual Meeting. The annual meeting of the shareholders shall be held on such date and at such time as may be fixed by resolution of the Board of Directors.
Section 1.2 Special Meetings. Special meetings of the shareholders may be called only by the Chairman of the Board or the Board of Directors pursuant to a resolution approved by a majority of the total number of directors that the corporation would have if there were no vacancies or unfilled newly created directorships (the “Whole Board”).
Section 1.3 Place of Meetings. Meetings of the shareholders shall be held at the principal business office of the corporation or at such other places within or without the State of Oregon, as may be determined by the Board of Directors. The Board of Directors may, at its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Oregon Business Corporation Act (the “Act”).
Section 1.4 Notice of Meetings. Written notices stating the date, time and place of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be mailed to each shareholder entitled to vote at the meeting not less than 10 nor more than 60 days before the date of the meeting. If mailed, the notice shall be effectively given when it is mailed to the shareholder with postage prepaid at the shareholder’s address shown in the corporation’s current record of shareholders.
Section 1.5 Waiver of Notice. A shareholder may at any time waive any notice required by law, the Articles of Incorporation or these Bylaws. The waiver must be in writing, be signed by the shareholder entitled to the notice and be delivered to the corporation for inclusion in the minutes for filing with the corporate records. A shareholder’s attendance at a meeting waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting. The shareholder’s attendance also waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.
Section 1.6 Record Date.
(a) For the purpose of determining shareholders entitled to notice of a shareholders’ meeting or to vote or to take any other action, the Board of Directors of the corporation may fix a future date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days before the meeting or action requiring a determination of shareholders. The record date shall be the same for all voting groups.
(b) A determination of shareholders entitled to notice of or to vote at a shareholders’ meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
(c) If a court orders a meeting adjourned to a date more than 120 days after the date fixed for the original meeting, it may provide that the original record date continue in effect or it may fix a new record date.
Section 1.7 Shareholders’ List for Meeting. After a record date for a meeting is fixed, the corporation shall prepare an alphabetical list of the names of all of its shareholders entitled to notice of a shareholders’ meeting. The list must be arranged by voting group and within each voting group by class or series of shares and show the address of and number of shares held by each shareholder. The shareholders’ list must be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held. The corporation shall make the shareholders’ list available at the meeting, and any shareholder or the shareholder’s agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment. Refusal or failure to prepare or make available the shareholder’s list does not affect the validity of action taken at the meeting.
Section 1.8 Quorum: Adjournment. Shares entitled to vote may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. A majority of the votes entitled to be cast on the matter constitutes a quorum for action on that matter. Any meeting of shareholders, annual or special, may be adjourned solely by the chairman of the meeting from time to time to reconvene at the same or some other time, date and place, and notice need not be given of any such adjourned meeting if the time, date and place thereof are announced at the meeting at which the adjournment is taken. The shareholders present at a meeting shall not have authority to adjourn the meeting. At an adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting originally held. Once a share is represented for any purpose at a meeting, it shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is set for the adjourned meeting.
Section 1.9 Voting Requirements: Action Without Meeting. If a quorum exists, action on a matter, other than the election of directors, is approved if the votes cast by the shares entitled to vote favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law or the Articles of Incorporation. Directors are elected by a plurality of votes cast by the shares entitled to vote in an election at a meeting at which a quorum is present. Action required or permitted by law to be taken at a shareholders’ meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the corporation for inclusion in the minutes or filing with the corporate records. Action taken under this section is effective when the last shareholder signs the consent, unless the consent specifies an earlier or later effective date. If the law requires that notice of proposed action be given to nonvoting shareholders and the action is to be taken by unanimous consent of the voting shareholders, the corporation must give its nonvoting shareholders written notice of the proposed action at least 10 days before the action is taken. The notice must contain or be accompanied by the same material that, under the Act, would have been required to be sent to nonvoting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.
Section 1.10 Proxies. A shareholder may vote shares in person or by proxy. An appointment of a proxy shall be effective when received by the Secretary or other officer of the corporation authorized to tabulate votes. An appointment is valid for 11 months unless a longer period is expressly provided for in the appointment form. An appointment is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest that has not been extinguished.
Section 1.11 Advance Notice of Shareholder Nominees and Shareholder Business.
(a) Advance Notice of Shareholder Business.
At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be brought: (A) pursuant to the corporation’s proxy materials with respect to such meeting, (B) by or at the direction of the Board of Directors, or (C) by a shareholder of the corporation who (1) is a shareholder of record at the time of the giving of the notice required by this Section 1.11(a) and on the record date for the determination of shareholders entitled to vote at the annual meeting and (2) has timely complied in proper written form with the notice procedures set forth in this Section 1.11(a). In addition, for business to be properly brought before an annual meeting by a shareholder, such business must be a proper matter for shareholder action pursuant to these bylaws and applicable law. For the avoidance of doubt, clause (C) above shall be the exclusive means for a shareholder to bring business before an annual meeting of shareholders.
(i) To comply with clause (C) of Section 1.11(a) above, a shareholder’s notice must set forth all information required under this Section 1.11(a) and must be timely received by the Secretary of the corporation. To be timely, a shareholder’s notice must be received by the Secretary at the principal executive offices of the corporation not later than the 90th day nor earlier than the 120th day before the one-year anniversary of the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year’s annual meeting, then, for notice by the shareholder to be timely, it must be so received by the Secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting, or (ii) the tenth day following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described in this Section 1.11(a)(i). “Public Announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or any successor thereto (the “1934 Act”).
(ii) To be in proper written form, a shareholder’s notice to the Secretary must set forth as to each matter of business the shareholder intends to bring before the annual meeting: (1) a brief description of the business intended to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and address, as they appear on the corporation’s books, of the shareholder proposing such business and any Shareholder Associated Person (as defined below), (3) the class and number of shares of the corporation that are held of record or are beneficially owned by the shareholder or any Shareholder Associated Person and any derivative positions held or beneficially held by the shareholder or any Shareholder Associated Person, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such shareholder or any Shareholder Associated Person with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such shareholder or any Shareholder Associated Person with respect to any securities of the corporation, (5) any material interest of the shareholder or a Shareholder Associated Person in such business, and (6) a statement whether either such shareholder or any Shareholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to approve the proposal (such information provided and statements made as required by clauses (1) through (6), a “Business Solicitation Statement”). In addition, to be in proper written form, a shareholder’s notice to the Secretary must be supplemented not later than ten days following the record date to disclose the information contained in clauses (3) and (4) above as of the record date. For purposes of this Section 1.11, a “Shareholder Associated Person” of any shareholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such shareholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such shareholder and on whose behalf the proposal or nomination, as the case may be, is being made, or (iii) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (i) and (ii).
(iii) Without exception, no business shall be conducted at any annual meeting except in accordance with the provisions set forth in this Section 1.11(a) and, if applicable, Section 1.11(b). In addition, business proposed to be brought by a shareholder may not be brought before the annual meeting if such shareholder or a Shareholder Associated Person, as applicable, takes action contrary to the representations made in the Business Solicitation Statement applicable to such business or if the Business Solicitation Statement applicable to such business contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that business was not properly brought before the annual meeting and in accordance with the provisions of this Section 1.11(a), and, if the chairperson should so determine, he or she shall so declare at the annual meeting that any such business not properly brought before the annual meeting shall not be conducted.
(b) Advance Notice of Director Nominations at Annual Meetings.
Notwithstanding anything in these bylaws to the contrary, only persons who are nominated in accordance with the procedures set forth in this Section 1.11(b) shall be eligible for election or re-election as directors at an annual meeting of shareholders. Nominations of persons for election to the Board of Directors of the corporation shall be made at an annual meeting of shareholders only (A) by or at the direction of the Board of Directors or (B) by a shareholder of the corporation who (1) was a shareholder of record at the time of the giving of the notice required by this Section 1.11(b) and on the record date for the determination of shareholders entitled to vote at the annual meeting and (2) has complied with the notice procedures set forth in this Section 1.11(b). In addition to any other applicable requirements, for a nomination to be made by a shareholder, the shareholder must have given timely notice thereof in proper written form to the Secretary of the corporation.
(i) To comply with clause (B) of Section 1.11(b) above, a nomination to be made by a shareholder must set forth all information required under this Section 1.11(b) and must be received by the Secretary of the corporation at the principal executive offices of the corporation at the time set forth in, and in accordance with, the final three sentences of Section 1.11(a)(i) above.
(ii) To be in proper written form, such shareholder’s notice to the Secretary must set forth:
(1) as to each person (a “nominee”) whom the shareholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of the nominee, (B) the principal occupation or employment of the nominee, (C) the class and number of shares of the corporation that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (E) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the shareholder, (F) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee will owe a fiduciary duty under Oregon law with respect to the corporation and its shareholders, and (G) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (2) as to such shareholder giving notice, (A) the information required to be provided pursuant to clauses (2) through (5) of Section 1.11(a)(ii) above, and the supplement referenced in the second sentence of Section 1.11(a)(ii) above (except that the references to “business” in such clauses shall instead refer to nominations of directors for purposes of this paragraph), and (B) a statement whether either such shareholder or Shareholder Associated Person will deliver a proxy statement and form of proxy to holders of a number of the corporation’s voting shares reasonably believed by such shareholder or Shareholder Associated Person to be necessary to elect such nominee(s) (such information provided and statements made as required by clauses (A) and (B) above, a “Nominee Solicitation Statement”).
(iii) At the request of the Board of Directors, any person nominated by a shareholder for election as a director must furnish to the Secretary of the corporation (1) that information required to be set forth in the shareholder’s notice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person’s nomination was given and (2) such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee; in the absence of the furnishing of such information if requested, such shareholder’s nomination shall not be considered in proper form pursuant to this Section 1.11(b).
(iv) Without exception, no person shall be eligible for election or re-election as a director of the corporation at an annual meeting of shareholders unless nominated in accordance with the provisions set forth in this Section 1.11(b). In addition, a nominee shall not be eligible for election or re-election if a shareholder or Shareholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that a nomination was not made in accordance with the provisions prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the annual meeting, and the defective nomination shall be disregarded.
(c) Advance Notice of Director Nominations for Special Meetings.
(i) Nominations of persons for election to the Board of Directors shall be made at a special meeting of shareholders at which directors are to be elected pursuant to the corporation’s notice of meeting only (1) by or at the direction of the Board of Directors or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the corporation who (A) is a shareholder of record at the time of the giving of the notice required by this Section 1.11(c) and on the record date for the determination of shareholders entitled to vote at the special meeting and (B) delivers a timely written notice of the nomination to the Secretary of the corporation that includes the information set forth in Sections 1.11(b)(ii) and (b)(iii) above. To be timely, such notice must be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. A person shall not be eligible for election or re-election as a director at a special meeting unless the person is nominated (i) by or at the direction of the Board of Directors or (ii) by a shareholder in accordance with the notice procedures set forth in this Section 1.11(c). In addition, a nominee shall not be eligible for election or re-election if a shareholder or Shareholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading.
(ii) The chairperson of the special meeting shall, if the facts warrant, determine and declare at the meeting that a nomination or business was not made in accordance with the procedures prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the meeting, and the defective nomination or business shall be disregarded.
(d) Other Requirements and Rights.
In addition to the foregoing provisions of this Section 1.11, a shareholder must also comply with all applicable requirements of state law and of the 1934 Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.11, including, with respect to business such shareholder intends to bring before the annual meeting that involves a proposal that such shareholder requests to be included in the corporation’s proxy statement, the requirements of Rule 14a-8 (or any successor provision) under the 1934 Act. Nothing in this Section 1.11 shall be deemed to affect any right of the corporation to omit a proposal from the corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the 1934 Act.
Section 1.12 Organization. Meetings of shareholders shall be presided over by the Chief Executive Officer or by another chairman designated by the Board of Directors. The Secretary, or in his or her absence, an Assistant Secretary, or, in the absence of the Secretary and all Assistant Secretaries, a person whom the Chairman of the meeting shall appoint shall act as Secretary of the meeting and keep a record of the proceedings thereof.
The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of shareholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the Chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such Chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to shareholders of record of the corporation and their duly authorized and constituted proxies, and such other persons as the Chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the Chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with rules of parliamentary procedure.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Duties of Board of Directors. All corporate powers shall be exercised by or under the authority of and the business and affairs of the corporation shall be managed by its Board of Directors. In addition to the powers and authorities these Bylaws expressly confer upon them, the Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not required by the Act, the Articles of Incorporation, or these Bylaws to be exercised or done by the shareholders.
Section 2.2 Number, Election and Qualification. Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the number of directors of the corporation shall be fixed, and may be increased or decreased from time to time, exclusively by resolution approved by the affirmative vote of a majority of the Board of Directors. The Board of Directors shall be elected by the shareholders at their annual meeting, and each director shall be elected to serve until the next annual meeting of shareholders, and until the director’s successor shall be elected and qualified or until earlier death, resignation or removal. Directors need not be residents of the State of Oregon or shareholders of the corporation.
Section 2.3 Regular Meetings. A regular meeting of the Board of Directors may be held without other notice than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may, by resolution, provide the time and place for the holding of additional regular meetings without other notice than such resolution.
Section 2.4 Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or a majority of the Board of Directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings.
Section 2.5 Notice. Notice of the date, time and place of any special meetings of the Board of Directors shall be given to each director in any manner reasonably likely to be received at least 24 hours prior to the meeting by any means provided by law. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
Section 2.6 Waiver of Notice. A director may at any time waive any notice required by law, the Articles of Incorporation or these Bylaws. A director’s attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting, or promptly upon the director’s arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.
Section 2.7 Quorum, Majority Vote. Subject to Section 2.9 of these Bylaws, a number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
Section 2.8 Meeting by Telephone Conference; Action Without Meeting.
(a) Members of the Board of Directors may hold a board meeting by telephone conference or other communications equipment by means of which all persons participating in the meeting can simultaneously hear each other. Participation in such a meeting shall constitute presence in person at the meeting.
(b) Any action that is required or permitted to be taken by the directors at a meeting may be taken without a meeting if a consent in writing, or by electronic transmission, setting forth the action so taken shall be signed by all of the directors entitled to vote on the matter. The action shall be effective on the date when the last signature is placed on the consent or at such earlier or later time as is set forth therein. Such writing or writings, or electronic transmission or transmissions, which shall have the same effect as a unanimous vote of the directors, shall be filed with the minutes of the corporation.
Section 2.9 Vacancies and Newly Created Directorships. Subject to applicable law and the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, or unless the Board of Directors determines by resolution that any vacancy or newly created directorship shall be filled by the shareholders, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by the sole remaining director. Any director so chosen shall hold office until the next annual meeting of shareholders and until such director’s successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director.
Section 2.10 Presumption of Assent. A director of the corporation who is present at a meeting of the Board of Directors or a committee of the Board of Directors shall be deemed to have assented to the action taken unless (a) the director’s dissent to, or abstention from, the action is entered in the minutes of the meeting, (b) a written dissent or abstention to the action is filed with the presiding officer of the meeting before the adjournment thereof or forwarded by certified or registered mail to the Secretary of the corporation immediately after the adjournment of the meeting or (c) the director objects at the beginning of the meeting, or promptly upon arrival, to the holding of the meeting or transacting business at the meeting. The right to dissent or abstention shall not apply to a director who voted in favor of the action.
Section 2.11 Transactions with Directors.
(a) A transaction in which a director of the corporation has a direct or indirect interest shall be valid notwithstanding the director’s interest in the transaction if (1) the material facts of the transaction and the director’s interest are disclosed or known to the Board of Directors or a committee thereof and it authorizes, approves or ratifies the transaction; (2) the material facts of the transaction and the director’s interest are disclosed or known to shareholders entitled to vote and they authorize, approve or ratify the transaction; or (3) the transaction is fair to the corporation.
(b) For purposes of Section 2.11(a)(1) above, a conflict of interest transaction may be authorized, approved or ratified if it receives the affirmative vote of a majority of directors or committee members thereof, who have no direct or indirect interest in the transaction. If such a majority of such members vote to authorize, approve or ratify the transaction, a quorum is present for the purpose of taking action.
(c) For purposes of Section 2.11(a)(2) above, a conflict of interest transaction may be authorized, approved or ratified by a majority vote of shareholders entitled to vote thereon. Shares owned by or voted under the control of a director, or an entity controlled by a director, who has a direct or indirect interest in the transaction may be counted in a vote of shareholders to determine whether to authorize, approve or ratify a conflict of interest transaction.
(d) A director has an indirect interest in a transaction if another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction or another entity of which the director is a director, officer or trustee is a party to the transaction and the transaction is or should be considered by the Board of Directors of the corporation.
Section 2.12 Removal. Subject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, any director, or the entire Board of Directors, may be removed from office at any time, with or without cause but only by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of the corporation entitled to vote for the election of directors.
Section 2.13 Resignation. Any director may resign by delivering written notice to the Board of Directors, the Chairman or the corporation. Such resignation shall be effective (a) on receipt, (b) five days after its deposit in the United States mails, if mailed postpaid and correctly addressed, or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by addressee, unless the notice specifies a later effective date. Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the Board of Directors. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the Articles of Incorporation, when one or more directors resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
ARTICLE III
COMMITTEES OF THE BOARD
Section 3.1 Appointment. Unless the Articles of Incorporation provide otherwise, the Board of Directors may create one or more committees and appoint one or more members of the Board of Directors to serve on them. A majority of all directors in office must approve the creation of a committee and the appointment of its members. No member of any committee shall continue to be a member thereof after ceasing to be a director of the corporation. The Board of Directors shall have the power at any time to increase or decrease the number of members of any committee, to fill vacancies thereon, to change any member thereof and to change the functions or terminate the existence thereof.
Section 3.2 Limitation on Powers of a Committee. A committee shall not have the authority of the Board of Directors in reference to: (a) authorizing distributions, except according to a formula or method, or within limits, prescribed by the Board of Directors; (b) approving or proposing to shareholders actions that the law requires to be approved by shareholders; (c) filling vacancies on the Board of Directors or on any of its committees; or (d) adopting, amending or repealing the Bylaws.
Section 3.3 Conduct of Meetings. Each committee shall conduct its meetings in accordance with the applicable provisions of these Bylaws relating to meetings and action without meetings of the Board of Directors. Each committee shall adopt any further rules regarding its conduct, keep minutes and other records and appoint subcommittees and assistants as it deems appropriate.
Section 3.4 Compensation. By resolution of the Board of Directors, committee members may be paid reasonable compensation for services on committees and their expenses of attending committee meetings.
ARTICLE IV
OFFICERS
Section 4.1 Number. The Board of Directors at its first meeting following its election each year shall appoint a President and a Secretary. At this meeting, or at any other time, the Board of Directors may appoint one of its members as Chairman of the Board. Other officers and assistant officers as may be deemed necessary or desirable may be appointed by the Board of Directors and shall have such powers and duties prescribed by the Board of Directors or the officer authorized by the Board of Directors to prescribe the duties of other officers. Any two or more offices may be held by the same person and directors may hold any office unless the Articles of Incorporation or these Bylaws otherwise provide.
Section 4.2 Appointment and Term of Office. The officers of the corporation shall be appointed annually by the Board of Directors. The term of office of each officer commences upon appointment. Each officer shall hold office until a successor shall have been duly appointed and shall have qualified or until the officer’s death, resignation or removal in the manner hereinafter provided.
Section 4.3 Qualification. No officer need be a director, shareholder or Oregon resident.
Section 4.4 Resignation and Removal. An officer may resign at any time by delivering notice to the corporation. A resignation is effective (a) on receipt, (b) five days after its deposit in the United States mails, if mailed postpaid and correctly addressed, or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by addressee, unless the notice specifies a later effective date. If the corporation accepts a specified later effective date, the Board of Directors may fill the pending vacancy before the effective date but the successor may not take office until the effective date. Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the Board of Directors. Any officer appointed by the Board of Directors may be removed from the officer position at any time with or without cause. Appointment of an officer shall not of itself create contract rights. Removal or resignation of an officer shall not affect the contract rights, if any, of the corporation or the officer.
Section 4.5 Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors for the unexpired portion of the term.
Section 4.6 Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors. In the absence of the Chairman of the Board, the Chairman of the Nominating and Corporate Governance Committee shall so preside. Unless otherwise specifically determined by the Board of Directors or otherwise required by law, the Chairman of the Board shall possess the same power as the Chief Executive Officer to sign all contracts, certificates and other instruments of the corporation which may be authorized by the Board of Directors. The Chairman of the Board shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Chairman of the Board shall be responsible, in consultation with the Chief Executive Officer, for setting an agenda for each meeting of the Board of Directors.
Section 4.7 President. The President shall be the Chief Executive Officer of the corporation unless the Board of Directors shall have designated another officer as the Chief Executive Officer of the corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board of Directors to the Chairman of the Board, and/or to any other officer, the President shall have the responsibility for the general management and the control of the business and affairs of the corporation and the general supervision and direction of all of the officers, employees and agents of the corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are prescribed from time to time by the Board of Directors.
Section 4.8 Secretary. The Secretary shall attend all meetings of the Board of Directors and any committee thereof and all meetings of shareholders and shall record and keep the minutes of all meetings of directors and shareholders in one or more books to be kept for that purpose. The Secretary shall perform such other duties and have such other authorities as are prescribed from time to time by the Board of Directors or the Chief Executive Officer.
Section 4.9 Vice Presidents: Each Vice president shall perform duties and responsibilities prescribed by the Board of Directors or the President. The Board of Directors or the President may confer a special title upon a Vice President.
ARTICLE V
INDEMNIFICATION
Section 5.1 Directors and Officers. The corporation shall indemnify its directors and officers to the fullest extent permitted by the Act, as the same exists or may hereafter be amended (but, in the case of alleged occurrences of actions or omissions preceding any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than the Act permitted the corporation to provide prior to such amendment).
Section 5.2 Employees and Other Agents. The corporation shall have power to indemnify its non-officer employees and other agents as set forth in the Act.
Section 5.3 No Presumption of Bad Faith. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal proceeding, that the person had reasonable cause to believe that the conduct was unlawful.
Section 5.4 Advances of Expenses. The expenses incurred by a director or officer in any proceeding shall be paid by the corporation in advance at the written request of the director or officer, if the director or officer:
(a) furnishes the corporation a written affirmation of such person’s good faith belief that such person is entitled to be indemnified by the corporation; and
(b) furnishes the corporation a written undertaking to repay such advance to the extent that it is ultimately determined that such person is not entitled to be indemnified by the corporation. Such advances shall be made without regard to the person’s ability to repay such expenses and without regard to the person’s ultimate entitlement to indemnification under this Article V or otherwise.
Section 5.5 Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances under this Article V shall be deemed to be contractual rights and to be effective to the same extent and as if provided for in a contract between the corporation and the director or officer who serves in such capacity at any time while this Article V and relevant provisions of the Act and other applicable law, if any, are in effect. Any right to indemnification or advances granted by this Article V to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (a) the claim for indemnification or advances is denied, in whole or in part, or (b) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting a claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any proceeding in advance of its final disposition when the required affirmation and undertaking have been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Act for the corporation to indemnify the claimant for the amount claimed, but the burden of providing such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its shareholders) to have made a determination prior to a commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the Act, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
Section 5.6 Non-Exclusivity of Rights. The right conferred on any person by this Article V shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, bylaws, agreement, vote of shareholders or disinterested Directors or otherwise, both as to action in the person’s official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent permitted by the law.
Section 5.7 Survival of Rights. The right conferred on any person by this Article V shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 5.8 Insurance. To the fullest extent permitted by the Act, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Article V.
