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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

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DIGIMARC CORPORATION
(Name of Registrant as Specified In Its Charter)

 
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DIGIMARC CORPORATION
19801 SW 72nd Avenue, Suite 100
Tualatin, Oregon 97062


NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2002

To the Stockholders of Digimarc Corporation:

        Notice is hereby given that the 2002 Annual Meeting of Stockholders (the Annual Meeting) of Digimarc Corporation, a Delaware corporation will be held on Thursday, May 9, 2002 at the River Place Hotel, 1510 SW Harbor Way, Portland, Oregon 97201, at 2:00 p.m., local time. The purposes of the Annual Meeting will be:

        The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. Our Board of Directors has fixed the close of business on March 15, 2002 as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.

        Whether or not you expect to attend the Annual Meeting in person, we urge you to mark, sign, date and return the enclosed proxy card as promptly as possible in the postage-prepaid envelope provided to ensure your representation and the presence of a quorum at the Annual Meeting. If you send in your proxy card and then decide to attend the Annual Meeting to vote your shares in person, you may still do so. Your proxy is revocable in accordance with the procedures set forth in the Proxy Statement.

    By Order of the Board of Directors,

 
 
LOGO

 
 
Bruce Davis
 Chief Executive Officer
Tualatin, Oregon
April 8, 2002		    


DIGIMARC CORPORATION
PROXY STATEMENT FOR 2002 ANNUAL MEETING OF STOCKHOLDERS

General Information

        This Proxy Statement is being furnished to the stockholders of Digimarc Corporation (sometimes referred to herein as the Company), a Delaware corporation, on or about April 8, 2002, in connection with the solicitation by our Board of Directors (the Board of Directors) of proxies for use in voting at our Annual Meeting of Stockholders (the Annual Meeting) to be held on Thursday, May 9, 2002, at 2:00 p.m., local time, at the River Place Hotel, 1510 SW Harbor Way, Portland, Oregon 97201, and any adjournment or postponement thereof. The shares represented by the proxies received, properly marked, dated, executed and not revoked will be voted at the Annual Meeting by the proxies elected thereby.

        The close of business on March 15, 2002 has been fixed as the record date (the Record Date) for determining the holders of shares of our common stock (Common Stock) entitled to notice of, and to vote at, the Annual Meeting. As of the close of business on the Record Date, there were 17,178,509 shares of Common Stock outstanding and entitled to vote at the Annual Meeting.

        Each outstanding share of Common Stock on the Record Date is entitled to one vote on all matters. The required quorum for the Annual Meeting is a majority of the shares outstanding, present either in person or by proxy, on the Record Date. There must be a quorum for the Annual Meeting to be held. Our Inspector of Elections will tabulate votes cast in person at the Annual Meeting.

Revocability of Proxy

        You may revoke your proxy and change your vote at any time prior to voting at the Annual Meeting by:

Solicitation

        This solicitation of proxies is being made by and paid for by us. Besides this solicitation by mail, our directors, officers and other employees may solicit proxies. Such persons will not receive any additional compensation for assisting in the solicitation. We will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners. We will reimburse such persons and our transfer agent for their reasonable out-of-pocket expenses in forwarding such material. We may also retain the services of a proxy solicitation, information agent and/or mailing service to perform the broker nominee search and to distribute proxy materials to banks, brokers, nominees and intermediaries, for which we would not pay more than $8,000.

Voting Procedures


ELECTION OF DIRECTORS
(Proposal No. 1)

        At the Annual Meeting, two directors are to be elected to serve for a term of three years and until their successors are elected and qualified, or until the death, resignation or removal of such director. Proxies will be voted for the election each of the nominees named below as director unless the authority to vote for the nominee is withheld. Mr. Davis and Mr. Grossi have indicated that each one is able and willing to serve if elected. In the event, however, that any nominee is unable or declines to serve as director at the time of the Annual Meeting, the proxies will be voted for any nominee who is designated by the current Board of Directors to fill the vacancy. If Mr. Davis or Mr. Grossi should become unavailable prior to the election, the Board of Directors may recommend another person, and Mr. Davis and Mr. Ranjit, as your representatives, will vote for such person.