Section 5.9 Amendments. The rights to indemnification and advancement of expenses conferred upon any current or former director or officer of the corporation pursuant to this Article V (whether by reason of the fact that such person is or was acting as a director, officer or agent of the corporation or as a fiduciary within the meaning of the Employee Retirement Income Security Act of 1974 with respect to any employee benefit plan of the corporation, or serves or served at the request of the corporation as a director or officer, or as a fiduciary of an employee benefit plan, of another corporation, partnership, joint venture, trust or other enterprise) shall be contract rights, shall vest when such person becomes a director or officer of the corporation, and shall continue as vested contract rights even if such person ceases to be a director or officer of the corporation. Any amendment, repeal, or modification of, or adoption of any provision inconsistent with, this Article V (or any provision hereof) shall not adversely affect any right to indemnification or advancement of expenses granted to any person pursuant hereto with respect to any act or omission of such person occurring prior to the time of such amendment, repeal, modification, or adoption (regardless of whether the proceeding relating to such acts or omissions, or any proceeding relating to such person’s rights to indemnification or to advancement of expenses, is commenced before or after the time of such amendment, repeal, modification, or adoption), and any such amendment, repeal, modification, or adoption that would adversely affect such person’s rights to indemnification or advancement of expenses hereunder shall be ineffective as to such person, except with respect to any threatened, pending, or completed proceeding that relates to or arises from (and only to the extent such proceeding relates to or arises from) any act or omission of such person occurring after the effective time of such amendment, repeal, modification, or adoption.
Section 5.10 Savings Clause. If this Article V or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, the corporation shall indemnify each director, officer or other agent to the fullest extent permitted by any applicable portion of this Article V that shall not have been invalidated, or by any other applicable law.
Section 5.11 Certain Definitions. For the purposes of this Article V, the following definitions shall apply:
(a) The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement and appeal of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.
(b) The term “expenses” shall be broadly construed and shall include without limitation, expense of investigations, judicial or administrative proceedings or appeals, attorneys’ fees and disbursements and any expenses of establishing a right to indemnification under Section 5.5 of this Article V, but shall not include judgments or fines against the indemnified party.
(c) The term “corporation” shall include, in addition to the resulting or surviving corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as the person would have with respect to such constituent corporation if its separate existence had continued.
(d) References to a “director,” “officer,” “employee,” or “agent” of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.
(e) References to “other enterprises” shall include employee benefit plans; references to “fines” in the Act shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner the person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Article V.
ARTICLE VI
ISSUANCE OF SHARES
Section 6.1 Certificate for Shares.
(a) No shares of the corporation shall be issued unless authorized by the Board of Directors, which authorization shall include the maximum number of shares to be issued and the consideration to be received for each share. Before the corporation issues shares, the Board of Directors shall determine that the consideration received or to be received for such shares is adequate. Such determination by the Board of Directors shall be conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid and nonassessable. The Board of Directors may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. If certificates are issued, the certificates shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by any two of the following Officers: the Chairman of the Board of Directors, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary. Any or all of the signatures on a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the corporation itself or an employee of the corporation. All certificates shall be consecutively numbered or otherwise identified.
(b) Every certificate for shares of stock that are subject to any restriction on transfer pursuant to the Articles of Incorporation, the Bylaws, applicable securities laws, agreements among or between shareholders or any agreement to which the corporation is a party shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction and that the corporation retains a copy of the restriction. Every certificate issued when the corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the designations, relative rights, preferences and limitations of the shares of each class and series authorized to be issued and the authority of the Board of Directors to determine variations for future series or a statement of the existence of such designations, relative rights, preferences and limitations and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge.
(c) The name and mailing address of the person to whom the shares represented thereby are issued with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be canceled, and no new certificates shall be issued until a former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors prescribes.
Section 6.2 Transfer of Shares. Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by the holder’s legal representative, who shall furnish proper evidence of authority to transfer, or by the holder’s attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.
Section 6.3 Transfer Agent and Registrar. The Board of Directors may from time to time appoint one or more Transfer Agents and one or more Registrars for the shares of the corporation, with such powers and duties as the Board of Directors determines by resolution. The signature of officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a Transfer Agent or by a Registrar other than the corporation itself or an employee of the corporation.
Section 6.4 Officer Ceasing to Act. If the person who signed a share certificate, either manually or in facsimile, no longer holds office when the certificate is issued, the certificate is nevertheless valid.
Section 6.5 Fractional Shares. The corporation shall not issue certificates for fractional shares.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
Section 7.1 Contracts. The Board of Directors may authorize any officer or officers and agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.
Section 7.2 Loans. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name less authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.
Section 7.3 Checks, Drafts, etc. All checks, drafts or other orders for the payment of money and notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers and agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Seal. If the Board of Directors adopts a corporate seal, the seal of the corporation shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words “Corporate Seal.”
Section 8.2 Severability. Any determination that any provision of these Bylaws is for any reason inapplicable, invalid, illegal or otherwise ineffective shall not affect of invalidate any other provision of these Bylaws.
ARTICLE IX
AMENDMENTS
Subject to the provisions of the Articles of Incorporation, and in furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized and empowered to adopt, amend and repeal these Bylaws at any regular or special meeting of the Board of Directors or by written consent, subject to the power of the shareholders of the corporation to adopt, amend or repeal any Bylaws. The foregoing notwithstanding, the shareholders shall have no power to adopt, amend or repeal these Bylaws unless such adoption, amendment or repeal is approved by the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, considered for purposes of this Article IX as a single class.
Adopted: February 26, 2026
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
As an Oregon corporation, each of Digimarc Corporation (“Digimarc”) and Deschutes Parent, Inc. (“Holdings”) is subject to the Oregon Business Corporation Act (the “OBCA”) and the exculpation from liability and indemnification provisions contained therein. As authorized by Section 60.047(2) of the OBCA, Article IX of each of Digimarc’s and Holdings’ articles of incorporation eliminates the liability of Digimarc’s and Holdings’ respective directors to Digimarc or Holdings, as applicable, or their respective shareholders for certain acts or omissions. Neither Digimarc’s nor Holdings’ articles of incorporation eliminate the liability of their respective directors to the extent that the OBCA does not permit corporations to limit directors’ liability.
Section 60.387 et seq. of the OBCA authorizes corporations to indemnify their directors and officers against liability where the director or officer has acted in good faith and with a reasonable belief that the actions taken were in the best interests of the corporation or at least not opposed to the corporation’s best interests and, if in a criminal proceeding, such individual had no reasonable cause to believe the conduct in question was unlawful. Under the OBCA, corporations may not indemnify a director or officer against liability in connection with a claim by or in the right of the corporation if (i) the director or officer has been adjudged liable to the corporation or (ii) the proceeding charged the director or officer with (and adjudged the director or officer liable for) improperly receiving a personal benefit. Nor may corporations indemnify directors or officers against breaches of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, any unlawful distribution under Section 60.367 of the OBCA, or any transaction from which the director or officer derived an improper personal benefit. The OBCA mandates indemnification against all reasonable expenses incurred in the successful defense of any claim made or threatened whether or not such claim was by or in the right of the corporation. Finally, a court may order indemnification if it determines that the director or officer is entitled to mandatory indemnification, or is otherwise fairly and reasonably entitled to indemnification in view of all the relevant circumstances, regardless of whether the director or officer met the good faith and reasonable belief standards of conduct set forth in the statute.
The OBCA also provides that the statutory indemnification provisions are not exclusive of any other rights directors or officers may be entitled to under a corporation’s articles of incorporation or bylaws, any agreement, general or specific action of the board of directors, vote of shareholders or otherwise. Article VIII of each of Digimarc’s and Holdings’ articles of incorporation and Article V of each of Digimarc’s and Holdings’ bylaws require Digimarc and Holdings, as applicable, to indemnify their respective directors, officers, agents and other representatives from losses suffered while acting on behalf of Digimarc or Holdings, as applicable. Article VIII and Article V, as applicable, specify that such representatives are to be indemnified to the fullest extent permitted by law, and that their right to indemnification shall not be affected by subsequent amendments to Digimarc’s or Holdings’ respective articles of incorporation or bylaws or the end of the representative’s service to Digimarc or Holdings, as applicable.
Section 60.411 of the OBCA also authorizes corporations to purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee or agent of the corporation, or who, while a director, officer, employee or agent of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against or incurred by such individual, whether or not the corporation would have the power to indemnify such person against such liability under Section 60.391 or Section 60.394 of the OBCA. Each of Digimarc and Holdings maintains insurance coverage relating to certain liabilities of directors and officers.
Additionally, each of Digimarc and Holdings has entered into indemnity agreements with certain of their respective officers and directors. The indemnity agreements require each of Digimarc and Holdings to, among other things, indemnify the officer or director against all expenses (including attorneys’ fees, judgments, fines and penalties, among others) incurred by such officer or director as a result of being named or threatened to be named as a party to any proceeding as a result of such officer or director’s service in such capacity. The indemnity agreements also require each of Digimarc and Holdings to indemnify the officer or director to the fullest extent permitted by law. However, the indemnification agreements prohibit each of Digimarc and Holdings from indemnifying any director or officer who is determined to be liable under Section 16(b) of the Exchange Act (or similar provisions of any federal, state or local laws) for an accounting of the profits made on the purchase or sale of shares of the corporation.
Item 21. Exhibits and Financial Statement Schedules
(a)
Exhibits
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Exhibit |
Description | |
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2.1* |
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2.2* |
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3.1 |
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3.2 |
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3.3* |
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3.4* |
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5.1* |
Opinion of Perkins Coie LLP regarding the validity of the shares being registered hereunder. |
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8.1* |
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10.1* |
Form of Digimarc LLC Amended and Restated Limited Liability Company Operating Agreement. |
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10.2*† |
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10.3† |
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10.4† |
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10.5† |
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10.6† |
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10.7† |
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10.8† |
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10.9† |
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10.10† |
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10.11† |
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21.1 |
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23.1* |
Consent of KPMG LLP (Independent Registered Public Accounting Firm). |
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23.2* |
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23.3* |
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24.1* |
Power of Attorney (contained on the signature pages hereto). |
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99.1* |
Form Proxy Card for Digimarc Corporation Shareholder Meeting. |
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107* |
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* |
Filed herewith. |
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† |
Indicates a management contract or compensatory plan. |
Item 22. Undertakings
The undersigned registrant hereby undertakes:
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(1) |
To file, during any period in which offers or sales are being made, a post‑effective amendment to this registration statement: |
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(i) |
to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
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(ii) |
to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post‑effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Filing Fee Tables” or “Calculation of Registration Fee” table, as applicable, in the effective registration statement; and |
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(iii) |
to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
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(2) |
That, for the purpose of determining any liability under the Securities Act of 1933, each such post‑effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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(3) |
To remove from registration by means of a post‑effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
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(4) |
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed by the registrant pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
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(5) |
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
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(i) |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
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(ii) |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
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(iii) |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
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(iv) |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
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(6) |
That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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(7) |
That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. |
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(8) |
That every prospectus: (i) that is filed pursuant to paragraph (7) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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(9) |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. |
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(10) |
To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. |
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(11) |
To supply by means of a post‑effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Beaverton, State of Oregon, on March 12, 2026.
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DESCHUTES PARENT, INC. |
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By: |
/s/ Riley McCormack |
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Name: Riley McCormack Title: President |
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Each person whose individual signature appears below hereby authorizes and appoints Riley McCormack and Charles Beck, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney‑in‑fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this registration statement, including any and all post‑effective amendments, or any registration statements to be filed in connection with this registration statement pursuant to Rule 462 under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys‑in‑fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys‑in‑fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated below on March 12, 2026.
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Signature |
Title |
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| /s/ Riley McCormack |
President and Director (Principal Executive Officer) |
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Riley McCormack |
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| /s/ Charles Beck |
Treasurer and Secretary (Principal Financial Officer |
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Charles Beck |
and Principal Accounting Officer) | |
| /s/ Katie Kool |
Chair of the Board of Directors |
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Katie Kool |
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| /s/ LaShonda Anderson-Williams |
Director |
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LaShonda Anderson-Williams |
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| /s/ Rishi Bajaj |
Director |
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Rishi Bajaj |
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| /s/ Sheila Cheston |
Director |
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Sheila Cheston |
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| /s/ Sandeep Dadlani |
Director |
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Sandeep Dadlani |
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| /s/ Dana Mcilwain |
Director |
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Dana Mcilwain |
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| /s/ Michael Park |
Director |
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Michael Park |
EXHIBIT 5.1
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Perkins Coie LLP 1120 NW Couch Street |
T. +1.503.727.2000 F. +1.503.727.2222 perkinscoie.com |
March 12, 2026
Deschutes Parent, Inc.
8500 SW Creekside Place
Beaverton, Oregon 97008
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Re: |
Deschutes Parent, Inc. - Registration Statement on Form S-4 |
Ladies and Gentlemen:
We have acted as counsel to Deschutes Parent, Inc., an Oregon corporation (the “Company”), and a direct and wholly-owned subsidiary of Digimarc Corporation, an Oregon corporation (“Digimarc”), in connection with the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), of a registration statement on Form S-4 (the “Registration Statement”) relating to the registration under the Securities Act of shares of the Company’s common stock, par value $0.001 per share (the “Shares”), as described in the Registration Statement. The Shares will be issued pursuant to the Agreement and Plan of Reorganization, dated March 12, 2026 (the “Reorganization Agreement”), among the Company, Digimarc, and Deschutes Merger Sub, Inc., an Oregon corporation and a wholly-owned subsidiary of the Company (“Merger Sub”). The Reorganization Agreement provides for, among other things, the merger (the “Merger”) of Digimarc with Merger Sub, with Digimarc surviving as a wholly-owned subsidiary of the Company, and the conversion of each share of common stock, par value $0.001 per share, of Digimarc issued and outstanding immediately prior to the effective time of the Merger, into one duly-issued, fully-paid and non-assessable Share.
In our capacity as counsel to the Company, we have examined such documents, records and instruments as we have deemed necessary for the purposes of this opinion. As to matters of fact material to the opinion expressed herein, we have relied on (a) information in public authority documents and (b) information provided in certificates of officers of the Company. All opinions based on the foregoing documents and certificates are as of the date of such documents and certificates, not as of the date of this opinion letter. We have not independently verified the facts so relied on.
We have examined the Registration Statement, Reorganization Agreement and such documents and records of the Company and other documents as we have deemed necessary for the purpose of this opinion. In such examination, we have assumed the following: (i) the authenticity of original documents and the genuineness of all signatures; (ii) the conformity to the originals of all documents submitted to us as copies; and (iii) the truth, accuracy and completeness of the information, representations and warranties contained in the records, documents, instruments and certificates we have reviewed. We express no opinion concerning any laws other than the laws in their current forms of the State of Oregon.
Based on the foregoing, we are of the opinion that when issued in accordance with the terms of the Reorganization Agreement and as described in the Registration Statement, the Shares will be validly issued, fully paid, and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and any amendments thereto, including any and all post-effective amendments, and to the reference to our firm in the prospectus and any prospectus supplements relating thereto under the heading “Legal Matters.” In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or related Rules.
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Very truly yours,
PERKINS COIE LLP |
Exhibit 8.1
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Perkins Coie LLP 1301 Second Avenue |
T. +1.206.359.8000 F. +1.206.359.9000 perkinscoie.com |
March 12, 2026
| Deschutes Parent, Inc. |
8500 SW Creekside Place
Beaverton, Oregon 97008
Ladies and Gentlemen:
We have acted as counsel to Digimarc Corporation, an Oregon corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”), by Deschutes Parent, Inc. an Oregon corporation (“Holdings”) of a registration statement on Form S-4 dated March 12, 2026 (the “Registration Statement”) regarding a proposal to shareholders of the Company to approve an agreement and plan of reorganization (the “Reorganization Agreement”) to effect a transaction in which the Company shall be merged with Deschutes Merger Sub, Inc., an Oregon corporation (“Merger Sub”) and a wholly owned subsidiary of Holdings, with the Company surviving the merger and Merger Sub ceasing to exist (the “Merger”), and, immediately following the Merger, the Company shall be converted from an Oregon corporation to an Oregon limited liability company (the “Conversion,” and together with the “Merger,” the “Reorganization”). Immediately following the Reorganization, the Company shall be a wholly owned subsidiary of Holdings.
For purposes of delivering this opinion, we have examined and relied upon the truth, accuracy, and completeness of the facts, statements and representations contained in (i) the Registration Statement, (ii) the Company’s 2025 Annual Report on Form 10-K, which is incorporated by reference into the Registration Statement, (iii) the certificate of the Company (the “Tax Certificate”), (iv) the Reorganization Agreement, and (v) such other documents, certificates, records, statements and representations made by the Company, Holdings or Merger Sub as we have deemed necessary or appropriate as a basis for the opinion set forth below. We have not, however, undertaken an independent investigation of any factual matter set forth in any of the foregoing.
In addition, we have assumed, with your permission, that the statements and representations concerning the Company, Holdings, and Merger Sub contained in the Registration Statement, the Company’s 2025 Annual Report on Form 10-K, the Tax Certificate, and the Reorganization Agreement, in each case, are true, correct and complete and will remain true, correct and complete at all relevant times.
Digimarc Corporation
March 12, 2026
Page 2
Based upon and subject to the foregoing and any other assumptions, limitations, exceptions and qualifications specified herein and in the Registration Statement, under “Proposal 1: Reorganization Proposal—Material Federal Income Tax Consequences”, it is our opinion under currently applicable United States federal income tax law, including the Internal Revenue Code of 1986, as amended (the “Code”), that the Reorganization should constitute a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code, for U.S. federal income tax purposes.
We express no opinion on any issue relating to the tax consequences of the Merger, Conversion, or Reorganization other than the opinion set forth above. Our opinion is based upon provisions of the Code, and regulations, rulings, and judicial decisions as of the date hereof. Future legislative, judicial or administrative changes, on either a prospective or retroactive basis, could affect our opinion. Further, our opinion is not binding upon the Internal Revenue Service or the courts, and there is no assurance that the Internal Revenue Service or a court will not take a contrary position.
We undertake no responsibility to advise you of any future change in the matters stated herein or in the federal income tax laws or the application or interpretation thereof. This opinion is furnished in our capacity as counsel to the Company solely for its use in connection with the Reorganization. We hereby consent to discussion of this opinion in the proxy statement/prospectus included as part of the Registration Statement, to filing a form of this opinion as an exhibit to the proxy statement/prospectus included as part of the Registration Statement, and to reference our firm in the proxy statement/prospectus included as part of the Registration Statement. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act, nor do we admit that we are experts with respect to any part of the Registration Statement within the meaning of the term “expert” as used in the Securities Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Perkins Coie LLP
Perkins Coie LLP
Exhibit 10.1
DIGIMARC LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
Dated as of ________, 2026
THE LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS OF DIGIMARC LLC (“UNITS”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH UNITS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (A) THE SECURITIES ACT, (B) ANY APPLICABLE STATE SECURITIES LAWS, (C) ANY OTHER APPLICABLE SECURITIES LAWS, AND (D) THE TERMS AND CONDITIONS OF THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT.
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
DIGIMARC LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the “Agreement”) of Digimarc LLC (the “ Company”) shall be effective as of this __ day of _______, 2026, and is entered into by Digimarc Corporation, an Oregon corporation (“DMRC” or the “Managing Member,” and together with the Persons whose names are set forth on Exhibit A attached hereto the “ Members”), and Digimarc LLC, an Oregon limited liability company.
RECITALS
WHEREAS, Digimarc Corporation, an Oregon corporation (“Old DMRC”), [HoldCo], an Oregon corporation (“Holdings”) and [Merger Sub], an Oregon corporation (“Merger Sub”) effected a reorganization of Old DMRC into a holding company structure (the “Reorganization”) by means of the Merger (as defined below), followed by the Conversion (as defined below), pursuant to which Old DMRC became a wholly owned subsidiary of Holdings and shareholders of Old DMRC exchanged their securities of Old DMRC for securities of Holdings; and
WHEREAS, to facilitate the Reorganization, Merger Sub merged with and into Old DMRC (the “Merger”) pursuant to Section 60.487 of the Oregon Revised Statutes; and
WHEREAS, following the Reorganization, Holdings was renamed DMRC; and
WHEREAS, Old DMRC, on the day following the Merger, converted from an Oregon corporation to an Oregon limited liability company (the “Conversion”); and
WHEREAS, upon the Conversion, Old DMRC was renamed the Company; and
WHEREAS, concurrent with the effectiveness of this Agreement, certain LTIP Units and Performance LTIP Units (each as defined in this Agreement) were granted to an executive of DMRC (the “Grant”); and
WHEREAS, upon the Grant, the Company became a partnership for federal income tax purposes (and relevant state and local income tax purposes) and was deemed to contribute all of its assets and liabilities to a new tax partnership in exchange for ________Common Units and 10,000 Series A Preferred Units (each as defined in this Agreement) in the Company; and
WHEREAS, the Members desire to enter into this Agreement to provide for the regulation of the affairs and the conduct of the business of the Company on the terms set forth in this Agreement.
ARTICLE I
THE LIMITED LIABILITY COMPANY
1.1 Definitions. Capitalized terms used herein shall have the meanings assigned to such terms in Exhibit A hereto.
1.2 Formation. The Company was formed as a limited liability company under and pursuant to the provisions of the Oregon Limited Liability Company Act, ORS Chapter 63, as amended from time to time (the “Act”) by the execution, delivery and filing of Articles of Organization described in ORS 63.047 (the "Articles of Organization”) with the Office of the Secretary of State of Oregon. The rights and liabilities of the Members shall be as provided under the Act, the Articles of Organization and this Agreement.
1.3 Name. The name of the Company shall be “Digimarc LLC” and its business shall be carried on in such name with such variations and changes as the Managing Member (as hereinafter defined) shall determine or deem necessary to comply with requirements of the jurisdictions in which the Company’s operations are conducted.
1.4 Purpose; Powers.
(a) The purposes of the Company are (i) to conduct or promote any lawful business, purpose or activity permitted for a limited liability company of the State of Oregon under the Act, (ii) subject to clause (i), to make such investments and engage in such activities as the Managing Member may approve, and (iii) to engage in any and all activities related or incidental to the purposes set forth in clauses (i) and (ii); provided, however, that, except if the Managing Member determines otherwise, such activities shall be limited to and conducted in such a manner as to not cause the Company to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes.
(b) The Company has the power to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or in furtherance of the purposes of the Company set forth in this Section 1.4 and has, without limitation, any and all powers that may be exercised on behalf of the Company by the Managing Member pursuant to Article III hereof.
1.5 Term. Except if the Company is sooner dissolved as provided herein, the term of the Company shall commence on the date of filing of the Articles of Organization and shall continue in full force and effect until the Company is dissolved and liquidated pursuant to the terms and conditions of Article VII and Article VIII of this Agreement.
1.6 Principal Business Office. The principal business office of the Company shall be located at c/o Digimarc Corporation, 8500 SW Creekside Place, Beaverton, Oregon 97008 or at such other location as may hereafter be determined by the Managing Member. The Company may maintain such other offices at such other places as the Managing Member deems advisable.
1.7 Registered Office. The address of the registered office of the Company in the State of Oregon is c/o Corporation Service Company, 285 Liberty Street, NE, Salem, Oregon 97301. At any time, the Managing Member may designate another registered office for the Company.
1.8 Registered Agent. The name of the registered agent of the Company for service of process on the Company in the State of Oregon is Corporation Service Company. At any time, the Managing Member may designate another registered agent for the Company.
1.9 Title to Company Property. Legal title to all property of the Company shall be held and vested and conveyed in the name of the Company and no real or other property of the Company shall be deemed to be owned by the Members individually. The membership Units of the Members shall constitute personal property.
1.10 Fiscal Year. The fiscal year of the Company (the “Fiscal Year”) for financial statement purposes shall be fixed by the Managing Member.
1.11 Power of Attorney. Each Member by execution of this Agreement, directly or through execution by power of attorney or other consent, irrevocably appoints the Managing Member its true and lawful attorney- in-fact, who may act for each Member and in its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate public offices, any and all documents, certificates and instruments, including without limitation, any and all amendments and restatements of this Agreement as may be deemed necessary or desirable by the Managing Member to carry out fully the provisions of this Agreement and the Act in accordance with their terms, which power of attorney is coupled with an interest and shall survive the death, dissolution or legal incapacity of the Member, or the Transfer by the Member of any part or all of its Membership Interest.
ARTICLE II
THE MEMBERS
2.1 The Members. As of the effective date of this Agreement, the Company shall have four classes of Units entitled “Common Units,” “Series A Preferred Units,” “LTIP Units,” and “Performance LTIP Units” which shall be issued to the Members in the amounts set forth opposite such Member’s name on Schedule A hereto. As of the date hereof, the Members (including the Common Members) are those listed on Schedule A attached hereto, which includes the addresses of such Members and the Units owned by each of them. The Units issued to the Members shall represent valid Membership Interests in the Company. The Units are subject to the restrictions on Transfer set forth in Article X and, except as set forth in a written agreement between the Managing Member or the Company and a Member with respect to Units held by such Member, no Members will have registration rights with respect to their Units.
2.2 Admission of New Members. New members shall be admitted only upon approval of the Managing Member, subject in all cases to Section 3.2, Article X and the other terms and conditions of this Agreement, and upon execution of a counterpart signature page to this Agreement. The Managing Member shall have the authority to amend and update Schedule A from time to time to reflect changes in the Members.
2.3 Liability of Members. All debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Members shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member. The failure of the Company to observe the usual limited liability company formalities or requirements relating to the exercise of its limited liability company powers or management of its business is not a ground for imposing personal liability on the Members for liabilities of the Company. If, notwithstanding the terms of this Agreement, it is determined under applicable Law that any Member has received a distribution which is required to be returned to or for the account of the Company or Company creditors, then the obligation under applicable Law of any Member to return all or part of a distribution made to such Member shall be the obligation of such Member and not of any other Member. To the fullest extent permitted by Law, no Member shall have any fiduciary duty, or any other duty or liability (except as expressly provided herein), to the Company or any other Member; provided, however that each Member shall be subject to those duties, and only those duties, set forth in ORS 63.155 to the extent, and only to the extent, that such duties may not be waived.
ARTICLE III
MANAGEMENT BY THE MANAGING MEMBER; COMPANY OBLIGATIONS
3.1 Managing Member. The management of the Company is fully reserved to the Managing Member, who is DMRC. Subject to Section 3.2 hereof, the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Managing Member, who shall make all decisions and take all actions for the Company. Decisions or actions taken by the Managing Member in accordance with this Agreement shall constitute decisions or actions by the Company and shall be binding on the Company. Except as expressly provided for herein, including Section 3.2 hereof, the Members (other than the Managing Member) shall not participate in, or take part in the control of, the business of the Company, and shall have no right or authority to act for or bind the Company.
3.2 Officers and Related Persons. The Managing Member shall have the authority to (i) appoint and terminate officers of the Company, including, but not limited to, a chief executive officer, a president, one or more chief investment officers, a chief financial officer, one or more vice presidents (each of whom may be designated as an executive vice president, a senior vice president or a vice president with a particular area of responsibility), a treasurer, one or more assistant treasurers, a secretary and one or more assistant secretaries, each of which shall have such rights, powers and authority as the Managing Member may, in its sole discretion, from time to time delegate to any such officer, and (ii) retain and terminate employees, agents and consultants of the Company and to delegate such duties to any such officers, employees, agents and consultants as the Managing Member deems appropriate, including the power, acting individually or jointly, to represent and bind the Company in all matters, in accordance with the scope of their respective duties.
3.3 Company Obligations.
(a) Except as provided in this Section 3.3 and elsewhere in this Agreement (including the provisions of Articles V and IX hereof regarding distributions, payments and allocations to which it may be entitled), the Managing Member shall not be compensated for its services as Managing Member of the Company.
(b) All Administrative Expenses shall be obligations of the Company, and the Managing Member shall be entitled to reimbursement by the Company for any expenditure (including Administrative Expenses) incurred by it that has been made other than out of the funds of the Company. All reimbursements hereunder shall be characterized for federal income tax purposes as expenses of the Company incurred on its behalf, and not as expenses of the Managing Member.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.1 Capital Contributions. Each Member has made or is deemed to have made a capital contribution to the Company in exchange for the Units set forth opposite such Member’s name on Schedule A hereto, as it may be amended or restated from time to time by the Managing Member to the extent necessary to reflect accurately sales, exchanges or other Transfers, redemptions, Capital Contributions, the issuance of additional Units or similar events having an effect on a Member’s ownership of Units.
4.2 Additional Capital Contributions and Issuances of Additional Units. Except as provided in this Section 4.2 or in Section 4.3 hereof, the Members shall have no right or obligation to make any additional Capital Contributions or loans to the Company. The Managing Member may contribute additional capital to the Company, from time to time, and receive additional Membership Interests, in the form of Units, in respect thereof, in the manner contemplated in this Section 4.2.
(a) Issuances of Additional Units.
(i) General. As of the effective date of this Agreement, the Company shall have four classes of Units, entitled “Common Units,” Series A Preferred Units, “LTIP Units,” and “Performance LTIP Units.” The Managing Member is hereby authorized to cause the Company to issue such additional Membership Interests, in the form of Units, for any Company purpose at any time or from time to time to the Members (including the Managing Member) or to other Persons for such consideration and on such terms and conditions as shall be established by the Managing Member in its sole and absolute discretion, all without the approval of any other Members. The Managing Member’s determination that consideration is adequate shall be conclusive insofar as the adequacy of consideration relates to whether the Units are validly issued and fully paid. Any additional Units issued thereby may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to the then-outstanding Units held by the Members, all as shall be determined by the Managing Member in its sole and absolute discretion and without the approval of any other Member, subject to Oregon law that cannot be preempted by the terms hereof and as set forth in a written document hereafter attached to and made an exhibit to this Agreement (each, a “Unit Designation”), including, without limitation, (i) the allocations of items of Company income, gain, loss, deduction and credit to each such class or series of Units; (ii) the right of each such class or series of Units to share in the Company’s distributions; and (iii) the rights of each such class or series of Units upon dissolution and liquidation of the Company; provided, that no additional Units shall be issued to the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) unless:
(1) (A) the additional Units are issued in connection with an issuance of DMRC Shares or other membership interests of, or other interests in, DMRC, which DMRC Shares, membership interests or other interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Units issued to the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) by the Company in accordance with this Section 4.2(a)(i)(1) and (B) the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) shall make a Capital Contribution to the Company in an amount equal to the cash consideration, if any, received by the Managing Member from the issuance of such DMRC Shares, membership interests or other interests in the Managing Member;
(2) the additional Units are issued in connection with an issuance of DMRC Shares or other membership interests of, or other interests in, DMRC pursuant to a distribution declared by DMRC, which DMRC Shares, membership interests or interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Units issued to the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) by the Company in accordance with this Section 4.2(a)(i)(2), provided that (A) if the Managing Member allows the holders of its DMRC Shares to elect whether to receive such distribution in DMRC Shares or other membership interests of, or other interests in the Managing Member or cash, the Company will give the other Members (excluding the Managing Member or any direct or indirect Subsidiary of the Managing Member) the same election to elect to receive (I) Units or cash or, (II) at the election of the Managing Member, DMRC Shares, membership interests or other interests in the Managing Member or cash, and (B) if the Company issues additional Units pursuant to this Section 4.2(a)(i)(2), then an amount of income equal to the value of the Units received will be allocated to those holders of Common Units that elect to receive additional Units;
(3) the additional Units are issued in exchange for property owned by the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) with a fair market value, as determined by the Managing Member, in good faith, equal to the value of the Units; or
(4) the additional Units are issued to all Members in proportion to their respective Percentage Interests.
Without limiting the foregoing, the Managing Member is expressly authorized to cause the Company to issue Units for less than fair market value, so long as the Managing Member concludes in good faith that such issuance is in the best interests of the Managing Member and the Company. Upon the issuance of any additional Units, the Managing Member shall amend Schedule A as appropriate to reflect such issuance.
(ii) Upon Issuance of Additional Securities. The Managing Member shall not issue any Additional Securities (other than DMRC Shares issued in connection with an exchange pursuant to Section 11.1 hereof or DMRC Shares or other membership interests of or other interests in the Managing Member issued in connection with a distribution as described in Section 4.2(a)(i)(2) hereof) or engage in any transaction that would cause an adjustment to the Conversion Factor or Rights other than to all holders of DMRC Shares, Preferred Shares, Junior Shares or New Securities, as the case may be, unless (A) the Managing Member shall cause the Company to issue to the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) Units or Rights having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the Additional Securities, and (B) the Managing Member, (or any direct or indirect wholly owned Subsidiary of the Managing Member) contributes the proceeds, if any, from the issuance of such Additional Securities and from any exercise of Rights contained in such Additional Securities to the Company; provided, that the Managing Member is allowed to issue Additional Securities in connection with an acquisition of property to be held directly by the Managing Member, but if and only if such direct acquisition and issuance of Additional Securities have been approved by a majority of the Independent Directors. Without limiting the foregoing, the Managing Member is expressly authorized to issue Additional Securities for less than fair market value, and the Managing Member is authorized to cause the Company to issue to the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) corresponding Units, so long as (x) the Managing Member concludes in good faith that such issuance is in the best interests of the Managing Member and the Company and (y) the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) contributes all proceeds, if any, from such issuance to the Company, including without limitation, the issuance of DMRC Shares and corresponding Units pursuant to (1) a share purchase or distribution reinvestment plan providing for purchases of DMRC Shares at a discount from fair market value or (2) share awards and options that have an exercise price that is less than the fair market value of the DMRC Shares, either at the time of issuance or at the time of exercise, and restricted or other share awards approved by the Board of Directors. For example, in the event the Managing Member issues DMRC Shares for a cash purchase price and the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) contributes all of the proceeds of such issuance to the Company as required hereunder, the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) shall be issued a number of additional Units equal to the product of (A) the number of such DMRC Shares issued by the Managing Member, the proceeds of which were so contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the denominator of which is the Conversion Factor in effect on the date of such contribution.
(b) Certain Contributions of Proceeds of Issuance of DMRC Shares. In connection with any and all issuances of DMRC Shares, the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) shall make Capital Contributions to the Company of the proceeds therefrom (if any), provided that if the proceeds actually received and contributed by the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) are less than the gross proceeds of such issuance as a result of any underwriter’s discount, commissions, placement fees or other expenses paid or incurred in connection with such issuance, then the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) shall be deemed to have made a Capital Contribution to the Company in the amount equal to the sum of the net proceeds of such issuance plus the amount of such underwriter’s discount, commissions, placement fees or other expenses paid by the Managing Member, and the Company shall be deemed simultaneously to have reimbursed such discount, commissions, placement fees and expenses as an Administrative Expense for the benefit of the Company for purposes of Section 3.3 hereof.
(c) Repurchases of DMRC Securities. If the Managing Member shall repurchase shares of any class or series of its membership interest, the purchase price thereof and all costs incurred in connection with such repurchase shall be reimbursed to the Managing Member by the Company pursuant to Section 3.3 hereof and the Managing Member shall cause the Company to redeem an equivalent number of Units of the appropriate class or series held by the Managing Member (or any direct or indirect wholly owned Subsidiary of the Managing Member) (which, in the case of DMRC Shares, shall be a number equal to the quotient of the number of such DMRC Shares divided by the Conversion Factor).
4.3 Additional Funding.
(a) If the Managing Member determines that it is in the best interests of the Company to provide for additional Company funds (“Additional Funds”) for any Company purpose, the Managing Member may (i) cause the Company to obtain such funds from outside borrowings, or (ii) elect to have the Managing Member or any of its Affiliates provide such Additional Funds to the Company through loans or otherwise.
4.4 LTIP Units.
(a) Issuance of LTIP Units. Notwithstanding anything contained herein to the contrary, the Managing Member may from time to time issue LTIP Units to Persons who provide services to or for the benefit of the Company or the Managing Member for such consideration as the Managing Member may determine to be appropriate, and admit such Persons as Members. Subject to the following provisions of this Section 4.4 and the special provisions of Sections 4.5 and 5.1(g) hereof, LTIP Units shall be treated as Common Units, with all of the rights, privileges and obligations attendant thereto, provided, however, that the LTIP Units shall have no voting rights other than those provided in Section 4.4(d) hereof. For purposes of computing the Members’ Percentage Interests, holders of LTIP Units shall be treated as Common Unit holders and LTIP Units shall be treated as Common Units. In particular, the Company shall maintain at all times a one-to-one correspondence between LTIP Units and Common Units for conversion, distribution and other purposes, including, without limitation, complying with the following procedures:
(i) If an Adjustment Event (as defined below) occurs, then the Managing Member shall make a corresponding adjustment to the LTIP Units to maintain a one-for-one conversion and economic equivalence ratio between Common Units and LTIP Units. The following shall be “Adjustment Events”: (A) the Company makes a distribution on all outstanding Common Units in the form of Units, (B) the Company subdivides the outstanding Common Units into a greater number of units or combines the outstanding Common Units into a smaller number of units, or (C) the Company issues any Units in exchange for its outstanding Common Units by way of a reclassification or recapitalization of its Common Units. If more than one Adjustment Event occurs, the adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not be Adjustment Events: (x) the issuance of Units in a financing, reorganization, acquisition or other similar business Common Unit Transaction, (y) the issuance of Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan or (z) the issuance of any Units to the Managing Member in respect of a capital contribution to the Company of proceeds from the sale of Additional Securities by Managing Member. If the Company takes an action affecting the Common Units other than actions specifically described above as “Adjustment Events” and in the opinion of the Managing Member such action would require an adjustment to the LTIP Units to maintain the one-to-one correspondence described above, the Managing Member shall have the right to make such adjustment to the LTIP Units, to the extent permitted by law and by any Incentive Plan and Vesting Agreement, in such manner and at such time as the Managing Member, in its sole discretion, may determine to be appropriate under the circumstances. If an adjustment is made to the LTIP Units, as herein provided, the Company shall promptly file in the books and records of the Company an officer’s certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after filing of such certificate, the Company shall deliver a notice to each LTIP Unitholder setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment; provided that the failure to deliver such notice shall not invalidate the adjustment or the authority granted hereunder, and
(ii) The LTIP Unitholders shall, when, as and if authorized and declared by the Managing Member out of assets legally available for that purpose, be entitled to receive distributions in an amount per LTIP Unit equal to the distributions per Common Unit (the “Common Unit Distribution”), paid to holders of Common Units on such Company Record Date established by the Managing Member with respect to such distribution. So long as any LTIP Units are outstanding, no distributions (whether in cash or in kind) shall be authorized, declared or paid on Common Units, unless equal distributions have been or contemporaneously are authorized, declared and paid on the LTIP Units; provided that the distributions of assets on liquidation, dissolution or winding up shall be made solely in accordance with the Members’ positive Capital Account balances as provided in Section 5.6(a) hereof.
(b) Priority. Subject to the provisions of this Section 4.04, the special provisions of Section 4.5 and Section 5.1(g) hereof and any Vesting Agreement, the LTIP Units shall rank pari passu with the Common Units as to the payment of regular and special periodic or other distributions; provided that distributions of assets on liquidation, dissolution or winding up shall be made solely in accordance with the Members’ positive Capital Account balances as provided in Section 5.6(a). As to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, any class or series of Units which by its terms specifies that it shall rank junior to, on a parity with, or senior to the Common Units shall also rank junior to, or pari passu with, or senior to, as the case may be, the LTIP Units; provided that distributions of assets on liquidation, dissolution or winding up shall be made solely in accordance with the Members’ positive Capital Account balances as provided in Section 5.06(a). Subject to the terms of any Vesting Agreement, an LTIP Unitholder shall be entitled to transfer his or her LTIP Units to the same extent, and subject to the same restrictions as holders of Common Units are entitled to transfer their Common Units pursuant to Article IX.
(c) Special Provisions. LTIP Units shall be subject to the following special provisions:
(i) Vesting Agreements. LTIP Units may, in the sole discretion of the Managing Member, be issued subject to vesting, forfeiture and additional restrictions on transfer pursuant to the terms of a Vesting Agreement. The terms of any Vesting Agreement may be modified by the Managing Member from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant Vesting Agreement or by the Incentive Plan, if applicable. LTIP Units that have vested under the terms of a Vesting Agreement are referred to as “Vested LTIP Units”; all other LTIP Units shall be treated as “Unvested LTIP Units.” Upon grant, the grantee of any LTIP Unit shall be treated as a Member for all purposes, provided, however, that the LTIP Units shall have no voting rights other than those provided in Section 4.4(d) hereof. The Members acknowledge that the liquidation value of each LTIP Unit shall be zero upon grant, the amount equal to the zero Capital Account balance of such LTIP Unit upon grant, for all purposes.
(ii) Forfeiture. Unless otherwise specified in the Vesting Agreement or in any applicable compensatory plan, program or arrangement pursuant to which LTIP Units are issued, upon the occurrence of any event specified in a Vesting Agreement, plan, program or arrangement as resulting in either the right of the Company or the Managing Member to repurchase LTIP Units at a specified purchase price or some other forfeiture of any LTIP Units, then if the Company or the Managing Member exercises such right to repurchase or forfeiture or upon the occurrence of the event causing forfeiture in accordance with the applicable Vesting Agreement, plan, program or arrangement, the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the Vesting Agreement, plan, program or arrangement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions declared with respect to a Company Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of LTIP Units, the balance of the portion of the Capital Account of the LTIP Unitholder that is attributable to all of such LTIP Unitholder’s LTIP Units shall be reduced by the amount, if any, by which it exceeds the Target Balance contemplated by Section 5.1(g), calculated with respect to the LTIP Unitholder’s remaining LTIP Units, if any.
(iii) Allocations. LTIP Unitholders shall be entitled to certain special allocations of gain under Section 5.1(g) hereof.
(iv) Redemption. The Redemption Right provided to Members under Section 11.1 hereof shall not apply with respect to LTIP Units unless and until they are converted to Common Units as provided in clause (v) below and Section 4.5 hereof.
(v) Conversion to Common Units. Vested LTIP Units are eligible to be converted into Common Units in accordance with Section 4.5 hereof.
(vi) Tax Treatment. The Members intend that the LTIP Units shall be classified as “profits interests” within the meaning of IRS Revenue Procedure 93-27, 1993-2 C.B. 343 (June 9, 1993), as clarified by IRS Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001), and the provisions of this Agreement shall be interpreted in a manner consistent with this intent.
(d) Voting. LTIP Unitholders shall have no voting rights other than the voting rights that are expressly set forth in this Section 4.4(d). So long as any LTIP Units remain outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the LTIP Units (Vested LTIP Units and Unvested LTIP Units) outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to LTIP Units so as to materially and adversely affect (as determined in good faith by the Managing Member) any right, privilege or voting power of the LTIP Units or the LTIP Unitholders as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately the rights and privileges and of the holders of Common Units; but subject, in any event, to the following provisions:
(i) With respect to any Common Unit Transaction, so long as the LTIP Units are treated in accordance with Section 4.5(f) hereof, the consummation of such Common Unit Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such; and
(ii) Any creation or issuance of any Units or of any class or series of Membership Interest including without limitation additional Common Units or LTIP Units, whether ranking senior to, junior to, or on a parity with the LTIP Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such.
The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding LTIP Units shall have been converted into Common Units.
4.5 Conversion of LTIP Units.
(a) Subject to the provisions of this Section 4.5, an LTIP Unitholder shall have the right (the “Conversion Right”), at such holder’s option, at any time to convert all or a portion of such holder’s Vested LTIP Units into Common Units; provided that a holder may not exercise the Conversion Right for less than 1,000 Vested LTIP Units or, if such holder holds less than 1,000 Vested LTIP Units, all of the Vested LTIP Units held by such holder. LTIP Unitholders shall not have the right to convert Unvested LTIP Units into Common Units until they become Vested LTIP Units; provided that when an LTIP Unitholder is notified of the expected occurrence of an event that will cause such LTIP Unitholder’s Unvested LTIP Units to become Vested LTIP Units, such LTIP Unitholder may give the Company a Conversion Notice conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by the LTIP Unitholder, shall be accepted by the Company subject to such condition. The Managing Member shall have the right at any time to cause a conversion of Vested LTIP Units into Common Units. In all cases, the conversion of any LTIP Units into Common Units shall be subject to the conditions and procedures set forth in this Section 4.5.
(b) A holder of Vested LTIP Units may convert such LTIP Units into an equal number of fully paid and non-assessable Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.4 hereof. Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such Member, to the extent attributable to its ownership of LTIP Units, divided by (y) the Common Unit Economic Balance, in each case as determined as of the effective date of conversion (the “Capital Account Limitation”).
In order to exercise the Conversion Right, an LTIP Unitholder shall deliver a notice (a “Conversion Notice”) in the form attached as Exhibit D hereto to the Company (with a copy to the Managing Member) not less than ten nor more than 60 days prior to a date (the “Conversion Date”) specified in such Conversion Notice; provided that if the Managing Member has not given to the LTIP Unitholders notice of a proposed or upcoming Common Unit Transaction at least 30 days prior to the effective date of such Common Unit Transaction, then LTIP Unitholders shall have the right to deliver a Conversion Notice until the earlier of (x) the tenth day after such notice from the Managing Member of a Common Unit Transaction or (y) the third Trading Day immediately preceding the effective date of such Common Unit Transaction. A Conversion Notice shall be provided in the manner provided in Section 16.2 hereof. Each LTIP Unitholder covenants and agrees with the Company that all Vested LTIP Units to be converted pursuant to this Section 4.5(b) shall be free and clear of all liens, claims and encumbrances. Notwithstanding anything herein to the contrary, a holder of LTIP Units may deliver a Notice of Redemption pursuant to Section 11.1(a) hereof relating to those Common Units that will be issued to such holder upon conversion of such LTIP Units into Common Units in advance of the Conversion Date; provided that the redemption of such Common Units by the Company shall in no event take place until after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to put an LTIP Unitholder in a position where, if such holder so wishes, the Common Units into which such holder’s Vested LTIP Units will be converted can be tendered to the Company for redemption simultaneously with such conversion, with the further consequence that, if Managing Member elects to assume the Company’s redemption obligation with respect to such Common Units under Section 11.1(b) hereof by delivering to such holder the DMRC Shares Amount, then such holder can have the DMRC Shares Amount issued to such holder simultaneously with the conversion of such holder’s Vested LTIP Units into Common Units. The Managing Member and LTIP Unitholder shall reasonably cooperate with each other to coordinate the timing of the events described in the foregoing sentence.
(c) The Company, at any time at the election of the Managing Member, may cause any number of Vested LTIP Units held by an LTIP Unitholder to be converted (a “Forced Conversion”) into an equal number of Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.4 hereof; provided that the Company may not cause Forced Conversion of any LTIP Units that would not at the time be eligible for conversion at the option of such LTIP Unitholder pursuant to Section 4.5(b) hereof. In order to exercise its right of Forced Conversion, the Company shall deliver a notice (a “Forced Conversion Notice”) in the form attached as Exhibit E hereto to the applicable LTIP Unitholder not less than ten nor more than 60 days prior to the Conversion Date specified in such Forced Conversion Notice. A Forced Conversion Notice shall be provided in the manner provided in Section 16.2 hereof and shall be revocable by the Managing Member at any time prior to the Forced Conversion.
(d) A conversion of Vested LTIP Units for which the holder thereof has given a Conversion Notice or the Company has given a Forced Conversion Notice shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such LTIP Unitholder, as of which time such LTIP Unitholder shall be credited on the books and records of the Company with the issuance as of the opening of business on the next day of the number of Common Units issuable upon such conversion. After the conversion of LTIP Units as aforesaid, the Company shall deliver to such LTIP Unitholder, upon his or her written request, a certificate of the Managing Member certifying the number of Common Units and remaining LTIP Units, if any, held by such person immediately after such conversion. The Assignee of any Member pursuant to Article X hereof may exercise the rights of such Member pursuant to this Section 4.5 and such Member shall be bound by the exercise of such rights by the Assignee.
(e) For purposes of making future allocations under Section 5.1(g) hereof and applying the Capital Account Limitation, the portion of the Economic Capital Account Balance of the applicable LTIP Unitholder that is treated as attributable to his or her LTIP Units shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the Common Unit Economic Balance.