        Our Bylaws authorize the number of directors to be not less than five and not more than eleven. The number of directors is currently fixed at eight. Our Board of Directors is divided into three classes, Class I, Class II and Class III. One class of directors will be elected each year for a three-year term and until their successors are selected and qualified or until their earlier resignation or removal. Mr. Taysom, Mr. van Luijt and Mr. Krepick, Class I directors, will serve until our 2003 annual meeting of stockholders; Mr. Monego, Mr. Rhoads and Mr. Smith, Class II directors, will serve until our 2004 annual meeting of stockholders; and Mr. Davis and Mr. Grossi, Class III directors, are up for election at this Annual Meeting.

 
   Age
   Director
Since
   Expiration
of Term
Nominees:            
Bruce Davis   49   1997   2002
Brian Grossi   51   1996   2002

Continuing Directors:
 
 
 
 
 
 
Philip J. Monego, Sr.   54   1996   2004
William A. Krepick   56   2000   2003
Geoffrey Rhoads   39   1995   2004
Peter Smith   69   2000   2004
Alty van Luijt   50   2000   2003
John Taysom   48   1997   2003

Class III Director Nominees

        Bruce Davis has served as our chief executive officer and director since December 1997. He also held the title of President from December 1997 through May 2001. Prior to joining us, Mr. Davis served as president of Titan Broadband Communications, a provider of information technology and satellite communications systems and services, from April 1997 to December 1997. Prior to that, Mr. Davis served as president of Prevue Networks, Inc., a supplier of electronic program guides and program promotion services for the cable and satellite television markets, from July 1996 to February 1997. Prior to that, Mr. Davis founded and served as president of TV Guide On Screen, a joint venture of News Corporation and TCI (now part of AT&T) which supplied electronic program guides and navigational software for the cable television market, from January 1993 to July 1996.

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Mr. Davis received a B.S. in accounting and psychology and an M.A. in criminal justice from the State University of New York at Albany, and a J.D. from Columbia University.

        Brian J. Grossi has served as one of our directors since July 1996. Mr. Grossi co-founded AVI Capital, a venture capital firm specializing in high-technology companies, in 1994. Prior to that, Mr. Grossi was a general partner with Alpha Partners, a venture capital firm, from 1982 to 1992. Prior to that, he worked at the Stanford Research Institute as a research engineer and project leader from 1976 to 1982. Currently, Mr. Grossi serves as a director of Intraspect Software, Inc., and Pointbase, Inc. Mr. Grossi received a B.S. and an M.S. in mechanical engineering from Stanford University.

Continuing Class I Directors

        William A. Krepick was appointed to our Board of Directors in October 2000. Mr. Krepick is president and chief executive officer of Macrovision Corporation since November 2001. He has been with Macrovision since November 1988, and served as vice president, Sales and Marketing until June 1992 and senior vice president, Theatrical Copy Protection from July 1992 to June 1995, and President and Chief Operating Officer from July 1995 to October 2001. Prior to 1988, he worked for ROLM Corp., Coherent, Inc. and SRI International. Mr. Krepick has a B.S.M.E. from Rensselaer Polytechnic Institute and an M.B.A. from Stanford University.

        Alty van Luijt was appointed to our Board of Directors in December 2000. Since April 2000, Mr. van Luijt has been the senior vice president for Strategy and Business Development with Philips Corporate Research, a unit of Royal Philips Electronics. Prior to that, he was senior vice president for Philips Digital Networks from May 1999 through April 2000. He has held various positions within Philips since 1977. Mr. van Luijt holds an M.S. in electronics from Eindhoven University of Technology in the Netherlands.

        John Taysom has served as one of our directors since December 1997. Mr. Taysom has been employed by Reuters, a worldwide television and news agency, since 1982 and is currently the co-CEO of the Reuters Greenhouse Fund. Mr. Taysom also serves on the Board of Directors of Equinix (EQIX) and a number of private companies. Mr. Taysom received a B.Sc. in economics from Bath University.

Continuing Class II Directors

        Philip J. Monego, Sr. has been chairman of our Board of Directors since 1996. Mr. Monego has served as founder, chief executive officer and chairman of the Board of Directors of Voquette, Inc., an enterprise content management software company for Fortune 2000 organizations and government intelligence agencies, since May 1999. Prior to that, Mr. Monego was co-founder, president and chief executive officer of NetChannel, Inc., an Internet information delivery service, from May 1996 to June 1998. Prior to that, Mr. Monego was interim president and chief executive officer of Yahoo! Corporation from April 1995 to September 1995. During his over 30 years in the information technology industry, Mr. Monego has been a founder, CEO, senior executive and investor in more than a dozen companies. As the president and founder of Technology Perspectives, a Strategic Management Consulting Firm, started in 1987, he has served as a strategic advisor to chief executives for some of the world's largest information technology and media companies. He is a private investor and is also currently a venture partner in the Media Technology Venture family of funds. Mr. Monego received a B.A. in management from LaSalle University.