(f) If the Company or the Managing Member shall be a party to any Common Unit Transaction (including without limitation a merger, consolidation, unit exchange, self tender offer for all or substantially all Common Units or other business combination or reorganization, or sale of all or substantially all of the Company’s assets, but excluding any Common Unit Transaction which constitutes an Adjustment Event) in each case as a result of which Common Units shall be exchanged for or converted into the right, or the holders of Common Units shall otherwise be entitled, to receive cash, securities or other property or any combination thereof (each of the foregoing being referred to herein as a “Common Unit Transaction”), then the Managing Member shall, subject to the terms of any applicable Incentive Plan or Vesting Agreement, exercise immediately prior to the Common Unit Transaction its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the Common Unit Transaction or that would occur in connection with the Common Unit Transaction if the assets of the Company were sold at the Common Unit Transaction price or, if applicable, at a value determined by the Managing Member in good faith using the value attributed to the Units in the context of the Common Unit Transaction (in which case the Conversion Date shall be the effective date of the Common Unit Transaction).
In anticipation of such Forced Conversion and the consummation of the Common Unit Transaction, the Company shall use commercially reasonable efforts to cause each LTIP Unitholder to be afforded the right to receive in connection with such Common Unit Transaction in consideration for the Common Units into which such LTIP Unitholder’s LTIP Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Common Unit Transaction by a holder of the same number of Common Units, assuming such holder of Common Units is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be (a “Constituent Person”), or an affiliate of a Constituent Person. In the event that holders of Common Units have the opportunity to elect the form or type of consideration to be received upon consummation of the Common Unit Transaction, prior to such Common Unit Transaction, the Managing Member shall give prompt written notice to each LTIP Unitholder of such election, and shall use commercially reasonable efforts to afford the LTIP Unitholders the right to elect, by written notice to the Managing Member, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into Common Units in connection with such Common Unit Transaction. If an LTIP Unitholder fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held by such LTIP Unitholder (or by any of such LTIP Unitholder’s transferees) the same kind and amount of consideration that a holder of a Common Unit would receive if such Common Unit holder failed to make such an election.
Subject to the rights of the Company and the Managing Member under any Vesting Agreement and any Incentive Plan, the Company shall use commercially reasonable efforts to cause the terms of any Common Unit Transaction to be consistent with the provisions of this Section 4.5(f) and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any LTIP Unitholders whose LTIP Units will not be converted into Common Units in connection with the Common Unit Transaction that will (i) contain provisions enabling the holders of LTIP Units that remain outstanding after such Common Unit Transaction to convert their LTIP Units into securities as comparable as reasonably possible under the circumstances to the Common Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in this Agreement for the benefit of the LTIP Unitholders.
4.6 Performance LTIP Units. A series of Units designated as the Performance LTIP Units is hereby established.
(a) Issuance of Performance LTIP Units. The Managing Member may from time to time issue Performance LTIP Units to Persons who provide services to or for the benefit of the Company or as otherwise permitted by the Incentive Plan, for such consideration or for no consideration as the Managing Member may determine to be appropriate, and admit such Persons as Members. The number of Performance LTIP Units shall be determined from time to time by the Managing Member in accordance with the terms of the Incentive Plan.
(b) Terms of Performance LTIP Units. Each Performance LTIP Unit that has become a Vested Performance LTIP Unit shall be treated in the same manner as a Vested LTIP Unit that has no separate Performance LTIP Unit designation with all of the rights, privileges and obligations attendant thereto and all references to Vested LTIP Units herein shall refer equally to Vested Performance LTIP Units. During such time as any Performance LTIP Unit has not become a Vested Performance LTIP Unit, each such Performance LTIP Unit shall be treated in the same manner as an Unvested LTIP Unit, and all references to an Unvested LTIP Unit herein shall refer equally to such Performance LTIP Unit, except the following provisions shall apply:
(i) Distributions.
(1) Distributions Generally. The holder of a Performance LTIP Unit shall not be entitled to receive any distributions with respect to such Performance LTIP Unit, except (x) in accordance with Section 5.6 hereof, (y) in accordance with Section 5.3(e) hereof and (y) at such times as distributions are made with respect to Common Units pursuant to Section 5.3(a) hereof, and subject to Section 5.3(b) hereof, a holder of a Performance LTIP Unit on the applicable Company Record Date shall be entitled to receive a distribution with respect to such Performance LTIP Unit in an amount equal to the product of the distribution payable per Common Unit on such Company Record Date with respect to such distribution multiplied by the Performance LTIP Units Sharing Percentage.
(2) Special Distribution Upon Vesting. Upon a Performance LTIP Unit becoming a Vested Performance LTIP Unit, a holder of a Performance LTIP Unit shall be entitled to receive a one-time distribution with respect to that Performance LTIP Unit and any other Performance LTIP Unit of that holder that vested on that date (the “Vesting Date”), in an amount equal to (x) the aggregate amount of distributions that would have been received on such Vested Performance LTIP Unit pursuant to subparagraph (1) above if the Performance LTIP Units Sharing Percentage had not been applied to the amount of the distribution payable per Common Unit on each Company Record Date, minus (y) the aggregate amount of distributions previously received pursuant to paragraph (1) above on all Performance LTIP Units that were issued to the holder at the same time as the Vested Performance LTIP Units, including any Performance LTIP Units that did not vest on the Vesting Date.
(ii) Allocations.
(1) Allocations Generally. The holder of a Performance LTIP Unit shall not be entitled to receive allocations of Profit or Loss of the Company with respect to such Performance LTIP Unit, other than (x) the special allocation of gain set forth in Section 5.1(g) hereof and the allocations set forth in Sections 5.1(d), (e) and (j) hereof and (y) allocations of Profit and Loss pursuant to Sections 5.1(a) and (b) hereof and the allocations set forth in Section 5.1(c), treating, for purposes of such allocations, each Performance LTIP Unit as a fraction of one outstanding Common Unit equal to one Common Unit multiplied by the Performance LTIP Units Sharing Percentage.
(2) Special Allocation Upon Vesting. If the receipt of the special distribution provided for in Section 4.6(b)(i)(2) by a holder of Performance LTIP Units would cause or increase a deficit balance in such holder’s Capital Account, such holder shall be allocated specially for such taxable year (and, if necessary, later taxable years) items of income and gain in an amount and manner sufficient to eliminate such deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d).
(iii) Conversion. The provisions set forth below in Sections 4.6(b)(iii) hereof shall apply with respect to the Performance LTIP Units in addition to the provisions of Section 4.5:
(1) When a Performance LTIP Unitholder is notified of the expected occurrence of an event that will cause such Performance LTIP Unit to become a Vested Performance LTIP Unit, such Performance LTIP Unitholder may give the Company a Conversion Notice (with all references in the Conversion Notice to LTIP Units referring equally to Performance LTIP Units) with respect to such Performance LTIP Unit conditioned upon and effective as of the time of vesting, and such Conversion Notice, unless subsequently revoked by the Performance LTIP Unitholder, shall be accepted by the Company subject to such condition.
(2) Upon the expected occurrence of an event that will cause such Performance LTIP Unit to become a Vested Performance LTIP Unit, the Company may issue a Forced Conversion Notice (with all references in the Forced Conversion Notice to LTIP Units referring equally to Performance LTIP Units) with respect to such Performance LTIP Unit conditioned upon and effective on or after the time of vesting of such Performance LTIP Unit.
(3) In all cases, the conversion of such Performance LTIP Unit in accordance with this Section 4.6(b)(iii) and pursuant to the applicable provisions of Section 4.5 hereof shall be subject to the conditions and procedures set forth in Section 4.5 hereof.
(iv) Percentage Interest. Notwithstanding the definition of Percentage Interest, the Percentage Interest of each Member holding Performance LTIP Units with respect to such Performance LTIP Units shall equal the Percentage Interest of a Member who holds an equivalent number of Common Units multiplied by the Performance LTIP Units Sharing Percentage (the “Performance LTIP Unitholder Percentage Interest”). Accordingly, there shall be two Percentage Interests for each Member owning such Performance LTIP Units, one which reflects the Percentage Interest assigned to such Performance LTIP Units (treating such Performance LTIP Unit as a Common Unit for this purpose) and one which reflects the Performance LTIP Unitholder Percentage Interest. The Percentage Interest of each Member who holds such Performance LTIP Units, with respect to such Performance LTIP Units, shall equal the Performance LTIP Unitholder Percentage Interest for purposes of the provisions of this Agreement regarding the allocation of Profit and Loss of the Company (or items thereof) with respect to the Performance LTIP Units, other than the allocations set forth in Section 5.1(g) hereof and Sections 5.1(d), (e) and (j) hereof.
4.7 Capital Accounts. A separate capital account (a “Capital Account”) shall be established and maintained for each Member in accordance with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing Member acquires an additional Membership Interest in exchange for more than a de minimis Capital Contribution, (ii) the Company distributes to a Member more than a de minimis amount of Company property as consideration for a Membership Interest, (iii) the Company is liquidated within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g) or (iv) the Company grants a Membership Interest (other than a de minimis Membership Interest) as consideration for the provision of services to or for the benefit of the Company to an existing Member acting in a Member capacity, or to a new Member acting in a Member capacity or in anticipation of being a Member, the Managing Member shall revalue the property of the Company to its fair market value (as determined by the Managing Member, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f).When the Company’s property is revalued by the Managing Member, the Capital Accounts of the Members shall be adjusted in accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the Capital Accounts previously) would be allocated among the Members pursuant to Section 5.1 hereof if there were a taxable disposition of such property for its fair market value (as determined by the Managing Member, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) on the date of the revaluation.
4.8 Percentage Interests. If the number of outstanding Common Units or LTIP Units increases or decreases during a taxable year, each Member’s Percentage Interest shall be adjusted by the Managing Member effective as of the effective date of each such increase or decrease to a percentage equal to the number of Common Units and LTIP Units held by such Member divided by the aggregate number of Common Units and LTIP Units, as applicable, outstanding after giving effect to such increase or decrease. If the Members’ Percentage Interests are adjusted pursuant to this Section 4.8, the Profits and Losses for the taxable year in which the adjustment occurs shall be allocated between the part of the year ending on the day when that adjustment occurs and the part of the year beginning on the following day either (i) as if the taxable year had ended on the date of the adjustment or (ii) based on the number of days in each part. The Managing Member, in its sole and absolute discretion, shall determine which method shall be used to allocate Profits and Losses for the taxable year in which the adjustment occurs. The allocation of Profits and Losses for the earlier part of the year shall be based on the Percentage Interests before adjustment, and the allocation of Profits and Losses for the later part shall be based on the adjusted Percentage Interests. In the event that there is an increase or decrease in the number of outstanding Units (other than Common Units and LTIP Units) during a taxable year, the Managing Member shall have similar discretion, as provided in the preceding sentences of this Section 4.8, to allocate items of Profit and Loss between the part of the year ending on the day when that increase or decrease occurs and the part of the year beginning on the following day, and that allocation shall take into account the Members’ relative interests in those items of Profit and Loss before and after such increase or decrease.
4.9 No Interest on Contributions. No Member shall be entitled to interest on its Capital Contribution.
4.10 Return of Capital Contributions. No Member shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Company, except as specifically provided in this Agreement. Except as otherwise provided herein, there shall be no obligation to return to any Member or former Member any part of such Member’s (or former Member’s) Capital Contribution for so long as the Company continues in existence.
4.11 No Third-Party Beneficiary. No creditor or other third party having dealings with the Company shall have the right to enforce the right or obligation of any Member to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at Law or in equity, it being understood and agreed that the provisions of this Agreement, except as provided in Article IX hereof, shall be solely for the benefit of, and may be enforced solely by, the parties to this Agreement and their respective permitted successors and assigns. None of the rights or obligations of the Members herein set forth to make Capital Contributions or loans to the Company shall be deemed an asset of the Company for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Company or pledged or encumbered by the Company to secure any debt or other obligation of the Company or of any of the Members. In addition, it is the intent of the parties hereto that no distribution to any Member shall be deemed a return of money or other property in violation of the Act. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, a Member is obligated to return such money or property, such obligation shall be the obligation of such Member and not of any other Member. Without limiting the generality of the foregoing, a deficit Capital Account of a Member shall not be deemed to be a liability of such Member nor an asset or property of the Company.
ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS
5.1 Allocation of Profit and Loss.
(a) Profit. After giving effect to the special allocations set forth in Sections 5.1(c) through (g), Profit of the Company for each fiscal year of the Company shall be allocated to the Members in accordance with their respective Percentage Interests.
(b) Loss. After giving effect to the special allocations set forth in Sections 5.1(c) through (g), Loss of the Company for each fiscal year of the Company shall be allocated to the Members in accordance with their respective Percentage Interests.
(c) Minimum Gain Chargeback. Notwithstanding any provision to the contrary, (i) any expense of the Company that is a “nonrecourse deduction” within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Members’ respective Percentage Interests, (ii) any expense of the Company that is a “partner nonrecourse deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated to the Member that bears the “economic risk of loss” of such deduction in accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Company Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any Company taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated among the Members in accordance with Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Member Nonrecourse Debt Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any Company taxable year, then, subject to the exceptions set forth in Regulations Section 1.704(2)(g), items of gain and income shall be allocated among the Members in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j). The manner in which it is reasonably expected that the deductions attributable to nonrecourse liabilities will be allocated for purposes of determining a Member’s share of the nonrecourse liabilities of the Company within the meaning of Regulations Section 1.752-3(a)(3) shall be in accordance with a Member’s Percentage Interest.
(d) Qualified Income Offset. If a Member receives in any taxable year an adjustment, allocation or distribution described in subparagraphs (4), (5) or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance in such Member’s Capital Account that exceeds the sum of such Member’s shares of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i), such Member shall be allocated specially for such taxable year (and, if necessary, later taxable years) items of income and gain in an amount and manner sufficient to eliminate such deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii) (d). After the occurrence of an allocation of income or gain to a Member in accordance with this Section 5.1(d), to the extent permitted by Regulations Section 1.704-1(b), items of expense or loss shall be allocated to such Member in an amount necessary to offset the income or gain previously allocated to such Member under this Section 5.1(d).
(e) Capital Account Deficits. Loss shall not be allocated to a Member to the extent that such allocation would cause a deficit in such Member’s Capital Account (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Member’s shares of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain. Any Loss in excess of that limitation shall be allocated to the other Members. After the occurrence of an allocation of Loss to the other Members in accordance with this Section 5.1(e), to the extent permitted by Regulations Section 1.704-1(b), Profit first shall be allocated to the other Members in an amount necessary to offset the Loss previously allocated to the other Members under this Section 5.1(e).
(f) Allocations Between Transferor and Transferee. If a Member Transfers any part or all of its Membership Interest, the distributive shares of the various items of Profit and Loss allocable among the Members during such fiscal year of the Company shall be allocated between the transferor and the transferee Member either (i) as if the Company’s fiscal year had ended on the date of the Transfer or (ii) based on the number of days of such fiscal year that each was a Member without regard to the results of Company activities in the respective portions of such fiscal year in which the transferor and the transferee were Members. The Managing Member, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Profit and Loss between the transferor and the transferee Member.
(g) Special Allocations Regarding LTIP Units. Notwithstanding the provisions of Sections 5.1(a) and (b) hereof, except as determined by the Managing Member and as reflected in an applicable LTIP Unit grant agreement, Liquidating Gains shall first be allocated to the LTIP Unitholders until their Economic Capital Account Balances, to the extent attributable to their ownership of LTIP Units, are equal to (i) the Common Unit Economic Balance, multiplied by (ii) the number of their LTIP Units (the “Target Balance”) and thereafter shall be allocated in accordance with Section 5.1(a). Liquidating Gains otherwise allocable to the LTIP Unitholders shall be allocated (i) on a “first-in, first-out” basis with respect to LTIP Units issued on different dates and (ii) on an equal basis with respect to LTIP Units issued on the same date (i.e., Liquidating Gains shall be allocated first to the LTIP Units that were issued on the earliest date, and then with respect to such LTIP Units, equally among such LTIP Units). For this purpose, “Liquidating Gains” means net capital gains realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Company, including but not limited to net capital gain realized in connection with an adjustment to the value of Company assets under Section 704(b) of the Code. The “Economic Capital Account Balances” of the LTIP Unit holders will be equal to their Capital Account balances plus shares of Member Nonrecourse Debt Minimum Gain or Company Minimum Gain (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to the extent attributable to their ownership of LTIP Units. Similarly, the “Common Unit Economic Balance” shall mean (i) the Capital Account balance of Managing Member, plus the amount of Managing Member’s share of any Member Nonrecourse Debt Minimum Gain or Company Minimum Gain (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)), in either case to the extent attributable to Managing Member’s direct or indirect ownership of Common Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under this Section 5.1(g), divided by (ii) the number of Common Units directly or indirectly owned by Managing Member. Any such allocations shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to each under this Section 5.1(g). The parties agree that, except as determined by the Managing Member and as reflected in an applicable LTIP Unit grant agreement, the intent of this Section 5.1(g) is to make the Capital Account balance associated with each LTIP Unit economically equivalent to the Capital Account balance associated with Common Units directly or indirectly owned by Managing Member (on a per-Unit basis). The Managing Member shall be permitted to interpret this Section 5.1(g) or to amend this Agreement to the extent necessary and consistent with this intention.
(h) Definition of Profit and Loss. “Profit” and “Loss” and any items of income, gain, expense or loss referred to in this Agreement shall be determined in accordance with federal income tax accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of income, gain and expense that are specially allocated pursuant to Sections 5.1(c),(d),(e) and (k) hereof, and amounts paid by the Company with respect to any PTET (including pursuant to a PTET Election) shall be disregarded in computing the amount of any item of income, gain, loss or deduction with respect to the Company to be allocated pursuant to this Article V and to be reflected in the Capital Accounts of the Members. All allocations of income, Profit, gain, Loss and expense (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.1, except as otherwise required by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). With respect to properties acquired by the Company, the Managing Member shall have the authority to elect the method to be used by the Company for allocating items of income, gain and expense as required by Section 704(c) of the Code with respect to such properties, and such election shall be binding on all Members.
(i) Preferred Units. The Managing Member shall amend this agreement from time to time to reflect the allocation of profit and loss in connection with priority distributions on any preferred units issued by the Company.
(j) Profits Interests. LTIP Units are intended to constitute “profits interests” within the meaning of Revenue Procedure 93-27, 1993-2 C.B. 343 (June 9, 1993), and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001). For any fiscal year in which distributions are actually made to holders of LTIP Units, after all other allocations have been tentatively made pursuant to this Section 5.1, if necessary to cause the Capital Accounts relating to any LTIP Units to be equal (immediately before such distributions and so as to avoid negative Capital Accounts) to the amounts distributed to the holders of the LTIP Units, the Managing Member, in its discretion, may allocate appropriate items of gross income that are accrued and realized following the issuance of the relevant LTIP Units to the holders of such LTIP Units. If there are insufficient items of gross income to be allocated to the holders of the LTIP Units, then such distributions shall, to the extent of such excess, be treated as “guaranteed payments” within the meaning of Section 707(c) of the Code.
(k) Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any Company properties pursuant to Section 734(b) of the Code (including any such adjustments pursuant to Regulations Section 1.734-2(b)(1)) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as the result of a distribution to any Member in complete liquidation of such Membership Interest, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be allocated to the Members in accordance with Regulations Section 1.704-1(b)(2)(iv)(m)(2) if such Regulation Section applies, or to the Member to whom such distribution was made if Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(l) Tax Allocations. All allocations of income, Profit, gain, Loss and expense (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.1 for “book” purposes, except as otherwise required by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). With respect to properties contributed to the Company, the Managing Member shall have the authority to elect the method to be used by the Company for allocating items of income, gain and expense as required by Section 704(c) of the Code with respect to such properties, and such election shall be binding on all Members. Any taxes paid by the Company with respect to any PTET (including pursuant to a PTET Election) shall be allocated to the Members to whom such payments are attributable
(m) Excess Nonrecourse Liabilities. The Members’ proportionate shares of the “excess nonrecourse liabilities” of the Company, within the meaning of Regulation Section 1.752-3(a)(3), shall be allocated to the Member in any manner determined by the Managing Member and permissible under the Regulations.
(n) Curative Allocations. The allocations set forth in Sections 5.1(c), (d), (e), and (k) hereof (the “Regulatory Allocations”) are intended to comply with certain requirements of Regulations Sections 1.704-1(b) and 1.704-2. The Managing Member shall take the Regulatory Allocations into account in allocating other items of income, Profit, gain, Loss and deduction among the Members so that, to the extent possible without violating the requirements giving rise to the Regulatory Allocations, the net amount of such allocations of other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred.
5.2 [RESERVED]
5.3 Distribution of Cash.
(a) Subject to Sections 5.3(b) and 5.3(c) hereof and to the terms of any Unit Designation, the Company shall distribute cash at such times and in such amounts as are determined by the Managing Member in its sole and absolute discretion, to the Members who are Members on the Company Record Date with respect to such quarter (or other distribution period) in proportion with their respective Common Units and LTIP Units on the Company Record Date. For the avoidance of doubt, in accordance with Section 4.4(a)(ii) hereof, the LTIP Unitholders shall be entitled to receive distributions in an amount per LTIP Unit equal to the Common Unit Distribution.
(b) In the Managing Member’s discretion, distributions made pursuant to this Section 5.3 may be adjusted as necessary to ensure that the amount apportioned to each LTIP Unit does not exceed the amount attributable to items of Company income or gain realized after the date such LTIP Unit was issued by the Company. The intent of this Section 5.3(b) is to ensure that any LTIP Units qualify as “profits interests” under Revenue Procedure 93-27,1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001), and Section 5.3 shall be interpreted and applied consistently therewith. The Managing Member at its discretion may amend this Section 5.3(b) to ensure that any LTIP Units will qualify as “profits interests” under Revenue Procedure 93-27,1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001) (and any other similar rulings or regulations that may be in effect at such time).
(c) Notwithstanding any other provision of this Agreement, the Managing Member is authorized to take any action that it determines to be necessary or appropriate to cause the Company to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445,1446 and 1471-1474 of the Code. To the extent that the Company is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to a Member or assignee (including by reason of Section 1446 of the Code), either (i) if the actual amount to be distributed to the Member (the “Distributable Amount”) equals or exceeds the Withheld Amount, the entire Distributable Amount shall be treated as a distribution of cash to such Member, or (ii) if the Distributable Amount is less than the Withheld Amount, the excess of the Withheld Amount over the Distributable Amount shall be treated as a Company Loan from the Company to the Member on the day the Company pays over such amount to a taxing authority. A Company Loan shall be repaid upon the demand of the Company or, alternatively, through withholding by the Company with respect to subsequent distributions to the applicable Member or assignee and any such distributions so withheld shall be deemed first to have been distributed to the applicable Member or assignee and then immediately repaid to the Company.
Any amounts treated as a Company Loan pursuant to this Section 5.3(b) shall bear interest at the lesser of (i) 300 basis points above the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, or, if not so published, in any similar publication or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Company or the Managing Member, as applicable, is deemed to extend the loan until such loan is repaid in full.
(d) In no event may a Member receive a distribution of cash with respect to a Unit if such Member is entitled to receive the same cash distribution as the holder of record of a DMRC Share for which all or part of such Unit has been or will be redeemed.
(e) Notwithstanding anything to the contrary in this Section 5.3, the Company shall, subject to the availability of proceeds, make cash distributions to each Member on the Tax Distribution Date with respect to each Fiscal Year to the extent of the required Tax Distribution, if any, of such Member for such Fiscal Year; provided, however, the Company may, upon election by the Managing Member in its sole discretion, make such cash distributions on a quarterly basis based upon estimates of the required Tax Distribution in a manner sufficient to permit the Members to satisfy their respective quarterly estimated tax payment obligations. All quarterly tax distributions to a Member shall be treated as an advance of, and shall offset, the cash distribution payable to the Member (pursuant to this Section 5.3(e)) on the next Tax Distribution Date. Any distributions made pursuant to this Section 5.3(e) to a Member shall be treated as an advance payment of, and shall reduce, the amounts otherwise distributable to such Member pursuant to Sections 5.3(a) and 4.6(b)(2) in subsequent distributions.
(f) In the event the Company pays any PTET in any jurisdiction, including as a result of making a PTET Election in such jurisdiction, any amounts so paid with respect to such PTET shall be deemed distributed to the Members to whom such payments are attributable
5.4 No Right to Distributions in Kind. No Member shall be entitled to demand property other than cash in connection with any distributions by the Company.
5.5 Limitations on Distributions. Notwithstanding any of the provisions of this Article V, the Company shall not be required to make distributions from the Company to any Member to the extent such distribution is inconsistent with, or in violation of, the Act or any provision of this Agreement or other applicable law.
5.6 Distributions Upon Liquidation.
(a) Upon liquidation of the Company, after payment of, or adequate provision for, debts and obligations of the Company, including any Member loans, any remaining assets of the Company shall be distributed to all Members with positive Capital Accounts in accordance with their respective positive Capital Account balances.
(b) For purposes of Section 5.6(a) hereof, the Capital Account of each Member shall be determined after all adjustments made in accordance with Sections 5.1, 5.2 and 5.3 hereof resulting from Company operations and from all sales and dispositions of all or any part of the Company’s assets.
(c) Any distributions pursuant to this Section 5.6 shall be made by the end of the Company’s taxable year in which the liquidation occurs (or, if later, within 90 days after the date of the liquidation). To the extent deemed advisable by the Managing Member, appropriate arrangements (including the use of a liquidating trust) may be made to assure that adequate funds are available to pay any contingent debts or obligations.
5.7 Substantial Economic Effect. It is the intent of the Members that the allocations of Profit and Loss under the Agreement have substantial economic effect (or be consistent with the Members’ interests in the Company in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto. This Article V and other relevant provisions of this Agreement shall be interpreted in a manner consistent with such intent.
ARTICLE VI
TAX MATTERS
6.1 Partnership for Tax Purposes. It is the intention of the Members that the Company be treated as a partnership for U.S. federal income tax purposes. By executing this Agreement, each of the Members hereby consents to any election made by the Managing Member on behalf of the Company to be treated as a partnership for U.S. federal income tax purposes (and any applicable state and local tax purposes).
6.2 Partnership Representative.
(a) The Managing Member shall be designated and shall act as the “partnership representative” pursuant to Section 6223 of the Code and any comparable state or local law with all of the rights, duties and powers provided for in Sections 6221 through 6241 of the Code and any comparable state or local law (the “Partnership Representative”). The Partnership Representative shall appoint on behalf of the Company a “designated individual” within the meaning of Regulations Section 301.6223-1(b)(3), and a designated individual so appointed shall be treated as, and shall have the authority to take any action that may be taken by and shall be subject to the requirements and obligations of, the Partnership Representative for purposes of this Section 6.2. Subject to the terms of this Agreement, the Partnership Representative shall represent and bind the Company in any audit or administrative proceeding conducted by any taxing authority, including, without limitation, the power and authority (i) to make an election under Section 6223 (if available) or Section 6226 of the Code, and any Regulations promulgated in accordance therewith, (ii) to take, and to cause the Company to take, all actions necessary or convenient to give effect to such an election and (iii) to make use of, or cause the Company to make use of, any other options that are or may become available under applicable Code sections, Regulations or guidance. The provision relating to indemnification of the Indemnitees (as hereinafter defined) set forth in Section 9.1 hereof shall be fully applicable to the Partnership Representative in its capacity as such, and the Partnership Representative, in its capacity as such, shall be an Indemnitee for all purposes of this Agreement. Each Member agrees to be bound by the decisions and elections of the Partnership Representative and shall provide such information and cooperation as shall be reasonably requested by the Partnership Representative in connection with such actions, including to reduce the amount of the Company’s liability for any imputed underpayment in accordance with the procedures under Section 6225(c) of the Code and comparable state or local laws. To the extent that any taxes, penalties, and interest are payable by the Company in respect of an audit, the Partnership Representative shall allocate such amounts (and any expenses incurred by the Company in adjudicating or otherwise resolving such liability) to the Members to which such amounts are attributable and such amount shall be treated as provided under Section 5.3(c) hereof. A Member’s allocable share of any such amounts shall include amounts allocable to any prior owner(s) of such Member’s Membership Interest. For the avoidance of doubt, notwithstanding anything to the contrary in this Agreement, the liabilities and obligations of each Member under this Section 6.2 shall survive (i) any actual or deemed transfer of an interest in the Company by such Member, (ii) such Member ceasing to be a Member under this Agreement and (iii) the termination, dissolution, liquidation, cancellation, and winding up of the Company.
(b) All third party costs and expenses incurred by the Partnership Representative in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Company. Nothing herein shall be construed to restrict the Company from engaging an accounting and/or law firm to assist the Partnership Representative in discharging its duties hereunder, so long as the compensation paid by the Company for such services is reasonable.
6.3 Tax Elections.
(a) The determinations of the Managing Member with respect to the Company’s treatment of any item or its allocation for U.S. federal, state or local tax purposes shall be binding upon all of the Members so long as such determination shall not be inconsistent with any express term hereof and provided that the Company’s accountants shall not have disagreed therewith. The Managing Member shall make (or refrain from making, as applicable) all appropriate elections and take (or refrain from taking, as applicable) all other appropriate actions to the extent required pursuant to Section 7701 of the Code (and the Regulations thereunder) for the Company to be classified as a “partnership” for U.S. federal income tax purposes and any applicable state and local tax purposes. The Managing Member may, in its sole discretion, make or revoke any tax election which the Managing Member deems appropriate, including without limitation, an election pursuant to Section 754 of the Code. For the avoidance of doubt, the Managing Member shall have the authority to cause the Company to make a PTET Election in any jurisdiction it determines would be desirable. Each Member will upon request supply any information reasonably necessary to give proper effect to any elections described in this Section 6.3.
(b) The Members, intending to be legally bound, hereby authorize the Company to make an election (the “Safe Harbor Election”) to have the “liquidation value” safe harbor provided in Proposed Treasury Regulation § 1.83-3(1) and the Proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005- 43, as such safe harbor may be modified when such proposed guidance is issued in final form or as amended by subsequently issued guidance (the “Safe Harbor”), apply to any interest in the Company transferred to a service provider while the Safe Harbor Election remains effective, to the extent such interest meets the Safe Harbor requirements (collectively, such interests are referred to as “Safe Harbor Interests”). The Managing Member is authorized and directed to execute and file the Safe Harbor Election on behalf of the Company and the Members. The Company and the Member (including any person to whom an interest in the Company is transferred in connection with the performance of services) hereby agree to comply with all requirements of the Safe Harbor (including forfeiture allocations) with respect to all Safe Harbor Interests and to prepare and file all U.S. federal income tax returns reporting the tax consequences of the issuance and vesting of Safe Harbor Interests consistent with such final Safe Harbor guidance. The Company is also authorized to take such actions as are necessary to achieve, under the Safe Harbor, the effect that the election and compliance with all requirements of the Safe Harbor referred to above would be intended to achieve under Proposed Treasury Regulation § 1.83-3, including amending this Agreement.
ARTICLE VII
EVENTS OF DISSOLUTION
7.1 Events. The Company shall be dissolved upon the occurrence of any of the following events (each, an “Event of Dissolution”):
(a) Determination by the Managing Member to dissolve the Company following the sale, Transfer or other disposition of all or substantially all of the assets of the Company;
(b) The majority vote of the Members to dissolve, wind up, and liquidate the Company; or
(c) A judicial dissolution of the Company under ORS 63.661.
7.2 Continuation. No other events shall cause the dissolution of the Company.
ARTICLE VIII
LIQUIDATION AND TERMINATION
8.1 Liquidation and Termination.
(a) In the event that an Event of Dissolution shall occur, then the Company shall be liquidated and its affairs shall be wound up in an orderly fashion under the direction of the Managing Member or its designee. All proceeds from such liquidation shall be distributed in accordance with the provisions of Section 5.6.
(b) Upon the completion of the distribution of the Company’s assets following liquidation, the Company shall be terminated and Articles of Dissolution shall be executed and filed by the Company in accordance with ORS 63.644.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification and Advances.
(a) The Company shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Company as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established that the act or omission of the Indemnitee giving rise to the proceeding is a type of act or omission for which indemnification is not permitted under ORS 63.160. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 9.1(a). The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 9.1(a). Any indemnification pursuant to this Section 9.1 shall be made only out of the assets of the Company.
(b) The Company shall reimburse an Indemnitee for reasonable expenses incurred by an Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding upon receipt by the Company of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized in this Section 9.1 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met. To the fullest extent permitted by Law, expenses (including attorneys’ fees) incurred by any Indemnitee in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified by the Company as authorized in this Section 9.1.
(c) The indemnification provided by this Section 9.1 shall be in addition to any other right to which an Indemnitee or other Person may be entitled under any agreement, pursuant to any vote of the Members, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity.
(d) The Company may purchase and maintain insurance, as an expense of the Company, on behalf of the Indemnitees and such other Persons as the Managing Member shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Company’s activities, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 9.1, the Company shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Company also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 9.1; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purposes reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is not opposed to the best interests of the Company.
(f) In no event may an Indemnitee subject the Members to personal liability by reason of the indemnification provisions set forth in this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 9.1 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 9.1 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.
(i) Any amendment modification or repeal of this Section 9.1 or any provision hereof shall be prospective only and shall not in any way affect the indemnification of an Indemnitee by the Company under this Section 9.1 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.
9.2 Liability of the Managing Member.
(a) Notwithstanding anything to the contrary set forth in this Agreement, neither the Managing Member, nor any of its directors, officers, agents or employees shall be liable for monetary damages to the Company or any Members for losses sustained or liabilities incurred as a result of errors in judgment or mistakes of fact or law or of any act or omission if any such party acted in good faith and so long as such act or omission is not a type of act or omission for which exculpation is not permitted under ORS 63.160. The Managing Member shall not be in breach of any duty that the Managing Member may owe to the Members or the Company or any other Persons under this Agreement or of any duty stated or implied by law or equity provided the Managing Member, acting in good faith, abides by the terms of this Agreement.
(b) The Members expressly acknowledge that the Managing Member is acting on behalf of the Company, the Members and the Managing Member’s stockholders collectively, that the Managing Member is under no obligation to consider the separate interests of the Members (including, without limitation, the tax consequences to Members or the tax consequences of some, but not all, of the Members) in deciding whether to cause the Company to take (or decline to take) any actions. In the event of a conflict between the interests of the Managing Member’s stockholders on the one hand and the Members (other than the Managing Member) on the other, the Managing Member shall endeavor in good faith to resolve the conflict in a manner not adverse to either the Managing Member’s stockholders or the Members (other than the Managing Member); provided, that for so long as the Managing Member owns a controlling interest in the Company, any such conflict that the Managing Member, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either the Managing Member’s stockholders or the Members (other than the Managing Member) shall be resolved in favor of the Managing Member’s stockholders. The Managing Member shall not be liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by the Members in connection with such decisions.
(c) Subject to its obligations and duties as Managing Member set forth in Section 3.1 hereof, the Managing Member may exercise any of the powers granted to it under this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The Managing member shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.
(d) Any amendment, modification or repeal of this Section 9.2 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Managing Member’s or any of its officers’, directors’, agents’ or employees’ liability to the Company and the Members under this Section 9.2 as in effect immediately prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.
ARTICLE X
TRANSFER OF MEMBERSHIP INTERESTS IN THE COMPANY
10.1 Purchase for Investment. Subject to the provisions of Section 10.2 hereof, each Member agrees that such Member will not sell, assign or otherwise Transfer such Member’s Units or any fraction thereof, whether voluntarily or by operation of Law or at judicial sale or otherwise, to any Person who does not make the representations and warranties to the Managing Member set forth in Section 15.2 hereof.
10.2 Restrictions on Transfer of Units.
(a) Subject to the provisions of Sections 10.2(b), 10.2(c), 10.3 and 11.1 hereof, no Member may offer, sell, assign, hypothecate, pledge or otherwise Transfer all or any portion of such Member’s Units, or any of such Member’s economic rights as a Member without the consent of the Managing Member, which consent may be granted or withheld in the Managing Member’s sole and absolute discretion; provided, that the term Transfer for purposes of this Section 10.2(a) does not include (a) any redemption of Common Units by the Company or the Managing Member, or acquisition of Common Units by the Managing Member, pursuant to Section 11.1 or (b) any redemption of Units pursuant to any Unit Designation. The Managing Member may require, as a condition of any Transfer to which it consents, that the transferor assume all costs incurred by the Company in connection therewith (including, but not limited to, cost of legal counsel).
(b) No Member may withdraw from the Company other than as a result of a permitted Transfer (i.e., a Transfer consented to as contemplated by clause (a) above or a Transfer pursuant to Sections 10.3 or 10.6 hereof) of all of such Member’s Units pursuant to this Article X or pursuant to a redemption of all of such Member’s Common Units pursuant to Section 11.1 hereof. Upon the permitted Transfer or redemption of all of a Member’s Common Units and LTIP Units, such Member shall cease to be a Member.
(c) No Member may effect a Transfer of its Units, in whole or in part, if, in the opinion of legal counsel for the Company, such proposed Transfer would require the registration of the Units under the Securities Act or would otherwise violate any applicable federal or state securities or blue sky law (including investment suitability standards).
(d) No Transfer by a Member of its Units, in whole or in part, may be made to any Person (including, for the avoidance of doubt, pursuant to the Redemption Right) if (i) in the opinion of legal counsel for the Company, such Transfer would result in the Company or the Managing Member being treated as an association taxable as a corporation, or (ii) in the opinion of legal counsel for the Company, such Transfer is reasonably likely to cause the Company or the Managing Member to fail to satisfy the 90% qualifying income test described in Section 7704(c) of the Code.
(e) Any purported Transfer in contravention of any of the provisions of this Article X shall be void ab initio and ineffectual and shall not be binding upon, or recognized by, the Managing Member or the Company.
(f) Prior to the consummation of any Transfer under this Article X, the transferor and/or the transferee shall deliver to the Managing Member such opinions, certificates and other documents as the Managing Member shall request in connection with such Transfer.
10.3 Transfer of the Managing Member’s Membership Interest.
(a) Notwithstanding the other provisions of this Article X, other than to one of its Affiliates, the Managing Member shall not transfer all or any portion of its Membership Interests, except as provided in or in connection with a transaction contemplated by Sections 10.3(b), 1.0.3(c) or 1.0.3(d) hereof.
(b) Except as otherwise provided in Sections 10.3(c) or 1.0.3(d) hereof, the Managing Member shall not engage in any merger, consolidation or other combination with or into another Person or sale of all or substantially all of its assets (other than in connection with a change in the Managing Member’s state of organization or organizational form), in each case which results in a change of control of the Managing Member (a “Transaction”), unless at least one of the following conditions is met:
(i) the consent of a Majority in Interest (other than the Managing Member) is obtained and the Survivor (defined below) expressly agrees to assume all obligations of the Managing Member hereunder; provided, however, that this Section 10.3(b)(i) shall not apply at any time that one hundred percent (100%) of the Membership Interests are owned by the Managing Member;
(ii) as a result of such Transaction, all Members (other than the Managing Member and any Subsidiary of the Managing Member) will receive, or have the right to receive, for each Unit an amount of cash, securities or other property equal or substantially equivalent in value, as determined by the Managing Member in good faith, to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid in the Transaction to a holder of one DMRC Share in consideration of one DMRC Share, provided that if, in connection with such Transaction, a purchase, tender or exchange offer (“Offer”) shall have been made to and accepted by the holders of more than 50% of the outstanding DMRC Shares, each holder of Units (other than the Managing Member and any Subsidiary of the Managing Member) shall be given the option to exchange its Units for an amount of cash, securities or other property equal or substantially equivalent in value, as determined by the Managing Member in good faith, to the greatest amount of cash, securities or other property that such Member would have received had it (A) exercised its Redemption Right pursuant to Section 11.1 hereof and (B) sold, tendered or exchanged pursuant to the Offer the DMRC Shares received upon exercise of the Redemption Right immediately prior to the expiration of the Offer; or
(iii) the Managing Member is the surviving entity in the Transaction and either (A) the holders of DMRC Shares do not receive cash, securities or other property in the Transaction or (B) all Members (other than the Managing Member and any Subsidiary of the Managing Member) receive for each Unit an amount of cash, securities or other property (expressed as an amount per DMRC Share) equal or substantially equivalent in value, as determined by the Managing Member in good faith, to the product of the Conversion Factor and the greatest amount of cash, securities or other property (expressed as an amount per DMRC Share) received in the Transaction by any holder of DMRC Shares.
(c) Notwithstanding Section 10.3(b) hereof, the Managing Member may merge with or into or consolidate with another entity if immediately after such merger or consolidation (i) substantially all of the assets of the successor or surviving entity (the “Survivor”), other than Units held directly or indirectly by the Managing Member, are contributed, directly or indirectly, to the Company as a Capital Contribution in exchange for Units, or for economically equivalent partnership interests issued by a Subsidiary Partnership established at the direction of the Board of Directors, with a fair market value equal to the value of the assets so contributed as determined by the Survivor in good faith and (ii) the Survivor expressly agrees to assume all obligations of the Managing Member hereunder. Upon such contribution and assumption, the Survivor shall have the right and duty to amend this Agreement as set forth in this Section 10.3(c). The Survivor shall in good faith arrive at a new method for the calculation of the Cash Amount, the DMRC Shares Amount and Conversion Factor for a Unit after any such merger or consolidation so as to approximate the existing method for such calculation as closely as reasonably possible. Such calculation shall take into account, among other things, the kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of DMRC Shares or options, warrants or other rights relating thereto, and which a holder of Units could have acquired had such Units been exchanged immediately prior to such merger or consolidation. Such amendment to this Agreement shall provide for adjustment to such method of calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for with respect to the Conversion Factor. The Survivor also shall in good faith modify the definition of DMRC Shares and make such amendments to Section 11.1 hereof so as to approximate the existing rights and obligations set forth in Section 11.1 hereof as closely as reasonably possible. The above provisions of this Section 10.3(c) shall similarly apply to successive mergers or consolidations permitted hereunder.
(d) Notwithstanding anything in this Article X,
(i) the Managing Member may transfer all or any portion of its Membership Interest to (A) any wholly owned Subsidiary of the Managing Member or (B) one Person if that one Person owns 100% of the ownership interests of the Managing Member; provided that, in each case, such Person expressly agrees to assume all obligations of the Managing Member hereunder; and
(ii) the Managing Member may engage in a transaction required by law or by the rules of any national securities exchange or over-the-counter interdealer quotation system on which the DMRC Shares are listed or traded.
10.4 Admission of Substitute Member.
(a) Subject to the other provisions of this Article X, an assignee of the Units of a Member (which shall be understood to include any purchaser, transferee, donee or other recipient of any disposition of such Units) shall be deemed admitted as a Member of the Company only with the consent of the Managing Member, which consent may be given or withheld by the Managing Member in its sole and absolute discretion, and upon the satisfactory completion of the following:
(i) The assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof, including a revised Schedule A, and such other documents or instruments as the Managing Member may require in order to effect the admission of such Person as a Member.
(ii) The assignee shall have delivered a letter containing the representations and warranties set forth in Section 15.2 hereof.
(iii) If the assignee is a corporation, partnership, limited liability company or trust, the assignee shall have provided the Managing Member with evidence satisfactory to counsel for the Company of the assignee’s authority to become a Member under the terms and provisions of this Agreement.
(iv) The assignee shall have executed a power of attorney containing the terms and provisions set forth in Section 1.11 hereof.
(v) The assignee shall have paid all legal fees and other expenses of the Company and the Managing Member and filing and publication costs in connection with its substitution as a Member.
(vi) The assignee shall have obtained the prior written consent of the Managing Member to its admission as a Substitute Member, which consent may be given or denied in the exercise of the Managing Member’s sole and absolute discretion.
(b) For the purpose of allocating Profits and Losses and distributing cash received by the Company, a Substitute Member shall be treated as having become, and appearing in the records of the Company as, a Member on the later of the date specified in the Transfer documents or the date on which the Managing Member has received all necessary instruments of Transfer and substitution.
(c) The Managing Member and the Substitute Member shall cooperate with each other by preparing the documentation required by this Section 10.4 and making all official filings and publications. The Company shall take all such action as promptly as practicable after the satisfaction of the conditions in this Article X to the admission of such Person as a Member of the Company.
(d) For the avoidance of confusion, assignee of the Units of a Member (which shall be understood to include any purchaser, transferee, donee or other recipient of any disposition of such Units) that results from a Transaction set forth in Section 10.3 hereof, shall be deemed admitted as a Member upon the closing of the Transaction and the satisfaction of the provisions of Section 10.3 hereof.
10.5 Rights of Assignees of Units.
(a) Subject to the provisions of Sections 10.1, 10.2 and 10.3 hereof, except as required by operation of Law, the Company shall not be obligated for any purposes whatsoever to recognize the assignment by any Member of its Units until the Company has received notice thereof.
(b) Any Person who is the assignee of all or any portion of a Member’s Units, but does not become a Substitute Member and desires to make a further assignment of such Units, shall be subject to all the provisions of this Article X to the same extent and in the same manner as any Member desiring to make an assignment of its Units.
10.6 Effect of Bankruptcy, Death, Incompetence or Termination of a Member. The occurrence of an Event of Bankruptcy as to a Member, the death of a Member or a final adjudication that a Member is incompetent (which term shall include, but not be limited to, insanity) shall not cause the termination or dissolution of the Company, and the business of the Company shall continue if an order for relief in a bankruptcy proceeding is entered against a Member, the trustee or receiver of his estate or, if such Member dies, such Member’s executor, administrator or trustee, or, if such Member is finally adjudicated incompetent, such Member’s committee, guardian or conservator, shall have the rights of such Member for the purpose of settling or managing such Member’s estate property and such power as the bankrupt, deceased or incompetent Member possessed to assign all or any part of such Member’s Units and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Member.
10.7 Joint Ownership of Units. A Unit may be acquired by two individuals as joint tenants with right of survivorship, provided that such individuals either are married or are related and share the same home as tenants in common. The written consent or vote of both owners of any such jointly held Unit shall be required to constitute the action of the owners of such Unit; provided, that the written consent of only one joint owner will be required if the Company has been provided with evidence satisfactory to the counsel for the Company that the actions of a single joint owner can bind both owners under the applicable Laws of the state of residence of such joint owners. Upon the death of one owner of a Unit held in a joint tenancy with a right of survivorship, the Unit shall become owned solely by the survivor as a Member and not as an assignee. The Company need not recognize the death of one of the owners of a jointly-held Unit until it shall have received certificated notice of such death. Upon notice to the Managing Member from either owner, the Managing Member shall cause the Unit to be divided into two equal Units, which shall thereafter be owned separately by each of the former owners.
ARTICLE XI
REDEMPTION RIGHT
11.1 Redemption Right.
(a) Except as set forth in the sentence that immediately follows this sentence and subject to Section 11.1(c) hereof and the provisions of any agreement between the Company and one or more Members, beginning on the date that is twelve months after the date of issuance of any Common Units, each Member (other than the Managing Member or any direct or indirect wholly owned Subsidiary of the Managing Member) shall have the right (the “Redemption Right”) to require the Company to redeem on a Specified Redemption Date all or a portion of such Member’s Common Units at a redemption price equal to and in the form of the DMRC Shares Amount, whereupon the Managing Member shall acquire the Common Units tendered for redemption by the Redeeming Member and the Managing Member shall be treated for all purposes of this Agreement as the owner of such Common Units. The Company shall have no obligation to pay any cash amount to the Redeeming Member with respect to such Redeeming Member’s exercise of the Redemption Right, and each of the Redeeming Member, the Company and the Managing Member shall treat the transaction between the Managing Member and the Redeeming Member as a sale of the Redeeming Member’s Common Units to the Managing Member for federal income tax purposes. Each Redeeming Member agrees to execute such documents as the Managing Member may reasonably require in connection with the issuance of DMRC Shares upon exercise of the Redemption Right. The Redemption Right shall be exercised pursuant to a Notice of Redemption in the form attached hereto as Exhibit B delivered to the Company (with a copy to the Managing Member) by the Member who is exercising the Redemption Right (the “Redeeming Member”), and such notice shall be irrevocable unless otherwise agreed upon by the Managing Member. No Member may deliver more than one Notice of Redemption during each calendar quarter unless otherwise agreed upon by the Managing Member. A Member may not exercise the Redemption Right for less than one thousand (1,000) Common Units or, if such Member holds less than one thousand (1,000) Common Units, all of the Common Units held by such Member. The Redeeming Member shall have no right, with respect to any Common Units so redeemed, to receive any distribution paid with respect to Common Units if the Company Record Date for such distribution is on or after the Specified Redemption Date.