        Geoffrey Rhoads founded Digimarc in 1995 and now serves as our chief technology officer and director. Previously, Mr. Rhoads served as our interim president from September to November 1995, and as chairman of our Board of Directors from January 1995 to March 1996. Prior to that, Mr. Rhoads was the founder and president of Pinecone Imaging Corporation, a company which

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develops imaging systems for telescopes, from 1992 through 1995. Mr. Rhoads received his B.A. in physics from the University of Oregon.

        Peter Smith was appointed to our Board of Directors in April 2000. Mr. Smith is currently retired. Most recently, Mr. Smith served as president of News Technology for News America from January 1998 to February 2000. In that capacity, he coordinated technology throughout News Corporation and served as a technology advisor to its board of directors. From January 1996 to January 1998, Mr. Smith served as its Executive Vice President, Television. Prior to that, Mr. Smith held the position of Director, Technology for News International (UK). Both News Technology and News International are News Corporation companies. Mr. Smith received a Bachelor of Engineering and Bachelor of Science from the University of Sydney, with first class honors.

The Board of Directors Recommends a Vote FOR the Election of each of the Nominees Named Above.


RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 2)

        The Board of Directors has appointed KPMG LLP as our independent auditors to audit our financial statements for the year ending December 31, 2002. If the stockholders do not ratify the selection of KPMG LLP as our independent auditors, our Board of Directors will reconsider the appointment. A representative of KPMG LLP, which served as our auditors in 2001, is expected to be present at the Annual Meeting and will be available to respond to appropriate questions from stockholders and to make a statement if he or she desires to do so.

The Board of Directors Recommends a vote FOR the Ratification of KPMG LLP as our Independent Auditors for the year ending December 31, 2002.


PROPOSAL THREE—AMENDMENT AND RESTATMENT OF DIGIMARC CORPORATION'S
1999 STOCK INCENTIVE PLAN
(Proposal No. 3)

        You are asked to vote on the proposed amendment and restatement of our 1999 Stock Incentive Plan (the 1999 Plan) to increase the number of shares of Common Stock reserved for issuance under the 1999 Plan from 6,147,714 shares to 6,897,714 shares, an increase of 750,000 shares. The purpose of amending the 1999 Plan is to enable us to continue to attract and retain talented employees by offering them participation in the 1999 Plan. As a result of our acquisition of the assets of the United States government identification systems business and foreign government digital identification systems business of Polaroid Corporation, Polaroid ID Systems, Inc. and certain other affiliated entities of Polaroid Corporation, we added approximately an additional 200 employees to our existing work force. In part because of this large increase to our workforce, the shares remaining in the 1999 Plan may not be sufficient to allow us to recruit and retain capable employees, consultants and directors for the successful conduct of our business.

        The Board of Directors has approved an amendment of the 1999 Plan to increase the number of shares of Common Stock reserved for issuance under the 1999 Plan from 6,147,714 shares to 6,897,714 shares, an increase of 750,000 shares. This proposal to amend the 1999 Plan requires stockholder approval pursuant to the terms of the 1999 Plan. The Board of Directors recommends approval of the amendment because it believes the amendment increases our ability to attract, retain and motivate key employees, officers and directors by providing them with an enhanced proprietary interest in us, which results in an incentive to enhance our growth and profitability.

        A general description of the principal terms of the 1999 Plan is set forth below. However, the summary does not purport to be a complete description of all of the provisions of the 1999 Plan. A

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copy of the 1999 Plan is attached hereto as Exhibit A and is also available to any stockholder upon request.

General Description.

        The 1999 Plan was initially approved by our Board of Directors in October 1999 and by our stockholders in November 1999, and amended by our Board of Directors in May 2000 and approved by our stockholders in July 2000. On March 29, 2002, the Board of Directors approved an amendment to the 1999 Plan, conditioned upon and not to take effect until approved by our stockholders, to increase the number of shares of common stock reserved for issuance under the 1999 Plan by 750,000 shares.

        As of March 15, 2002, 81,942 options to purchase shares of our common stock under the 1999 Plan have been exercised, 4,707,791 options to purchase shares of common stock are outstanding, and options to purchase 1,357,981 shares of common stock remained available for grant. The outstanding options were exercisable at a weighted average exercise price of $19.23 per share. As of March 15, 2002, the number of employees, directors and consultants eligible to receive grants under the 1999 Plan was approximately 400 persons.

        Amendment to Increase Shares Reserved.    As of March 15 2002, the number of shares reserved for issuance under the 1999 Plan is 6,147,714. This number equals the original 1,500,000 shares authorized for issuance at the time the 1999 Plan was implemented, plus another 75,322 shares that were either reserved but not granted under our 1995 Stock Incentive Plan as of the date of our initial public offering or were awards under our 1995 Stock Incentive Plan that have been forfeited, expired or were cancelled after our initial public offering, plus 1,500,000 shares authorized for issuance and approved by our stockholders in July 2000, plus 3,072,392 total aggregate shares of common stock reserved for issuance under the 1999 Plan pursuant to the automatic annual increase on January 1, 2001 and January 1, 2002.

        The proposed amendment to the 1999 Plan provides that the number of shares reserved for issuance will be increased by 750,000 shares, bringing the total current reserve for issuance to 6,897,714.

        Other Terms of the 1999 Plan.    The purpose of the 1999 Plan is to attract and retain the best available personnel, to provide additional incentive to our employees, directors and consultants and our related entities and to promote the success of our business. The 1999 Plan provides for the granting to employees of incentive stock options, and the granting to our employees, directors and consultants and our related entities of non-statutory stock options, stock appreciation rights, dividend equivalent rights, restricted stock, performance units, performance shares and other equity-based rights.

        Under the provisions of the 1999 Plan, the number of shares reserved under the 1999 Plan will be automatically increased by awards under our 1995 Stock Incentive Plan that are forfeited, expire or are cancelled. In addition, the 1999 Plan provides that the number of shares of stock reserved for issuance under the 1999 Plan will be increased annually by a number equal to 7% of the fully-diluted number of shares outstanding as of that date or a lesser number of shares determined by the Board of Directors. However, the maximum number of shares available for issuance as incentive stock options shall be increased by the lesser of 1,200,000 shares, 7% of the number of fully-diluted shares outstanding as of that date or a lesser number of shares determined by the Board of Directors.

        Under the 1999 Plan, our Board of Directors, or the compensation committee, administers the granting of stock and options to directors and officers in a way that allows these grants of stock to be exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended (the Securities Exchange Act) and determines the provisions, terms and conditions of each award. With respect to Awards under the 1999 Plan subject to Internal Revenue Code (Code) Section 162(m), the Compensation Committee consists solely of two or more "outside directors" as defined under Code Section 162(m) and applicable tax regulations. When stock or options are granted to other participants

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in the 1999 Plan, our Board of Directors, or the compensation committee administers these awards and determines the provisions, terms and conditions of each award. For grants of awards to individuals not subject to Rule 16b-3 and Code Section 162(m), the Board of Directors may authorize one or more officers to grant such awards.

        During their lifetime, those who hold the incentive stock options granted under this plan cannot transfer these options. The options may be distributed by a will or the laws of descent upon the death of the option holder. No one is allowed to exercise the incentive stock options except the person to whom the options were first issued while that person is alive. Stock or options other than incentive stock options which are issued under the 1999 Plan can be transferred to the extent agreed upon at the time of the award.

        The term of awards under the 1999 Plan will be determined by the Board of Directors or the compensation committee; however, the term of an incentive stock option may not be for more than ten years (or five years in the case of incentive stock options granted to any grantee who owns stock representing more than 10% of our combined voting power or any of our parent or subsidiary corporations). Where the award agreement permits the exercise or purchase of an award for a period of time following the recipient's termination of service with us, disability or death, that award will terminate to the extent not exercised or purchased on the last day of the specified period or the last day of the original term of the award, whichever occurs first.