(b) Notwithstanding the provisions of Section 11.1(a) hereof, if a Member exercises the Redemption Right by delivering to the Company a Notice of Redemption, then the Managing Member may, in its sole and absolute discretion, elect to cause the Company to redeem some or all of such Common Units by paying to the Redeeming Member the Cash Amount,
(c) Notwithstanding the provisions of Sections 11.1(a) and 11.1(b) hereof, a Member shall not be entitled to exercise the Redemption Right if (i) the delivery of DMRC Shares to such Member on the Specified Redemption Date by the Managing Member pursuant to Section 11.1(a) hereof would (i) be prohibited under the DMRC Charter or cause the acquisition of DMRC Shares by such Member to be “integrated” with any other distribution of DMRC Shares or Common Units for purposes of complying with the registration provisions of the Securities Act, or (ii) the exercise of the Redemption Right would be prohibited under Section 10.2(e) hereof.
(d) Each Redeeming Member covenants and agrees that all Common Units tendered for redemption pursuant to this Section 11.1 will be delivered to the Company or the Managing Member free and clear of all liens, claims, and encumbrances whatsoever and should any such liens, claims or encumbrances exist or arise with respect to such Common Units, neither the Company nor the Managing Member shall be under any obligation to acquire such Common Units pursuant to Section 11.1(a) or 11.1(b) hereof. Each Redeeming Member further agrees that, in the event any state or local property transfer tax is payable as a result of the Transfer of its Common Units to the Company or the Managing Member, such Redeeming Member shall assume and pay such transfer tax.
(e) Any Cash Amount to be paid to a Redeeming Member pursuant to this Section 11.1 shall be paid on the Specified Redemption Date. Any DMRC Share Amount to be paid to a Redeeming Member pursuant to this Section 11.1 shall be paid on the Specified Redemption Date; provided, that the Managing Member may elect to cause the Specified Redemption Date to be delayed to the extent necessary to effect compliance with applicable requirements of the Law. Notwithstanding the foregoing, the Managing Member agrees to use its commercially reasonable efforts to cause the closing of the acquisition of redeemed Common Units hereunder to occur as quickly as reasonably possible.
(f) Notwithstanding any other provision of this Agreement, the Managing Member is authorized to take any action that it determines to be necessary or appropriate to cause the Managing Member and the Company to comply with any withholding requirements established under the Code or any other federal, state, local or foreign Law that apply upon a Redeeming Member’s exercise of the Redemption Right. If the Managing Member determines that Common Units are “United States real property interests” within the meaning of Section 897(c) of the Code, a Redeeming Member claiming an exemption from withholding must furnish the Managing Member with a FIRPTA Certificate in the form attached hereto as Exhibit C and any similar forms or certificates required to avoid or reduce the withholding under federal, state, local or foreign Law or such other form as the Managing Member may reasonably request. If the Company or the Managing Member is required to withhold and pay over to any taxing authority any amount upon a Redeeming Member’s exercise of the Redemption Right and if the Redemption Amount equals or exceeds the Withheld Amount, the Withheld Amount shall be treated as an amount received by such Redeeming Member in redemption of its Common Units. If, however, the Redemption Amount is less than the Withheld Amount, the Redeeming Member shall not receive any portion of the Redemption Amount, the Redemption Amount shall be treated as an amount received by such Redeeming Member in redemption of its Common Units, and such Redeeming Member shall contribute the excess of the Withheld Amount over the Redemption Amount to the Company before the Company is required to pay over such excess to a taxing authority.
ARTICLE XII
AMENDMENTS; MERGER
12.1 Amendment of Agreement. The Managing Member’s consent shall be required for any amendment to this Agreement. The Managing Member, without the consent of the other Members, may amend this Agreement in any respect; provided, that the following amendments shall require the consent of a Majority in Interest (other than the Managing Member or any Subsidiary of the Managing Member):
(a) any amendment affecting the operation of the Conversion Factor or the Redemption Right (except as otherwise provided herein) in a manner that adversely affects the other Members in any material respect;
(b) any amendment that would adversely affect the rights of the other Members to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Units pursuant to Section 4.2 hereof;
(c) any amendment that would alter the Company’s allocations of Profit and Loss to the other Members, other than with respect to the issuance of additional Units pursuant to Section 4.2 hereof;
(d) any amendment that would impose on the other Members any obligation to make additional Capital Contributions to the Company beyond what is currently required by Section 4.3(b) hereof; or
(e) any amendment to this Article XII.
12.2 Amendment of Certificate. In the event this Agreement shall be amended pursuant to this Article XII, the Managing Member shall amend the Articles of Organization of the Company to reflect such change if such amendment is required or if the Managing Member deems such amendment to be desirable and shall make any other filings or publications required or desirable to reflect such amendment, including any required filing for recordation of any Articles of Organization or other instrument or similar document.
12.3 Merger of Company. The Managing Member, without the consent of the other Members, may (i) merge or consolidate the Company with or into any other domestic or foreign partnership, limited partnership, limited liability company or corporation or (ii) sell all or substantially all of the assets of the Company in a transaction pursuant to which the Members (other than the Managing Member or any Subsidiary of the Managing Member) receive the consideration set forth in Section 10.3(b)(ii) hereof or in a transaction that complies with Section 10.3(b)(iii) or Section 10.3(c) hereof and may amend this Agreement in connection with any such transaction consistent with the provisions of this Article XII; provided, that the consent of a Majority in Interest (other than the Managing Member or any Subsidiary of the Managing Member) shall be required in the case of any other (a) merger or consolidation of the Company with or into any other domestic or foreign partnership, limited partnership, limited liability company or corporation or (b) sale of all or substantially all of the assets of the Company.
ARTICLE XIII
CONSENTS, VOTING AND MEETINGS
13.1 Voting. The Members’ right to vote or otherwise participate with respect to matters relating to the Company shall be limited to those matters as to which the express terms of the Act, the Articles of Organization or this Agreement vest in the Members the right to so vote or otherwise participate. To the extent a Member has a right to vote with respect to such Member’s Units, such Member shall have one vote per Unit. Common Members shall have the exclusive right to vote, approve or consent to matters relating to the Company, except as otherwise specifically set forth in this Agreement.
13.2 Method of Giving Consent. The Common Members may vote, approve a matter or take any action by the unanimous vote of the Common Members, unless specified otherwise in this Agreement. Any consent, vote or approval required by this Agreement (“Consent”) may be given by a written Consent given by the approving Member or by the affirmative vote by the approving Member at any meeting. A copy of the Consent shall be filed with the records of the Company.
13.3 Meetings. Meetings of the Company shall be held at the principal place of business of the Company, or at any place stated in a notice of meeting. Meetings shall be held only when called by the Managing Member.
13.4 Record Dates. The Managing Member may set in advance a date for determining the Members entitled to notice of and to vote at any meeting. All record dates shall not be more than sixty (60) days prior to the date of the meeting to which such record date relates.
13.5 Submissions to Members; Deemed Consent. The Managing Member shall give all of the Members written notice of any proposal or other matter required by any provision of this Agreement or by Law to be submitted for the consideration and approval of the Members. Such written notice shall include any information required by the relevant provisions of this Agreement or by Law. A Member shall be deemed, for all purposes under this Agreement, to have Consented to or approved a particular matter submitted in writing for the approval by such Member if (a) the written notice requesting approval by such Member of such matter prominently discloses that such Member shall be deemed to Consent to or approve such matter if it fails to object to such matter within a reasonable period, but in any case not less than ten Business Days, after such Member’s receipt of written notice, and (b) such Member fails to object to such matter within such reasonable period.
ARTICLE XIV
RECORDS AND ACCOUNTING; FISCAL AFFAIRS
14.1 Records and Accounting.
(a) Proper and complete records and books of account of the business of the Company, including a list of the names, addresses and Units of all Members, shall be maintained at the Company’s principal place of business until six years following the termination of the Company.
(b) The books and records of the Company shall be maintained in accordance with generally accepted accounting principles.
14.2 Reports to Members and Former Members. The Company shall prepare and mail (or otherwise make available), or cause its independent accountants to prepare and mail, to each Member and, to the extent necessary, to each former Member (or its legal representatives), an IRS Form K-1 (and any applicable equivalent state and local tax form) setting forth in sufficient detail such information as shall enable such Member or former Member (or such Member’s legal representatives) to prepare its U.S. federal income tax returns in accordance with the Laws, rules and regulations then prevailing, (i) in draft form on or before March 15 of each year for the preceding year; and (ii) in final form thereafter, to be made available no later than September 15th.
14.3 Member Information. Upon the reasonable request of the Managing Member, each Member agrees to provide the Company with such non-confidential information concerning the Member and its business so that the Company can comply, or determine its compliance, with any Laws or regulations applicable to it . Notwithstanding anything in this Article XIV to the contrary, a Member shall have access to books and records of the Company during normal business hours and the right to receive copies of Company documents at such Member’s expense only for a purpose reasonably related to the Member’s interest as a Member of the Company.
ARTICLE XV
REPRESENTATIONS AND WARRANTIES
15.1 Representations and Warranties of the Company. The Company hereby represents and warrants to, and agrees with, each of the Members that, as of the date hereof:
(a) the Company is an Oregon limited liability company, duly organized and validly existing under the Laws of the jurisdiction of its formation with all requisite power and authority to carry on its business as currently conducted in all material respects. The Company is duly qualified to do business and in good standing as a foreign entity in the jurisdictions where the nature of the property owned or leased by it, or the nature of the business conducted by it, makes such qualification necessary, in all material respects. True and complete copies of the Articles of Organization and limited liability company agreement of the Company, each as amended to date, have heretofore been made available to the Members;
(b) the Company has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery, and performance by the Company of this Agreement have been duly authorized by all necessary action;
(c) this Agreement has been duly and validly executed and delivered by the Company and constitutes the binding obligation of the Company enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency or other similar Laws relating to or affecting the enforcement of creditors’ rights generally and to general principles of equity;
(d) the Units have been duly authorized by the Company and, when delivered, will have been duly authorized, validly issued, fully paid and nonassessable. Following the consummation of the transactions contemplated by this Agreement and except as set forth herein and in the Articles of Organization, each Member will acquire the Units free and clear of any preemptive rights, restrictions on Transfer, liens, encumbrances, claims or demands, other than liens or encumbrances created by such Member and any such restrictions under applicable federal and state securities Laws. The Common Units are the only class or series of membership interests of the Company. As of immediately following the consummation of the transactions contemplated by this Agreement, (i) all of the outstanding membership interests of the Company are set forth on Schedule A. Except for this Agreement, there are no outstanding warrants, options, subscriptions, convertible or exchangeable securities or other agreements, rights or forms of profit participation pursuant to which the Company is obligated to issue or sell any Units, other equity interests or other Units of the Company. Except for this Agreement, there are no contracts relating to the issuance, sale, repurchase, or Transfer of any Units by the Company;
(e) the execution, delivery, and performance by the Company of this Agreement, including the issue and sale of the Units, will not, with or without the giving of notice or the lapse of time, or both, (i) violate any provision of Law to which the Company is subject, (ii) violate any order, judgment, or decree applicable to the Company or (iii) conflict with, or result in a breach or default under, any agreement or instrument to which the Company is a party or any term or condition of its Articles of Organization, except where such conflict, breach or default would not reasonably be expected to, individually or in the aggregate, have an adverse effect on the Company’s ability to satisfy its obligations hereunder;
(f) no consent, approval, permit, license, order or authorization of, filing with, or notice or other action to, with or by any Governmental Authority or any other Person, is necessary, on the part of the Company to perform its obligations hereunder or to authorize the execution, delivery and performance by the Company of its obligations hereunder, except where such consent, approval, permit, license, order, authorization, filing or notice would not reasonably be expected to, individually or in the aggregate, have an adverse effect on the Company’s ability to satisfy its obligations hereunder or under any agreement or other instrument to which the Company is a party; and
(g) the Company is not, and upon consummation of the issuance and sale of the Units will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” of, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.
15.2 Representations and Warranties of each Member. Each Member (severally and not jointly, as to itself) hereby represents and warrants to, and agrees with, the Company and the other Members that, as of the date hereof:
(a) such Member has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery, and performance by such Member of this Agreement have been duly authorized by all necessary action;
(b) this Agreement has been duly and validly executed and delivered by such Member and constitutes the binding obligation of such Member enforceable against such Member in accordance with its terms, subject to applicable bankruptcy, insolvency or other similar Laws relating to or affecting the enforcement of creditors’ rights generally and to general principles of equity;
(c) the execution, delivery, and performance by such Member of this Agreement will not, with or without the giving of notice or the lapse of time, or both, (i) violate any provision of Law, rule or regulation to which such Member is subject, (ii) violate any order, judgment, or decree applicable to such Member or (iii) conflict with, or result in a breach or default under, any agreement or instrument to which such Member is a party or any term or condition of its articles of incorporation or bylaws, certificate of limited partnership or partnership agreement, or articles of organization or limited liability company agreement, as applicable, except where such conflict, breach or default would not reasonably be expected to, individually or in the aggregate, have an adverse effect on such Member’s ability to satisfy its obligations hereunder;
(d) no consent, approval, permit, license, order or authorization of, filing with, or notice or other action to, with or by any Governmental Authority or any other Person, is necessary, on the part of such Member to perform its obligations hereunder or to authorize the execution, delivery and performance by such Member of its obligations hereunder, except where such consent, approval, permit, license, order, authorization, filing or notice would not reasonably be expected to, individually or in the aggregate, have an adverse effect on such Member’s ability to satisfy its obligations hereunder or under any agreement or other instrument to which such Member is a party;
(e) such Member is an “accredited investor” as that term is defined in the Securities Act and rules and regulations promulgated pursuant thereto;
(f) such Member is acquiring the Units for investment and not with a view toward any resale or distribution thereof except in compliance with the Securities Act; such Member acknowledges that the Units have not been registered pursuant to the Securities Act and may not be transferred in the absence of such registration or an exemption therefrom under the Securities Act; and such Member has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the risks of its investment in the Units and is capable of bearing the economic risks of the transactions contemplated by this Agreement; and
(g) such Member is an informed and sophisticated participant in the transactions contemplated hereby and has undertaken such investigation, and has been provided with and has evaluated such documents and information, as it has deemed necessary in connection with the execution, delivery and performance of this Agreement and the investment in the Company; such Member acknowledges that it is relying on its own investigation and analysis in entering into the transactions contemplated hereby and has consulted its own legal, tax, financial and accounting advisors to determine the merits and risks thereof; and the Member has not relied on any due diligence investigation of any other Member or its advisors and their respective Affiliates, or on any oral or written materials prepared or presented by any other Member or its advisors, including any projections, forecasts, return on investment or other future cash flow illustrations prepared by any such Member or its advisors or their respective Affiliates.
ARTICLE XVI
GENERAL PROVISIONS
16.1 Other Business. The Members and any person or entity affiliated with the Members may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.
16.2 Notices. All notices, requests or approvals that any party hereto is required or desires to give to any Member or to the Company shall be in writing signed by or on behalf of the party giving the same and shall be deemed to be duly given if personally delivered, sent via facsimile or electronic mail and confirmed, or mailed by certified mail, return receipt requested, or sent by nationally recognized overnight delivery service with proof of receipt maintained, at the following addresses (or any other address that any such party may designate by written notice to the other parties):
(a) if given to the Company, to:
Digimarc LLC
8500 SW Creekside Place
Beaverton, Oregon 97301
Attn: George Karamanos
Email:
with a copy (which shall not constitute notice) to:
Perkins Coie LLP
1120 NW Couch Street
Portland, Oregon 97209
Attn: John R. Thomas
Email: jrthomas@perkinscoie.com
(b) if given to any Member, to the person and at the address (and, if applicable, fax number or electronic mail address) set forth under or opposite its name on Schedule A, or at such other address (and, if applicable, fax number or electronic mail address) as such Member may hereafter designate by written notice to the Company.
(c) All such notices shall be deemed to have been delivered and given for all purposes (i) on the delivery date if delivered by confirmed facsimile or electronic mail, (ii) on the delivery date if delivered personally to the party to whom the same is directed, (iii) one Business Day after deposit with a commercial overnight carrier, with written verification of receipt or (iv) five Business Days after the mailing date, whether or not actually received, if sent by U.S. mail, return receipt requested, postage and charges prepaid, or any other means of rapid mail delivery for which a receipt is available addressed to the receiving party as specified on the signature page of this Agreement. Changes of the person to receive notices or the place of notification shall be effectuated pursuant to a notice given under this Section 16.2.
16.3 Governing Law; Jurisdiction; Waiver of Jury Trial; Severability.
(a) This Agreement shall be governed by and construed in accordance with the Laws of the State of Oregon, without giving effect to any choice or conflict of Laws, provisions or rules that would cause the application of Laws of any jurisdiction other than the State of Oregon. Each party to this Agreement hereby consents to the exclusive jurisdiction of the state and federal courts in the State of Oregon and irrevocably agrees that all actions or proceedings arising out of or relating to this Agreement or the transactions contemplated hereby (whether such actions or proceedings are based in statute, tort, contract or otherwise), shall be litigated in such court. Each party hereto (i) consents to submit itself to the personal jurisdiction of such court for such actions or proceedings, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (iii) agrees that it will not bring any such action or proceeding in any court other than such court. Each party hereto accepts for itself and in connection with its properties, generally and unconditionally, the exclusive and irrevocable jurisdiction and venue of the aforesaid court and waives any defense of forum non conveniens, and irrevocably agrees to be bound by any non- appealable judgment rendered thereby in connection with such actions or proceedings. A copy of any service of process served upon the parties hereto shall be mailed by registered mail to the respective party except that, unless otherwise provided by applicable Law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by a party hereto refuses to accept service, each party hereto agrees that service upon the appropriate party by registered mail shall constitute sufficient service. Nothing herein shall affect the right of a party hereto to serve process in any other manner permitted by law. Each party acknowledges that any controversy which may arise under this agreement is likely to involve complicated and difficult issues, and therefore it hereby irrevocably waives any right it may have to a trial by jury in respect of any action arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement. EACH PARTY ACKNOWLEDGES, AGREES AND CERTIFIES THAT: (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD, IN THE EVENT OF LITIGATION, SEEK TO PREVENT OR DELAY ENFORCEMENT OF SUCH WAIVER; (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER; (III) IT MAKES SUCH WAIVER VOLUNTARILY; AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.3.
(b) If it shall be determined by a court of competent jurisdiction that any provisions or wording of this Agreement shall be invalid or unenforceable under the Act or other applicable Law, such invalidity or unenforceability shall not invalidate the entire Agreement. In that case, this Agreement shall be construed so as to limit any term or provision so as to make it enforceable or valid within the requirements of applicable Law, and, in the event such term or provisions cannot be so limited, this Agreement shall be construed to omit such invalid or unenforceable terms or provisions. If it shall be determined by a court of competent jurisdiction that any provision relating to the distributions and allocations of the Company or to any expenses payable by the Company is invalid or unenforceable, this Agreement shall be construed or interpreted so as (a) to make it enforceable or valid and (b) to make the distributions and allocations as closely equivalent to those set forth in this Agreement as is permissible under applicable Law.
16.4 Entire Agreement; Binding Effect. This Agreement sets forth the entire understanding of the parties hereto. This Agreement shall be binding upon, and inure to the benefit of, the Members.
16.5 Successors, Assigns and Transferees. Subject to the restrictions on Transfers set forth in this Agreement, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns; and by their signatures hereto, each party intends to and does hereby become bound. Any assignment of rights or obligations in violation of this Section 16.5 shall be null and void. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person any legal or equitable right, remedy or claim under, in or in respect of this Agreement or any provision herein contained other than the parties hereto and their respective permitted successors and assigns, all of whom are intended to be third party beneficiaries thereof.
16.6 Waiver. Failure or delay by any party hereto to enforce any covenant, duty, agreement, term or condition of this Agreement, or to exercise any right hereunder, shall not be construed as thereafter waiving such covenant, duty, term, condition or right. The waiver by any party or parties hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach hereunder. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
16.7 Additional Documents. Each Member agrees to perform all further acts and execute, acknowledge and deliver any documents that may be reasonably necessary to carry out the provisions of this Agreement.
16.8 No Third-Party Beneficiary. This Agreement is made solely for the benefit of the Members and no other Persons shall have any rights, interest, or claims hereunder or otherwise be entitled to any benefits under or on accounts of this Agreement as a third-party beneficiary otherwise.
16.9 Waiver of Partition. Except as may otherwise be required by law in connection with the winding up, liquidation and dissolution of the Company, each Member hereby irrevocably waives any and all rights that it may have to maintain an action for partition of any of the Company’s property.
16.10 Limited Liability Company. The Members intend to form a limited liability company and do not intend to form a partnership under the Laws of the State of Oregon or any other Laws.
16.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, when taken together, shall constitute but one instrument.
16.12 Headings. The headings used in this Agreement are inserted for reference purposes only and shall not be deemed to limit or affect in any way the meaning or interpretation of any of the terms or provisions herein.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Amended and Restated Limited Liability Company Operating Agreement of Digimarc LLC as of the date first set forth above.
|
DIGIMARC LLC
By: / s/______________
COMMON MEMBERS:
DIGIMARC CORPORATION
By: / s/ _______________
LTIP HOLDER
By: / s/ ________________ |
SCHEDULE A [TO BE UPDATED]
Members
|
Members |
Cash |
Agreed Value of Capital Contribution |
Common Units |
Percentage Interest of Common Units |
Agreed Value of Capital Contribution |
LTIP Units |
Percentage Interest of LTIP Units |
Percentage Interest of Common Units and LTIP Units |
|
DIGIMARC CORPORATION |
–– |
$___________ |
__________ |
____% |
0 |
0 |
0% |
_____% |
|
RILEY MCCORMACK |
$50,000 |
$50,000 |
- |
_____% |
― |
_____ |
100% |
______% |
|
TOTALS |
$50,000 |
$_____ |
____ |
100% |
0 |
_____ |
100% |
100% |
EXHIBIT A
DEFINITIONS
For purposes of this Agreement, unless the context otherwise requires:
“Act” means the Oregon Limited Liability Company Act, ORS Chapter 63, as amended from time to time.
“Additional Securities” means any: (1) shares representing limited liability company interests of DMRC now or hereafter authorized or reclassified that have dividend rights, or rights upon liquidation, winding up and dissolution, that are superior or prior to the DMRC Shares (“Preferred Shares”), (2) DMRC Shares, (3) shares of DMRC now or hereafter authorized or reclassified that have distribution rights, or rights upon liquidation, winding up and dissolution, that are junior in rank to the DMRC Shares (“Junior Shares”) and (4) (i) rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase or otherwise acquire DMRC Shares, Preferred Shares or Junior Shares, or (ii) indebtedness issued by DMRC that provides any of the rights described in clause (4)(i) of this definition (any such securities referred to in clause (4)(i) or (ii) of this definition, “New Securities”).
“Adjustment Events” has the meaning set forth in Section 4.4(a)(i) hereof.
“Administrative Expenses” means (i) all administrative and operating costs and expenses incurred by the Company, (ii) administrative costs and expenses of the Managing Member, including, without limitation, any salaries or other payments to directors, trustees, officers or employees of the Managing Member, and any accounting and legal expenses of the Managing Member, which expenses, the Members hereby agree, are expenses of the Company and not the Managing Member, and (iii) to the extent not included in clauses (i) or (ii) above, DMRC Expenses; provided, that Administrative Expenses shall not include any administrative costs and expenses incurred by the Managing Member that are attributable to Assets or interests in a Subsidiary that are owned by the Managing Member other than through its ownership interest in the Company.