        The exercise price or purchase price, if any, of awards under the 1999 Plan that are not incentive stock options will be determined by the Board of Directors or the compensation committee. In the case of incentive stock options, that price cannot be less than 100% (or 110%, in the case of incentive stock options granted to any grantee who owns stock representing more than 10% of our combined voting power or any of our parent or subsidiary corporations) of the fair market value of the common stock on the date the option is granted. The exercise price of non-qualified stock options shall not be less than 50% of the fair market value of the stock. The aggregate fair market value of the common stock with respect to any incentive stock options that are exercisable for the first time by an eligible employee in any calendar year may not exceed $100,000.

        The number of stock options and stock appreciation rights which may be awarded to an employee in any fiscal year is limited to 750,000 shares. However, in connection with his or her initial commencement of services with us, a participant in the 1999 Plan may be granted stock options and stock appreciation rights for up to an additional 750,000 shares, which shall not count against the limit set forth in the previous sentence. The purpose of the limit is to ensure that any stock options and stock appreciation rights granted under the 1999 Plan will qualify as "performance-based compensation" under Section 162(m) of the Code.

        The form of payment for the shares of common stock when options are exercised or stock is purchased under an award will be determined by the Board of Directors or the compensation committee and may include cash, check, shares of common stock or the assignment of part of the proceeds from the sale of shares acquired upon exercise or purchase of the award.

        If a third party acquires us through the purchase of all or substantially all of our assets, a merger or other business combination, except as otherwise provided in an individual award agreement, all unexercised options will terminate unless assumed by the successor corporation. Unless terminated sooner, the 1999 Plan will terminate automatically in 2009. The Board of Directors has the authority to amend, suspend or terminate the 1999 Plan, subject to stockholder approval of certain amendments. However, no action may be taken which will adversely affect awards previously granted under the 1999 Plan unless agreed to by the affected grantees.

        Certain Federal Tax Consequences.    The grant of a non-qualified stock option under the 1999 Plan does not result in any federal income tax consequences to the optionee or to us. Upon exercise of a

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non-qualified stock option, the optionee is subject to income taxes at the rate applicable to ordinary compensation income on the difference between the option exercise price and the fair market value of the shares on the date of exercise. This income is subject to withholding for federal income and employment tax purposes. We are entitled to an income tax deduction in the amount of the income recognized by the optionee, subject to possible limitations imposed by Section 162(m) of the Code. Any gain or loss on the optionee's subsequent disposition of the shares of common stock will receive long or short-term capital gain or loss treatment, depending on whether the shares are held for more than one year following exercise. We do not receive a tax deduction for any such gain.

        The grant of an incentive stock option under the 1999 Plan does not result in any federal income tax consequences to the optionee or to us. An optionee recognizes no federal taxable income upon exercising an incentive stock option (subject to the alternative minimum tax rules discussed below), and we receives no deduction at the time of exercise. The Internal Revenue Service recently issued proposed regulations that would subject participants to withholding at the time participants exercise an incentive stock option for Social Security, Medicare and other payroll taxes (not including income tax) based upon the excess of the fair market value of the shares on the date of exercise over the exercise price. These proposed regulations, if adopted, would be effective only for the exercise of incentive stock options on or after January 1, 2003. In the event of a disposition of stock acquired upon exercise of an incentive stock option, the tax consequences depend upon how long the optionee has held the shares of common stock. If the optionee does not dispose of the shares within two years after the incentive stock option was granted, nor within one year after the option was exercised, the optionee will recognize a long-term capital gain (or loss) equal to the difference between the sale price of the shares and the exercise price. We are not entitled to any deduction under these circumstances.

        If the optionee fails to satisfy either of the foregoing holding periods, he or she must recognize ordinary income in the year of the disposition (referred to as a "disqualifying disposition"). The amount of such ordinary income generally is the lesser of (i) the difference between the amount realized on the disposition and the exercise price, or (ii) the difference between the fair market value of the stock on the exercise date and the exercise price. Any gain in excess of the amount taxed as ordinary income will be treated as a long or short-term capital gain, depending on whether the stock was held for more than one year. We, in the year of the disqualifying disposition, are entitled to a deduction equal to the amount of ordinary income recognized by the optionee, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the appropriate taxes with respect to such income (if required) and the individual's total compensation is deemed reasonable in amount.

        The "spread" under an incentive stock option—i.e., the difference between the fair market value of the shares at exercise and the exercise price—is classified as an item of adjustment in the year of exercise for purposes of the alternative minimum tax.

        The grant of restricted stock will subject the recipient to ordinary compensation income on the difference between the amount paid for such stock and the fair market value of the shares on the date that the restrictions lapse. This income is subject to withholding for federal income and employment tax purposes. We are entitled to an income tax deduction in the amount of the ordinary income recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the appropriate taxes with respect to such income and the individual's total compensation is deemed reasonable in amount. Any gain or loss on the recipient's subsequent disposition of the shares will receive long or short-term capital gain or loss treatment depending on whether the shares are held for more than one year and depending on how long the stock has been held since the restrictions lapsed. We do not receive a tax deduction for any such gain.

        Recipients of restricted stock may make an election under Internal Revenue Code Section 83(b) ("Section 83(b) Election") to recognize as ordinary compensation income in the year that such

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restricted stock is granted the amount equal to the spread between the amount paid for such stock and the fair market value on the date of the issuance of the stock. If such an election is made, the recipient recognizes no further amounts of compensation income upon the lapse of any restrictions and any gain or loss on subsequent disposition will be long or short-term capital gain to the recipient. The Section 83(b) Election must be made within thirty days from the time the restricted stock is issued.

        Recipients of stock appreciation rights ("SARs"), performance units or performance shares generally should not recognize income until such rights are exercised (assuming there is no ceiling on the value of the right). Upon exercise, the participating individual will normally recognize ordinary compensation income for federal income tax purposes equal to the amount of cash and the fair market value of stock, if any, received upon such exercise. Participating individuals who are employees will be subject to withholding with respect to income recognized upon exercise of a SAR, performance unit or performance share.

        We will be entitled to a tax deduction to the extent and in the year that ordinary income is recognized by the participating individual, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the appropriate taxes with respect to such income and the individual's total compensation is deemed reasonable in amount. Participating individuals will recognize gain upon the disposition of any stock received on exercise of a SAR, performance unit or performance share equal to the excess of (1) the amount realized on such disposition over (2) the ordinary income recognized with respect to such stock under the principles set forth above. That gain will be taxable as long or short-term capital gain depending on whether the stock was held for more than one year.

        Recipients of dividend equivalent rights will recognize ordinary compensation income on any dividend payments received, which income is subject to withholding for federal income and employment tax purposes. We are entitled to an income tax deduction in the amount of the income recognized by a recipient, subject to the requirement of reasonableness, certain limitations imposed by Section 162(m) of the Code and the satisfaction of withholding obligations.

        THE FOREGOING IS ONLY A SUMMARY OF THE CURRENT EFFECT OF FEDERAL INCOME TAXATION UPON THE GRANTEE AND US WITH RESPECT TO THE GRANTEE'S PARTICIPATION IN THE 1999 PLAN. REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF A GRANTEE'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY TO WHICH THE GRANTEE MAY BE SUBJECT.

        Amended 1999 Plan Benefits.    As of the date of this Proxy Statement, no executive officer, director and no associates of any executive officer or director, has been granted any options subject to stockholder approval of the proposed amendment. The benefits to be received pursuant to the 1999 Plan amendments by our executive officers, directors and employees are not determinable at this time.

Vote Required

        The affirmative vote of the holders of a majority of the shares of our Common Stock present or represented at the Annual Meeting is required to approve the amendment of the 1999 Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSED AMENDMENT OF DIGIMARC CORPORATION'S 1999 STOCK INCENTIVE PLAN.

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Meetings and Committees of the Board of Directors

        During 2001, the Board of Directors met ten times. Each director attended at least 75% of the aggregate of (a) the total number of Board of Directors meetings held during the period in which he was a director and (b) the total number of committee meetings of the Board of Directors on which he served during the period in which he was a director.

        The Board of Directors has a compensation committee and an audit committee. The Board of Directors does not have a nominating committee.

        The compensation committee, consisting of Messrs. Monego and Grossi, exercises the authority of the Board of Directors on all compensation matters, including both cash and equity incentive compensation, and administers our employee benefit plans. The compensation committee met eight times during 2001.

        The audit committee, consisting of Messrs. Monego, Grossi, and Smith, recommends the selection of independent public accountants to the Board of Directors, reviews the scope and results of the audit and other services provided by our independent accountants and reviews our accounting practices and systems of internal accounting controls. The audit committee met four times during 2001.