“Affiliate” shall mean, as to any specified Person, (i) any Person who is an “affiliate” as that term is defined in Rule 12b‑2 of the general rules and regulations under the Exchange Act, (ii) any executive officer, director, trustee, managing member or Managing Member of such Person and (iii) any legal entity for which such Person acts as an executive officer, director, trustee, manager, managing member or Managing Member.
“Agreed Value” means the fair market value of a Member’s non-cash Capital Contribution as of the date of contribution as agreed to by such Member and the Managing Member. The names and addresses of the Members, number of Units issued to each Member, and the Agreed Value of non-cash Capital Contributions as of the date of contribution is set forth on Schedule A, as it may be amended or restated from time to time.
“Agreement” shall mean this Amended and Restated Limited Liability Company Operating Agreement (including the schedules and exhibits attached hereto) as originally executed and as amended, modified, supplemented or restated from time to time, as the context requires.
“Articles of Organization” shall have the meaning set forth in Section 1.2.
“Asset” means any asset or other investment in which the Company, directly or indirectly, holds an ownership interest.
“Award Agreement” shall have the meaning set forth in Section 5.2(a).
“Board of Directors” shall mean the Board of Directors of DMRC.
“Business Day” shall mean any day except a Saturday, Sunday or day on which banking institutions in New York, New York are not required to be open.
“Capital Account” shall have the meaning set forth in Section 4.4.
“Capital Account Limitation” has the meaning set forth in Section 4.5(b) hereof.
“Capital Contribution” means the total amount of cash, cash equivalents and the Agreed Value of any Asset or other asset contributed or agreed to be contributed, as the context requires, to the Company by each Member pursuant to the terms of this Agreement. Any reference to the Capital Contribution of a Member shall include the Capital Contribution made by a predecessor holder of the Membership Interest of such Member.
“Cash Amount” means an amount of cash per Common Unit equal to the Value of the DMRC Shares Amount on the Specified Redemption Date divided by the number of Common Units tendered for redemption.
“Code” shall mean the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor U.S. federal income tax code.
“Common Member” shall mean each Person identified on Schedule A as a holder of a Common Unit or any successor or assignee who becomes a substitute Common Member in accordance with the terms of this Agreement, and any Person admitted as an additional Common Member in accordance with the terms of this Agreement.
“Common Unit” shall mean a Unit which has been designated as a Common Unit of the Company.
“Common Unit Distribution” has the meaning set forth in Section 4.4(a)(ii) hereof.
“Common Unit Economic Balance” has the meaning set forth in Section 5.1(g) hereof.
“Common Unit Transaction” has the meaning set forth in Section 4.5(f) hereof.
“Company” shall mean Digimarc LLC, the Oregon limited liability company governed hereby.
“Company Loan” means a loan from the Company to the Member on the day the Company pays over the excess of the Withheld Amount over the Distributable Amount to a taxing authority.
“Company Minimum Gain” shall have the meaning set forth in Regulations Section 1.704‑2(d). In accordance with Regulations Section 1.704‑2(d), the amount of Company Minimum Gain is determined by first computing, for each nonrecourse liability of the Company, any gain the Company would realize if it disposed of the property subject to that liability for no consideration, other than full satisfaction of the liability, and then aggregating the separately computed gains. A Member’s share of Company Minimum Gain shall be determined in accordance with Regulations Section 1.704- 2(g)(1).
“Company Record Date” means the record date established by the Managing Member for the distribution of cash pursuant to Section 5.3 hereof, which record date shall be the same as the record date established by DMRC for a distribution to its shareholders of some or all of its portion of such distribution.
“Consent” shall have the meaning set forth in Section 13.2.
“Constituent Person” has the meaning set forth in Section 4.5(f) hereof.
“Conversion Date” has the meaning set forth in Section 4.5(b) hereof.
“Conversion Factor” means a factor of 1.0, as adjusted as provided in this definition. The Conversion Factor will be adjusted in the event that DMRC (i) declares or pays a dividend on outstanding DMRC Shares in DMRC Shares or makes a distribution to all holders of outstanding DMRC Shares in DMRC Shares, (ii) subdivides outstanding DMRC Shares or (iii) combines outstanding DMRC Shares into a smaller number of DMRC Shares. In each of such events, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of DMRC Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of DMRC Shares (determined without the above assumption) issued and outstanding on such record date and; provided, that in the event that an entity other than an Affiliate of DMRC shall become Managing Member pursuant to any merger, consolidation or combination of DMRC with or into another entity (the “Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one DMRC Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. If, however, the Managing Member receives a Notice of Redemption after the record date, if any, but prior to the effective date of such event, the Conversion Factor shall be determined as if the Managing Member had received the Notice of Redemption immediately prior to the record date for event. Notwithstanding the foregoing, no adjustment shall be made to the Conversion Factor if the number of outstanding Common Units is otherwise adjusted in the same manner and at the same time as the adjustment to the number of outstanding DMRC Shares.
“Conversion Notice” has the meaning set forth in Section 4.5(b) hereof.
“Conversion Right” has the meaning set forth in Section 4.5(a) hereof.
“Cumulative Assumed Tax Liability” means, with respect to any Member as of any Fiscal Year, the product of (a) the U.S. federal taxable income allocated by the Company to such Member in such Fiscal Year and all prior Fiscal Years, less the U.S. federal taxable loss allocated by the Company to such Member in such Fiscal Year and all prior Fiscal Years (taking into account for purposes of clause (a) any applicable limitations on the deductibility of capital losses or state and local income taxes, including, without limitation, the impact of PTET as it relates to any Member’s ability to deduct state and local income taxes, for U.S. federal income tax purposes and disregarding the effect of any deduction under Section 199A of the Code); multiplied by (b) the highest applicable U.S. federal, state and local income tax rate (including any tax rate imposed on “net investment income” by Code Section 1411) applicable to an individual resident in Chevy Chase, Maryland with respect to the character of U.S. federal taxable income or loss allocated by the Company to such Member (e.g., capital gains or losses, dividends, ordinary income, etc.) during each applicable Fiscal Year.
“Distributable Amount” shall have the meaning set forth in Section 5.3(b).
“DMRC” shall have the meaning set forth in the Recitals.
“DMRC Charter” means Articles of Incorporation of Digimarc Corporation dated as of April 29, 2010, as amended on September 28, 2020.
“DMRC Contribution” shall have the meaning set forth in the Recitals.
“DMRC Expenses” means (i) costs and expenses relating to the formation and continuity of existence and operation of DMRC and any Subsidiaries (other than Subsidiaries taxed as corporations for federal income tax purposes) thereof (which Subsidiaries shall, for purposes hereof, be included within the definition of DMRC), including taxes, fees and assessments associated therewith, any and all costs, expenses or fees payable to any trustee, director, officer or employee of DMRC, (ii) costs and expenses relating to any public offering and registration, or private offering, of securities by DMRC, and all statements, reports, fees and expenses incidental thereto, including, without limitation, underwriting discounts and selling commissions applicable to any such offering of securities, and any costs and expenses associated with any claims made by any holders of such securities or any underwriters or placement agents thereof, (iii) costs and expenses associated with any repurchase of any securities by DMRC, (iv) costs and expenses associated with the preparation and filing of any periodic or other reports and communications by DMRC under federal, state or local Laws or regulations, including filings with the Securities and Exchange Commission, (v) costs and expenses associated with compliance by DMRC with Laws, rules and regulations promulgated by any regulatory body, including the Securities and Exchange Commission and any securities exchange, (vi) costs and expenses associated with any health, dental, vision, disability, life insurance, 401(k) plan, incentive plan, bonus plan or other plan providing for compensation or benefits for the trustees, directors, officers or employees of DMRC or any of its Subsidiaries, (vii) costs and expenses incurred by DMRC relating to any issuance or redemption of Membership Interests and (viii) all other operating, administrative, financing or other costs of DMRC incurred pursuant to the Management Agreement or incurred in the ordinary course of its business on behalf of itself or on behalf of or related to the Company.
“DMRC Shares” means common shares representing limited liability company interests, no par value per share, of DMRC (or Successor Entity, as the case may be).
“DMRC Shares Amount” means the number of DMRC Shares equal to the product of (X) the number of Common Units offered for redemption by a Redeeming Member, multiplied by (Y) the Conversion Factor as adjusted to and including the Specified Redemption Date; provided that in the event DMRC issues to all holders of DMRC Shares rights, options, warrants or convertible or exchangeable securities entitling the holders of DMRC Shares to subscribe for or purchase or otherwise acquire additional DMRC Shares, or any other securities or property (collectively, the “Rights”), and such Rights have not expired at the Specified Redemption Date, then the DMRC Shares Amount shall also include such Rights issuable to a holder of the DMRC Shares Amount on the record date fixed for purposes of determining the holders of DMRC Shares entitled to Rights.
“Economic Capital Account Balances” has the meaning set forth in Section 5.1(g) hereof.
“Event of Bankruptcy” as to any Person means (i) the filing of a petition for relief as to such Person as debtor or bankrupt under the U.S. Bankruptcy Code of 1978, as amended, or similar provision of Law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); (ii) the insolvency or bankruptcy of such Person as finally determined by a court proceeding; (iii) the filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; or (iv) the commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation Law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided that if such proceeding is commenced by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.
“Event of Dissolution” shall have the meaning set forth in Section 7.1.
“Forced Conversion” has the meaning set forth in Section 4.5(c) hereof.
“Forced Conversion Notice” has the meaning set forth in Section 4.5(c) hereof.
“Fiscal Year” shall have the meaning set forth in Section 1.10.
”Governmental Authority” means: (i) any nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) the United States and other federal, state, local, municipal, foreign or other government or (iii) any governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal).
“Incentive Plan” means, collectively, DMRC’s 2008 Incentive Plan and 2018 Incentvie Plan and any successor plans thereto, each as may be amended from time to time.
“Independent Directors” means a director of DMRC who meets the independence requirements of the The NASDAQ Stock Market LLC as set forth from time to time. If at any time there are no Independent Directors, references herein to “Independent Directors” shall be deemed to refer to all directors of DMRC.
“Indemnitee” means (i) any Person made a party to a proceeding by reason of its status as (A) the Managing Member, (B) a director, officer or employee of the Managing Member or any Subsidiary thereof, or (C) the Manager or its Affiliates performing services for the Company and (ii) such other Persons (including Affiliates of the Managing Member or the Company) as the Managing Member may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.
“Junior Shares” has the meaning set forth in the definition of “Additional Securities.”
“Law” means any applicable constitutional provision, statute, act, code, law, regulation, rule, ordinance, order, decree, ruling, proclamation, resolution, judgment, decision, declaration, or interpretative or advisory opinion or letter of a Governmental Authority.
“Loss” has the meaning set forth in Section 5.1(h) hereof.
“Liquidating Gains” has the meaning set forth in Section 5.1(g) hereof.
“LTIP Unit” means a Unit which is designated as an LTIP Unit and which has the rights, preferences and other privileges designated in Section 4.4 hereof and elsewhere in this Agreement in respect of holders of LTIP Units, including both vested LTIP Units and Unvested LTIP Units. The allocation of LTIP Units among the Members shall be set forth on Exhibit A as it may be amended or restated from time to time.
“LTIP Unitholder” means a Member that holds LTIP Units.
“Majority in Interest” means Members (excluding, for the avoidance of doubt, LTIP Unitholders) holding more than 50% of the Percentage Interests of the Members.
“Managing Member” shall mean DMRC and/or any successor or additional managing member, each in its capacity as a managing member of the Company.
“Managing Member Capital Account Balance Per Common Unit” means the Capital Account balance of the Managing Member with respect to its Common Units divided by the number of Common Units held by the Managing Member.
“Member Nonrecourse Debt Minimum Gain” shall have the meaning set forth in Regulations Section 1.704-2(i). A Member’s share of Member Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).
“Members” shall mean the Managing Member, the Common Members and any new members admitted from time to time upon approval of the Managing Member.
“Membership Interest” means a limited liability company interest of the Company held by a Member at any particular time representing a fractional part of the limited liability company interests of the Company of all Members, and includes any and all benefits to which the holder of such a Membership Interest may be entitled as provided in this Agreement and in the Act, together with the obligations of such Member to comply with all the provisions of this Agreement and of the Act. Membership Interests may be expressed as a number of Common Units or other Units.
“Member Nonrecourse Debt Minimum Gain” has the meaning set forth in Regulations Section 2(i). A Member’s share of Member Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704‑2(i)(5).
“New Securities” has the meaning set forth in the definition of “Additional Securities.”
“Notice of Redemption” means the Notice of Redemption substantially in the form attached as Exhibit B hereto.
“Offer” shall have the meaning set forth in Section 10.3.
“Partnership Representative” has the meaning set forth in Section 6.2 hereof.
“Percentage Interest” of a Member shall mean the percentage interest of such Member in the Common Units and LTIP Units treating LTIP Units (including Performance LTIP Units), in accordance with Section 4.4(a), as Common Units for this purpose, except as provided in Section 4.6(b)(iv) hereof.
“Performance LTIP Unitholder” means a Member who holds Performance LTIP Units issued pursuant to one or more Vesting Agreements.
“Performance LTIP Unitholder Percentage Interest” shall have the meaning set forth in Section 4.6(b)(iv) hereof.
“Performance LTIP Units” means a Unit designated as a Performance LTIP Unit pursuant to Section 4.6 hereof.
“Performance LTIP Units Sharing Percentage” means ten percent (10%).
“Person” shall mean an individual, partnership, corporation, trust, limited liability company, unincorporated organization, government or agency or political subdivision thereof, or any other legal entity.
“Preferred Shares” has the meaning set forth in the definition of “Additional Securities.”
“Profit” has the meaning set forth in Section 5.1(h) hereof.
“PTET” means an entity-level tax imposed by any jurisdiction on an entity treated as a passthrough entity for U.S. federal income tax purposes in lieu of a tax on one or more of such entity’s partners, members or owners.
“PTET Election” means, with respect to a given jurisdiction, an election for the Company to be subject to a PTET as described in Notice 2020-75 and any regulations promulgated thereunder. For the avoidance of doubt, a PTET Election excludes any election made under Regulations Section 301.7701-3
“Redeeming Member” has the meaning set forth in Section 11.1(a) hereof.
“Redemption Amount” means either the Cash Amount or the DMRC Shares Amount.
“Redemption Right” has the meaning set forth in Section 11.1(a) hereof.
“Regulations” shall mean the Treasury regulations promulgated under the Code.
“Rights” has the meaning set forth in the definition of “DMRC Shares Amount.”
“Safe Harbor” shall have the meaning set forth in Section 6.3(b).
“Safe Harbor Election” shall have the meaning set forth in Section 6.3(b).
“Safe Harbor Interests” shall have the meaning set forth in Section 6.3(b).
“Securities Act” shall mean the United States Securities Act of 1933, as amended.
“Series A Preferred Unit” means a Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in Exhibit F hereto. It is the intention of the Managing Member that each Series A Preferred Unit shall be substantially the economic equivalent of one Series A Preferred Share.
“Series A Preferred Share” means a share of Series A Redeemable Nonvoting Preferred Stock of DMRC.
“Specified Redemption Date” means the first business day of the month that is at least 60 calendar days after the receipt by the Managing Member of a Notice of Redemption.
”Subsidiary” means with respect to any Person, (i) any corporation or other entity a majority of the Capital Stock of which having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is at the time owned, directly or indirectly, with power to vote, by such initial Person or (ii) a partnership in which such initial Person or any direct or indirect Subsidiary of such initial Person is a Managing Member.
“Subsidiary Partnership” means any partnership or limited liability company in which the Managing Member, the Company, or a wholly owned Subsidiary of the Managing Member or the Company owns a partnership or limited liability company interest.
“Substitute Member” means any Person admitted to the Company as a Member pursuant to Section 10.4 hereof.
“Successor Entity” has the meaning set forth in the definition of “Conversion Factor.”
“Survivor” shall have the meaning set forth in Section 10.3.
“Target Balance” has the meaning set forth in Section 5.1(g) hereof.
“Tax Distribution” means, with respect to any Member for any Fiscal Year, the excess, if any, of (a) the Cumulative Assumed Tax Liability of such Member as of such Fiscal Year, over (b) the amount of distributions made to such Member pursuant to Section 5.3(a) and 5.3(f) during such Fiscal Year and all prior Fiscal Years, plus the amount of distributions made to such Member pursuant to Section 5.3(e) with respect to all prior Fiscal Years.
“Tax Distribution Date” means, with respect to each Fiscal Year, the first April 15 following the end of such Fiscal Year.
“Trading Day” means a day on which the principal national securities exchange on which a security is listed or admitted to trading is open for the transaction of business or, if a security is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by Law or executive order to close.
“Transaction” shall have the meaning set forth in Section 10.3.
“Transfer” shall mean any sale, exchange, transfer (including any mortgage, hypothecation or pledge), assignment, distribution or other disposition, direct or indirect, whether voluntarily or by operation of Law or at judicial sale or otherwise.
“Unit” shall mean a fractional, undivided share of the Membership Interests of all Members issued hereunder, and includes Common Units, Series A Preferred Units, LTIP Units, Performance LTIP Units and any other class or series of Units that may be established after the date hereof in accordance with the terms hereof. The number of Units outstanding and the Percentage Interests represented by such Units are set forth on Schedule A hereto, as it may be amended or restated from time to time.
“Unit Designation” shall have the meaning set forth in Section 4.2(a).
“Unvested LTIP Units” has the meaning set forth in Section 4.4(c) hereof.
“Value” means, with respect to any security, the average of the daily market prices of such security for the ten consecutive Trading Days immediately preceding the date of such valuation. The market price for each such Trading Day shall be: (i) if the security is listed or admitted to trading on the New York Stock Exchange or any other national securities exchange, the last reported sale price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on such day, (ii) if the security is not listed or admitted to trading on the New York Stock Exchange or any other national securities exchange, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the Managing Member, or (iii) if the security is not listed or admitted to trading on the New York Stock Exchange or any national securities exchange and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the Managing Member, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten days prior to the date in question) for which prices have been so reported; provided that if there are no bid and asked prices reported during the ten days prior to the date in question, the value of the security shall be determined by the Board of Directors acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event the security includes any additional rights (including any Rights), then the value of such rights shall be determined by the Board of Directors acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.
“Vested LTIP Units” has the meaning set forth in Section 4.4(c) hereof.
“Vested Performance LTIP Units” means Performance LTIP Units that have satisfied or are deemed to have satisfied the applicable performance-vesting conditions under the terms of the applicable Vesting Agreement
“Vesting Agreement” means each or any, as the context implies, agreement or instrument, other than this Agreement, entered into by an LTIP Unitholder upon acceptance of an award of LTIP Units (including Performance LTIP Units) under an Incentive Plan.
“Withheld Amount” means any amount required to be withheld by the Company to pay over to any taxing authority as a result of any allocation or distribution of income to a Member.
EXHIBIT B
NOTICE OF REDEMPTION
In accordance with Section 11.1 of the Amended and Restated Limited Liability Company Operating Agreement (the “Agreement”) of Digimarc LLC, the undersigned hereby irrevocably (i) presents for redemption Common Units in Digimarc LLC in accordance with the terms of the Agreement and the Redemption Right referred to in Section 11.1 thereof, (ii) surrenders such Common Units and all right, title and interest therein and (iii) directs that the Cash Amount or DMRC Shares Amount (as defined in the Agreement) as determined by the Managing Member deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if DMRC Shares (as defined in the Agreement) are to be delivered, such DMRC Shares be registered or placed in the name(s) and at the address(es) specified below. The undersigned hereby represents, warrants and certifies that the undersigned (a) has title to such Common Units, free and clear of the rights and interests of any person or entity other than the Company or the Managing Member; (b) has the full right, power and authority to cause the redemption of the Common Units as provided herein; and (c) has obtained the approval of all persons or entities, if any, having the right to consent to or approve the Common Units for redemption.
Dated: ,
Name of Member:
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If DMRC Shares are to be issued, issue to:
Please insert social security or identifying number:
NAME:
EXHIBIT C-1
CERTIFICATION OF NON-FOREIGN STATUS
(FOR REDEEMING MEMBERS THAT ARE ENTITIES)
Under Sections 1445(e) and 1446(f) of the Internal Revenue Code of 1986, as amended (the “Code”), in the event of a disposition by a non-U.S. person of a partnership interest in a partnership in which (A) (i) 50% or more of the value of the gross assets consists of United States real property interests (“USRPIs”), as defined in Section 897(c) of the Code, and (ii) 90% or more of the value of the gross assets consists of USRPIs, cash, and cash equivalents, or (B) for which any portion of the gain on disposition of such partnership interest would be treated as effectively connected with the conduct of a trade or business within the United States under Section 864(c)(8) of the Code, the transferee will be required to withhold a portion of the amount realized by the non-U.S. person upon the disposition. To inform DMRC (the “Managing Member”) and Digimarc LLC(the “Company”) that no withholding is required with respect to the redemption by (“Member”) of its Common Units in the Company, the undersigned hereby certifies the following on behalf of Member:
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Member is not a foreign corporation, foreign partnership, foreign trust, or foreign estate, as those terms are defined in the Code and the Treasury regulations thereunder. |
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Member is not a disregarded entity as defined in Treasury Regulation Section 1.1445‑2(b)(2)(iii). |
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The U.S. employer identification number of Member is . |
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The principal business address of Member is: , and Member’s place of incorporation is . |
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Member agrees to inform the Managing Member if it becomes a foreign person at any time during the three-year period immediately following the date of this notice. |
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Member understands that this certification may be disclosed to the Internal Revenue Service by the Managing Member and that any false statement contained herein could be punished by fine, imprisonment, or both. |
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MEMBER: |
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Name: |
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Under penalties of perjury, I declare that I have examined this certification and, to the best of my knowledge and belief, it is true, correct, and complete, and I further declare that I have authority to sign this document on behalf of Member.
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EXHIBIT C-2
CERTIFICATION OF NON-FOREIGN STATUS
(FOR REDEEMING MEMBERS THAT ARE INDIVIDUALS)
Under Sections 1445(e) and 1446(f) of the Internal Revenue Code of 1986, as amended (the “Code”), in the event of a disposition by a non-U.S. person of a partnership interest in a partnership in which (A) (i) 50% or more of the value of the gross assets consists of United States real property interests (“USRPIs”), as defined in Section 897(c) of the Code, and (ii) 90% or more of the value of the gross assets consists of USRPIs, cash, and cash equivalents, or (B) for which any portion of the gain on disposition of such partnership interest would be treated as effectively connected with the conduct of a trade or business within the United States under Section 864(c)(8) of the Code, the transferee will be required to withhold a portion of the amount realized by the non-U.S. person upon the disposition.. To inform DMRC (the “Managing Member”) and Digimarc LLC (the “Company”) that no withholding is required with respect to my redemption of my Common Units in the Company, I, , hereby certify the following:
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I am not a nonresident alien for purposes of U.S. income taxation. |
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My U.S. taxpayer identification number (social security number) is . |
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My home address is: . |
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I agree to inform the Managing Member promptly if I become a nonresident alien at any time during the three-year period immediately following the date of this notice. |
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I understand that this certification may be disclosed to the Internal Revenue Service by the Managing Member and that any false statement contained herein could be punished by fine, imprisonment, or both. |
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Under penalties of perjury, I declare that I have examined this certification and, to the best of my knowledge and belief, it is true, correct, and complete.
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EXHIBIT D
NOTICE OF ELECTION BY MEMBER TO CONVERT
LTIP UNITS INTO COMMON UNITS
The undersigned holder of LTIP Units hereby irrevocably: (i) elects to convert the number of LTIP Units in Digimarc LLC (the “Company”) set forth below into Common Units in accordance with the terms of the Amended and Restated Limited Liability Agreement of the Company, as amended and (ii) directs that any cash in lieu of Common Units that may be deliverable upon such conversion be delivered to the address specified below. The undersigned hereby represents, warrants and certifies that the undersigned: (a) has title to such LTIP Units, free and clear of the rights or interests of any other person or entity other than the Company or the Managing Member; (b) has the full right, power, and authority to cause the conversion of such LTIP Units as provided herein; and (c) has obtained the consent to or approval of all persons or entities, if any, having the right to consent to or approve such conversion.
Name of Holder:
(Please Print: Exact Name as Registered with Company)
Number of LTIP Units to be Converted:
Date of this Notice:
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EXHIBIT E: COMPANY NOTICE OF LTIP CONVERSION ELECTION
Digimarc LLC (the “Company”) hereby irrevocably elects to cause the number of LTIP Units held by the holder of LTIP Units set forth below to be converted into Common Units in accordance with the terms of the Amended and Restated Limited Liability Agreement of the Company, as amended.
Name of Holder:
(Please Print: Exact Name as Registered with Company)
Number of LTIP Units to be Converted:
Date of this Notice:
EXHIBIT F: SERIES A PREFERRED UNIT DESIGNATION
A. Number. As of the close of business on the date this Agreement was adopted, the total number of Series A Preferred Units issued and outstanding will be 10,000. The Managing Member may issue additional Series A Preferred Units from time to time in accordance with the terms of the Agreement, and in connection with any such additional issuance the Managing Member shall revise Schedule A to the Agreement to reflect the total number of Series A Preferred Units then issued and outstanding.
B. Distributions. No distributions shall be declared or paid on the Series A Preferred Units.
C. Stated Value. The term “Stated Value” when used in reference to the Series A Preferred Units shall mean $5.00 per Unit.
D. Liquidation Preference.
(i) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company shall be made to or set apart for the holders of Junior Units, DMRC, in its capacity as the holder of the Series A Preferred Units, shall be entitled to receive the Stated Value per Unit.. If, upon any such liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable to DMRC, in its capacity as the holder of Series A Preferred Units, shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other Parity Preferred Units, then such assets, or the proceeds thereof, shall be distributed among DMRC, in its capacity as the holder of such Series A Preferred Units, and the holders of any such other Units ranking on parity with the Series A Preferred Units (“Parity Preferred Units”) ratably in accordance with the respective amounts that would be payable on such Series A Preferred Units and any such other Parity Preferred Units if all amounts payable thereon were paid in full. For the purposes of this Section D, (x) a consolidation or merger of the Company or DMRC with one or more entities, (y) a statutory share exchange by the Company or DMRC and (z) a sale or transfer of all or substantially all of the Company’s or DMRC’s assets, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company or DMRC.
(ii) Subject to the rights of the holders of Units of any series or class or classes of shares ranking on a parity with or prior to the Series A Preferred Units upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to DMRC, in its capacity as the holder of the Series A Preferred Units, as provided in this Section D, any series or class or classes of Units ranking junior to the Series A Preferred Units shall, subject to any respective terms and provisions applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and DMRC, in its capacity as the holder of the Series A Preferred Units, shall not be entitled to share therein.
E. Redemption of the Series A Preferred Units.
(i) The Series A Preferred Units shall be redeemed by the Company, in whole or in part, at the option of DRMC, in its capacity as the holder of the Series A Preferred Units, at any time that DMRC may redeem the Series A Preferred Shares, provided that CLNS shall redeem an equivalent number of Series A Preferred Shares. Such redemption of Series A Company Preferred Units shall occur substantially concurrently with the redemption by DMRC of such Series A Preferred Share (the “Series A Redemption Date”).
(ii) Upon redemption of Series A Preferred Units on the Series A Redemption Date, each Series A Preferred Unit so redeemed shall be converted into the right to receive the Stated Value per Series A Preferred Unit, plus any accrued and unpaid distributions with respect to the Series A Company Preferred Units to the Series A Redemption Date.
F. Conversion. The Series A Preferred Units are not convertible into or redeemable or exchangeable for any other property or securities of DMRC or the Company at the option of any holder of Series A Preferred Units.
G. Voting. Except as required by law, DMRC, in its capacity as the holder of the Series A Preferred Units, shall not be entitled to vote at any meeting of the Members or for any other purpose or otherwise to participate in any action taken by the Company or the Members, or to receive notice of any meeting of the Members.
H. Other Terms. Except as may otherwise be provided in this Exhibit F or as required by law, the terms of the Series A Preferred Units shall be identical to those of the Common Units.
Exhibit 10.2
DIGIMARC LLC
LTIP UNIT AWARD AGREEMENT
This LTIP UNIT AWARD AGREEMENT (this “Award Agreement”), dated as of [•] (the “Grant Date”), is entered into by and between Digimarc LLC, an Oregon limited liability company (the “Company”), and Riley McCormack (“Grantee” and, together with the Company, collectively, the “Parties,” and each, a “Party”). Capitalized terms used in this Award Agreement but not defined have the meanings given to them in the Amended and Restated Limited Liability Company Operating Agreement, dated as of [•], as the same may be amended from time to time (the “LLC Agreement”)
WHEREAS, Grantee provides services to or for the benefit of the Company;
WHEREAS, effective as of the Grant Date, the Company is issuing to the Grantee the number of LTIP Units set forth below, subject to and in accordance with the terms and conditions of this Award Agreement, LLC Agreement, and the Digimarc Corporation 2018 Incentive Plan (“Plan”).
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Award Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Grant of LTIP Units. The Company hereby issues to Grantee an award of [•] LTIP Units, subject to the terms and conditions of this Award Agreement, the LLC Agreement, and the Plan.
2. Definitions. For purposes of this Award Agreement, the following terms have the following meanings:
(a) “Annual Recurring Revenue” is a company performance metric calculated as the aggregation of annualized subscription fees from all of DMRC’s commercial contracts as of the measurement date, as reported in DMRC’s audited financial statements.
(b) “Change of Control Event” has the meaning set forth in the Plan as of the Grant Date.
(c) “Committee” means the Compensation and Talent Management Committee of the Board.
(d) “Disability” has the meaning set forth in the Executive Retention Agreement.
(e) “Executive Retention Agreement” means that certain Executive Retention Agreement by and between Grantee and Old DMRC, dated as of December 20, 2024.
(f) “Performance Period” means the period from December 1, 2025, through and including December 31, 2029.
(g) “Qualifying Change of Control Termination” has the meaning set forth in the Executive Retention Agreement.
(h) “Stock Price” as of any date equals the 20-consecutive-trading-day average closing price per share of the DMRC Shares through and including such date, as reported by The NASDAQ Stock Market LLC, as measured daily during the Performance Period; provided, however, that if the per-share price ascribed to the DMRC Shares in connection with a Change of Control Event occurring during the Performance Period equals or exceeds any of the thresholds in Section 3(b) below, then such Stock Price threshold will be deemed achieved as of immediately prior to the consummation of such Change of Control Event without regard to the preceding 20-consecutive-trading-day average closing price of the DMRC Shares; and provided further, that if the per-share price ascribed to the DMRC Shares in connection with a Change of Control Event occurring during the Performance Period falls between any two of the Stock Price thresholds in Section 3(b) below, then the vesting tranche associated with the higher of the two Stock Price thresholds will vest, on a prorated basis based on linear interpolation between such two Stock Price thresholds, as of immediately prior to the consummation of such Change of Control Event without regard to the preceding 20-consecutive-trading-day average closing price of the DMRC Shares. For example, upon a Change of Control Event resulting in a per-share price of $25.00 following the satisfaction of the $20.00 Stock Price threshold but prior to the satisfaction of the $30.00 Stock Price threshold, an incremental 15% of the PVUs will vest, such that a total of 35% of the PVUs will have vested as of such Change of Control Event.
(i) “Store Milestone” is a performance metric calculated as of June 30, 2026, where a minimum of 1,300 retail store locations are running firmware on their front-of-store scanners interoperable with the Company’s secure gift card solution.
(j) “Termination of Service” means the complete cessation of Grantee’s employment or service with the Company, DMRC, and their affiliates (including Board service) for any reason.
3. Vesting.
(a) Time-Vested LTIP Units. [•] LTIP Units (the “TVUs”) will vest in twelve equal quarterly installments of [•] LTIP Units on each consecutive calendar quarter-end beginning on December 31, 2025 (with vesting upon issuance retroactive to such date), in each case subject to Grantee’s continuous service with the Company through the applicable vesting date; provided, however, that one hundred percent of the TVUs will vest in full as of immediately prior to the consummation of a Change of Control Event through which Grantee remains in continuous service with the Company.
(b) Performance-Vested LTIP Units. The LTIP Units that are not TVUs (e.g., [•] LTIP Units) (the “PVUs”) will vest based on the achievement of certain Stock Price thresholds during the Performance Period, in each case subject to Grantee’s continuous service through the achievement of such Stock Price threshold, as follows:
(i) 20% of the PVUs will vest when the Stock Price first equals or exceeds $20.00.
(ii) 30% of the PVUs will vest when the Stock Price first equals or exceeds $30.00, such that 50% of the PVUs will then be vested.
(iii) 30% of the PVUs will vest when the Stock Price first equals or exceeds $42.50, such that 80% of the PVUs will then be vested.
(iv) 20% of the PVUs will vest when the Stock Price first equals or exceeds $55.00, such that 100% of the PVUs will then be vested.
The foregoing percentages are incremental, such that if two or more Stock Price thresholds are achieved as of the same date, all tranches satisfying their respective Stock Price thresholds on such date will vest.
(c) Additional PVU Vesting Terms.
(i) To the extent that any Stock Price threshold was achieved during the Performance Period prior to the Grant Date, the PVUs associated with such Stock Price threshold will be fully vested at issuance.
(ii) Once a Stock Price threshold is satisfied, vested PVUs will remain vested regardless of whether the Stock Price threshold remains satisfied thereafter.
(iii) To the extent that one or more Stock Price thresholds are not achieved during the Performance Period, the PVUs corresponding to such Stock Price threshold(s) will be forfeited by Grantee as of the last day of the Performance Period.
(iv) Any PVUs that do not vest in connection with a Change of Control Event will remain outstanding and eligible to vest following such Change of Control Event during the remainder of the Performance Period.
4. Termination of Service.
(a) Termination due to Death, Disability, or Qualifying Change of Control Transaction. Upon Grantee’s Termination of Service due to Grantee’s death, Disability, or Qualifying Change of Control Termination, all unvested TVUs will automatically vest, and all unvested PVUs will automatically vest regardless of whether the Stock Price thresholds have been achieved as of such termination.
(b) All Other Terminations. Exhibit A hereto describes the treatment of the LTIP Units upon Grantee’s Termination of Service for any reason other than those described in Section 4(a) above.
(c) Continuing Rights Under the LLC Agreement. Following any Termination of Service, Grantee will remain entitled to all rights applicable to the vested LTIP Units (after taking into account those LTIP Units that vest pursuant to Section 4(a) or 4(b) above) under the LLC Agreement, including the right to conversion of LTIP Units into Common Units upon achieving Common Unit Parity and the right to exchange vested Common Units for DMRC Shares.
5. Effect of Forfeiture. Following the forfeiture of any LTIP Units, neither Grantee nor his transferees, heirs, successors, or assigns will have any right, title, or interest whatsoever in such forfeited LTIP Units. Grantee will receive no payment from the Company or DMRC in connection with the forfeiture of any LTIP Units, including any distribution or payment in respect of Grantee’s Capital Account, if any, relating to the forfeited LTIP Units.
6. No Obligation to Register. The Company is under no obligation to register the LTIP Units pursuant to the Securities Act of 1933 (the “Securities Act”) or any other federal or state securities laws.
7. Restrictions on Transfer. The LTIP Units are subject to restrictions on transfer as set forth in the LLC Agreement, as applicable.
8. Investment Representations. Grantee represents and warrants to the Company that Grantee is acquiring the LTIP Units for Grantee’s own account and not with a view to or for sale in connection with any distribution of the LTIP Units or, as applicable, the Common Units. Grantee acknowledges that the LTIP Units (A) have not been and will not be registered under the Securities Act or any other applicable law of the United States and (B) have not been approved, disapproved, or recommended by any U.S. federal, state, or other securities commission or regulatory authority.
9. Profits Interests; Section 83(b) Election; Tax Withholding.
(a) The LTIP Units issued hereunder are intended to constitute “profits interests” as defined in Internal Revenue Service Revenue Procedure 93-27 and 2001-43 (or the corresponding requirements of any subsequent guidance promulgated by the Internal Revenue Service or other applicable law), and this Award Agreement should be interpreted to give effect to such intent.
(b) Grantee is required to make an election under Section 83(b) of the Code with respect to the LTIP Units issued hereunder within 30 days following the Grant Date. Grantee must complete the documentation set forth on Exhibit B hereto and must timely take all actions described therein in order to make such election (including providing a copy of each such election form to the Company).
(c) The Company is authorized to withhold from payments and distributions, or with respect to allocations to Grantee, all amounts required to be withheld under applicable law. All amounts withheld with respect to the LTIP Units will be treated as if such amounts were distributed to Grantee under the LLC Agreement. The Company will not be liable under this Award Agreement or the LLC Agreement for any over-withholding in respect of Grantee, and, in the event of any such over-withholding, Grantee’s sole recourse will be as provided under applicable law.
(d) GRANTEE ACKNOWLEDGES THAT IT IS GRANTEE’S SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE. BY SIGNING THIS AWARD AGREEMENT, GRANTEE REPRESENTS THAT GRANTEE HAS REVIEWED WITH GRANTEE’S OWN TAX ADVISORS THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED BY THIS AWARD AGREEMENT AND THAT GRANTEE IS RELYING SOLELY ON SUCH ADVISORS AND NOT ON ANY STATEMENTS OR REPRESENTATIONS OF THE COMPANY OR ANY OF ITS AGENTS. GRANTEE UNDERSTANDS AND AGREES THAT GRANTEE (AND NOT THE COMPANY) BE RESPONSIBLE FOR ANY TAX LIABILITY THAT MAY ARISE AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AWARD AGREEMENT.
10. Failure to Enforce Not a Waiver. The Company’s failure to enforce any provision of this Award Agreement may in no way be construed to be a waiver of such provision or of any other provision of this Award Agreement.
11. Governing Law. This Award Agreement is governed by, and should be construed according to, the laws of the State of Oregon without regard to its principles of conflict of laws.
12. Changes in Capital Structure. Without limiting Section 15.1 of the Plan, in the event of any stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend, or other change in DMRC’s corporate or capital structure or other change in corporate structure affecting the DMRC Shares or the Common Units, the Stock Price thresholds will be equitably adjusted to prevent the enlargement or dilution in Grantee’s rights hereunder and to preserve the intended economic incentives set forth herein.
13. Section 409A. The issuance of the LTIP Units is intended to be a grant of a profits interest rather than a deferral of compensation pursuant to Section 409A of the Code, and this Award Agreement and the issuance of the LTIP Units hereunder are to be construed and interpreted in accordance with such intent. Any action required by either of the Parties pursuant to this Award Agreement will be performed in such a manner that the LTIP Units do not become subject to the provisions of Section 409A of the Code.
14. Survival of Terms. This Award Agreement shall apply to and bind Grantee and the Company and their respective permitted assignees, transferees, heirs, legatees, executors, administrators, and legal successors.
15. Counterparts. This Award Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together will be deemed one and the same instrument.
16. Agreement Not a Contract for Services. Neither the granting of the LTIP Units, nor this Award Agreement, constitutes or evidences any agreement or understanding, express or implied, that Grantee has a right to continue to provide services as an officer, director, employee, consultant, or advisor of the Company, DMRC, or any Affiliate for any period of time or at any specific rate of compensation.
17. Authority of the Committee. The Committee has full authority to interpret and construe the terms of, and to administer, this Award Agreement, which determination as to any such matter of interpretation or construction shall be final, binding, and conclusive, in each case as an award granted under the Plan.
18. Severability. Should any provision of this Award Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding will not affect the validity of the remainder of this Award Agreement, the balance of which will continue to be binding upon the Parties with any such modification to become a part hereof and treated as though contained in this original Award Agreement. Moreover, if one or more of the provisions contained in this Award Agreement is for any reason held to be excessively broad as to scope, activity, subject, or otherwise so as to be unenforceable, then in lieu of severing such unenforceable provision, such provision or provisions should be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it then appears, and such determination by such judicial body should not affect the enforceability of such provisions or provisions in any other jurisdiction.
19. Acceptance. Grantee hereby acknowledges receipt of a copy of the LLC Agreement, this Award Agreement, and the Plan. Grantee has read and understands the terms and provisions of the LLC Agreement, this Award Agreement, and the Plan and accepts the LTIP Units subject to all the terms and conditions of the LLC Agreement, this Award Agreement, and the Plan.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Parties have executed this Award Agreement on the date first written above.
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DIGIMARC LLC |
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By: |
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Name: |
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Title: |
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| GRANTEE: | |||
| Riley McCormack | |||
[Signature Page to LTIP Unit Award Agreement]
EXHIBIT A
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Upon a Termination of Service by the Company for Cause or by Grantee without Good Reason, all then-unvested LTIP Units will be forfeited. |
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Upon a Termination of Service by the Company without Cause or by Grantee with Good Reason, in either case prior to June 30, 2026: |
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100% of the TVUs will become vested upon termination. |
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100% of the PVUs will become vested upon termination regardless of whether the Stock Price thresholds have been achieved as of such termination. |
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Upon a Termination of Service by the Company without Cause or by Grantee with Good Reason, in either case from August 1, 2026, through December 31, 2026: |
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100% of the TVUs will become vested upon termination. |
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100% of the PVUs will become vested upon termination regardless of whether the Stock Price thresholds have been achieved as of such termination. |
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Upon a Termination of Service by the Company without Cause or by Grantee with Good Reason, in either case from July 1, 2026, through July 31, 2026, and the Store Milestone has been met: |
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100% of the TVUs will become vested upon termination. |
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100% of the PVUs will become vested upon termination regardless of whether the Stock Price thresholds have been achieved as of such termination. |
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Upon a Termination of Service by the Company without Cause or by Grantee with Good Reason, in either case from July 1, 2026, through July 31, 2026, and the Store Milestone has not been met: |
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100% of the TVUs will become vested upon termination. |
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38.5% of each vesting tranche of the then-unvested PVUs will become vested upon termination regardless of whether the Stock Price thresholds have been achieved as of such termination. |
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All remaining then-unvested PVUs will remain eligible to vest until 25 days following DMRC’s release of its earnings for Q4 2027 (the “Vesting Deadline”), at which point any then-unvested PVUs will be forfeited, unless the Committee requests that Grantee continue to provide services to DMRC, including but not limited to services as a member of the Board. If Grantee continues to provide such services at the Board’s request, Grantee will be deemed to remain in continuous service, and the unvested PVUs will remain eligible to vest, and will not be forfeited, until (i) the cessation of the ongoing services or (ii) the Vesting Deadline, whichever is later. |
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Upon a Termination of Service by the Company without Cause or by Grantee with Good Reason, in either case from January 1, 2027, through January 31, 2027, and DMRC generates less than $25 million in Annual Recurring Revenue as of December 31, 2026: |
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100% of the TVUs will become vested upon termination. |
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All then-unvested PVUs will continue to vest until the Vesting Deadline, at which point any then-unvested PVUs will be forfeited, unless the Board requests that Grantee continue to provide services to DMRC, including but not limited to services as a member of the Board. If Grantee continues to provide such services at the Board’s request, Grantee will be deemed to remain in continuous service, and the unvested PVUs will remain eligible to vest, and will not be forfeited, until (i) the cessation of the ongoing services or (ii) the Vesting Deadline, whichever is later. |
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If (x) a Termination of Service by the Company without Cause or by Grantee with Good Reason occurs, in either case in 2027, and DMRC generates at least $25 million in Annual Recurring Revenue as of December 31, 2026, or (y) the Termination of Service without Cause or for Good Reason occurs between February 1, 2027, and December 31, 2027, and DMRC generates less than $25 million in Annual Recurring Revenue as of December 31, 2026: |
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100% of the TVUs will become vested upon termination. |
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50% of each vesting tranche of the then-unvested PVUs will become vested upon termination regardless of whether the Stock Price thresholds have been achieved as of such termination. |
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All remaining then-unvested PVUs will remain eligible to vest until the Vesting Deadline, at which point any then-unvested PVUs will be forfeited, unless Grantee continues to provide services to DMRC, including but not limited to services as a member of the Board. If Grantee continues to provide such services, Grantee will be deemed to remain in continuous service, and the unvested PVUs will remain eligible to vest pursuant to the vesting terms set forth in the Award Agreement. |
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Upon a Termination of Service by the Company without Cause or by Grantee with Good Reason, in either case on or after January 1, 2028: |
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100% of the TVUs will become vested upon termination. |
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All then-unvested PVUs will be forfeited, unless Grantee continues to provide services to DMRC, including but not limited to services as a member of the Board. If Grantee continues to provide such services, Grantee will be deemed to remain in continuous service, and the unvested PVUs will remain eligible to vest pursuant to the vesting terms set forth in the Award Agreement. |
EXHIBIT C
SECTION 83(b) ELECTION MATERIALS
FORM OF SECTION 83(b) ELECTION
INSTRUCTIONS
DIGIMARC LLC
To make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), in connection with your receipt, for tax purposes, of LTIP Units of DIGIMARC LLC (the “Company”), you should complete and sign three copies of the enclosed Section 83(b) Election form and mail two of the copies as indicated no later than 30 days after the Grant Date (as defined below).
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You should mail one copy of the Section 83(b) Election to the Internal Revenue Service, by certified mail (return receipt requested), using the attached letter to the Internal Revenue Service, which you must date and sign (also fill in your social security number). |
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You should deliver one copy of the Section 83(b) Election to the Company, using the attached letter, which you must date and sign. |
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You should retain one copy of the Section 83(b) Election and maintain records relating to your acquisition of the LTIP Units for as long as they may be needed for federal income tax purposes. |
ELECTION FORM
ELECTION TO INCLUDE LTIP UNITS IN GROSS INCOME PURSUANT TO
SECTION 83(b) OF THE INTERNAL REVENUE CODE
The undersigned received LTIP Units (the “LTIP Units”) of Digimarc LLC (the “Company”), on [•] (the “Grant Date”), in connection with the performance of services to the Company.
The undersigned desires to make an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (“Section 83(b)”), with respect to the LTIP Units acquired on the Grant Date.
Therefore, pursuant to Section 83(b) and Treasury Regulation §1.83-2 promulgated thereunder, the undersigned hereby makes an election, with respect to the LTIP Units (described more fully in Paragraph 2 below).
The following information is supplied in accordance with Treasury Regulation §1.83-2(e):
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The name, address and social security number of the undersigned: |
Name: ________________________________
Address: _______________________________
_______________________________
Social Security No.: ______________________
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A description of the property with respect to which the election is being made: [•] LTIP units in the Company, which are intended to constitute profits interests in the Company for federal tax purposes. |
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The date on which the property was transferred: _________________ (the Grant Date). The taxable year for which the election is made: ___________. |
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The restrictions to which the property is subject: The LTIP Units are subject to a time-based and performance-based vesting schedule. If the undersigned ceases to provide services to or for the benefit of the Company (including by providing services to certain of its affiliates) under certain circumstances or breaches certain obligations, or if certain performance goals are not achieved, then all or a portion of the LTIP Units may be subject to forfeiture. |
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The aggregate fair market value on the Grant Date of the property with respect to which the election is being made, determined without regard to any lapse restrictions: $0 |
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The aggregate amount paid for such property: $0 |
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A copy of this election has been furnished to the Company pursuant to Treasury Regulation §1.83-2(d). |
The undersigned has submitted a copy of this statement to the person for whom the services are performed in connection with the undersigned’s receipt of the above-described property. The taxpayer is the person performing the services in connection with the transfer of said property.
Signature:
Print Name:
Date:
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Internal Revenue Service Center
[Insert Address]
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Re: |
Section 83(b) Election |
SSN: __________________
Dear Sir or Madam:
Pursuant to Treasury Regulations Section 1.83-2(c) promulgated under Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), enclosed please find an election under Section 83(b) of the Code.
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Sincerely, |
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| Print Name: | |||
Enclosure
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Digimarc LLC
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Section 83(b) Election |
Dear Sir:
Pursuant to Treasury Regulations Section 1.83-2(d) promulgated under Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), enclosed please find a copy of an election under Section 83(b) of the Code.
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Sincerely, |
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| Print Name: | |||
Enclosure
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the use of our report dated March 11, 2026, with respect to the consolidated financial statements of Digimarc Corporation, incorporated herein by reference, and to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Portland, Oregon
March 12, 2026