        The Board of Directors adopted and approved the current charter for the audit committee in May 2000, a copy of which was attached to our Proxy Statement for the 2001 Annual Meeting of Stockholders. A copy of that Proxy Statement (as well as other information regarding Digimarc) can be inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission at: Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or you may obtain a copy by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains a website that contains reports, proxy statements and other information regarding us at http://www.sec.gov. All members of the audit committee are "independent" as that term is defined in Rule 4200 of the listing standards of the National Association of Securities Dealers.

Director Compensation

        Directors who are also our employees receive no additional compensation for their services as directors. Directors who are not our employees do not receive a fee for attendance in person at meetings of the Board of Directors or committees of the Board of Directors, but they are reimbursed for travel expenses and other out-of-pocket costs incurred in connection with their attendance of meetings.

        We have a 1999 Non-Employee Director Option Program, which was approved by our Board of Directors in October 1999, became effective in December 1999 and was amended on April 22, 2001 and on March 29, 2002. The 1999 Non-Employee Director Option Program, as amended, establishes an automatic option grant program for the grant of awards to our non-employee directors. Under this program, existing non-employee directors first elected to our Board of Directors are automatically granted an option to acquire 20,000 shares of Common Stock at an exercise price per share equal to fair market value of the Common Stock at the date of grant. These options vest and become exercisable in 36 equal installments on each monthly anniversary of the grant date, such that the stock option will be fully exercisable three years after the grant date. Upon the date of each annual stockholders meeting, each non-employee director who has been a member of our Board of Directors for at least six months prior to the date of the stockholders meeting will receive an automatic grant of options to acquire 12,000 shares of our Common Stock at an exercise price per share equal to fair market value of the Common Stock at the date of grant. These options vest and become exercisable in twelve equal installments on each monthly anniversary of the grant date, such that the stock option will be fully exercisable one year after the grant date.

9


        The 1999 Non-Employee Director Option Program was amended on March 29, 2002 to provide for the automatic grant of an option to acquire 3,000 shares of Common Stock at an exercise price per share equal to the fair market value of the Common Stock at the date of grant to each non-employee director who serves as a member of a committee of the Board of Directors immediately following each annual meeting of our stockholders, commencing with this Annual Meeting to be held on May 9, 2002. These options vest and become exercisable in twelve equal installments on each monthly anniversary of the grant date, such that the stock option will be fully exercisable one year after the grant date.

Relationships Among Directors or Executive Officers

        There are no family relationships among any of our directors or executive officers.

Compensation Committee Interlocks and Insider Participation

        No member of our compensation committee was at any time during the fiscal year ended December 31, 2001 an officer or employee of ours. No member of our compensation committee serves as a member of the Board of Directors or compensation committee of any entity that has any executive officer serving as a member of our Board of Directors or compensation committee. During 2001, Bruce Davis participated in deliberations of our Board of Directors concerning executive officer compensation.


REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following report shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such report be incorporated by reference into any such filings, nor be deemed to be incorporated by reference into any future filings under the Securities Act or the Exchange Act.

        The Audit Committee hereby reports as follows:

        1.    The Audit Committee has reviewed and discussed the audited consolidated financial statements with the Company's management.

        2.    The Audit Committee has discussed with KPMG LLP, the Company's independent accountants, the matters required to be discussed by SAS 61, as amended by Statement on Auditing Standards No. 90 (Communication with Audit Committees).

        3.    The Audit Committee has received the written disclosures and the letter from KPMG LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), has reviewed and discussed with KPMG LLP their independence from the Company and has considered whether the provision of the non-audit services during 2001 is compatible with maintaining KPMG LLP's independence from the Company.

        4.    Based on the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board of Directors of Digimarc, and the Board has approved, that the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, for filing with the Securities and Exchange Commission.

Philip J. Monego, Sr.
Brian J. Grossi
Peter Smith

10

AUDIT FEES, FINANCIAL INFORMATIONS SYSTEMS DESIGN AND IMPLEMENTATION AND ALL OTHER FEES

        The following table presents fees for professional audit services rendered by KPMG LLP for the audit of the Company's annual financial statements for 2001, and fees billed for other services rendered by KPMG, LLP.

Audit fees, excluding fees for other audit related services(1)   $ 233,700

Systems Integration Fees
 
 
—

All other fees:
 
 
 
 
Audit related fees(2)
 
 
118,000
 
Other non-audit service fees(3)
 
 
23,445
   

Total Audit and Non-Audit Fees
 
$
375,145




 

 

 

        As set forth in the Audit Committee Report, the Audit Committee has considered and determined that the provision of the non-audit services described above was compatible with maintaining KPMG LLP's independence.


MANAGEMENT

Officers

        The following table sets forth certain information regarding our executive officers and corporate officers.

Name
   Age
   Position
Executive Officers        
Bruce Davis   49   Chief Executive Officer and Director
Geoffrey Rhoads   39   Chief Technology Officer and Director
Paul Gifford   49   President and Chief Operating Officer
E. K. Ranjit   52   Chief Financial Officer
Robert Chamness   49   Vice President, General Counsel and Secretary
Michael Gorriarian   41   Chief Marketing Officer and Vice President of Sales
J. Scott Carr   39   Vice President and General Manager, Secure Documents
Reed Stager   41   Vice President and General Manager, Global Licensing
John Munday   52   President, Digimarc ID Systems, LLC
Indraneel Paul   45   Chief Operating Officer, Digimarc ID Systems, LLC

Corporate Officers
 
 
 
 
Burt W. Perry   47   Vice President of Engineering
William Y. Conwell   43   Vice President of Intellectual Property

Information concerning Mr. Davis and Mr. Rhoads is included under "Election of Directors."

11


Executive Officers

        Paul Gifford has been our President and Chief Operating Officer since April of 2001. Prior to that, Mr. Gifford served as the President and COO at Andromedia, Inc, an Internet software company. While there, he was responsible for building their executive team, led the acquisition of another software company, and managed both their US and European operations. From 1996 to 1998, Mr. Gifford served as the Vice President of Product Development at Auspex Systems Inc. In 1996, he served as a Vice President of Tencor Instruments. From 1985 to 1991, he founded and led the management of Sequent's core platform engineering organization and later served at Sequent as the General Manager of the business unit responsible for developing a Windows NT-based family of network server systems. He finished his time at Sequent as the Vice President of Enterprise Engineering. He also has held lead development and director level positions at Tektronix, Inc., IPL Systems, Inc. and Raytheon Co. Mr. Gifford has served on the Oregon Advanced Computing Institute's Technical Advisory Board as well as the Oregon Chapter of the American Electronics Association, served as Director for the Oregon Multimedia alliance, and was a member of board of directors for somethingelegant.com. Mr. Gifford holds a BSEE from Rochester Institute of Technology, a MSEE from the Rochester Institute of Technology/Brown University, and an Executive MBA from Stanford University.

        E. K. Ranjit has served as our Chief Financial Officer since August 1999 and was Secretary between November 1999 and February 2002. Prior to that, he served as Vice President of Finance and Treasurer of TriQuint Semiconductor, Inc., a supplier of integrated circuits for the wireless communications, telecommunications, data communications and aerospace markets from July 1996 to August 1999, and as its Corporate Controller from May 1991 to June 1996. Prior to that, Mr. Ranjit held management positions at GigaBit Logic and United Technologies Mostek. Mr. Ranjit received a B.S. from the University of Texas at Dallas, an M.B.A. from Pepperdine University, and is a Certified Public Accountant.

        Robert Chamness has served as vice president and general counsel since January 2002 and was elected corporate secretary in February 2002. Prior to joining Digimarc, Mr. Chamness was president and chief operating officer of Concentrex Incorporated (previously CFI ProServices, Inc.) from 1995 to 2000 and executive vice president and general counsel from 1993 to 1995. Prior to that, Mr. Chamness practiced law in San Francisco, Washington, D.C., and Indianapolis from 1978 to 1993. A nationally recognized expert in financial services, Mr. Chamness chaired the Consumer Financial Services Committee of the American Bar Associations's Business Law Section, served as president of the American College of Consumer Financial Services Lawyers, and received the American Bankers Association Distinguished Service Award. Mr. Chamness holds an A.B. cum laude from Wabash College and a J.D. magna cum laude from the Indiana University School of Law.

        Michael Gorriaran has served as chief marketing officer and vice president of sales since February 2002. Most recently, Mr. Gorriarán was a consultant with NewVision Management Consulting in Portland, providing strategic planning and marketing management services to firms in the high technology industry. Previously, he spent 18 years serving in various general management, marketing, strategic planning and sales management roles at Xerox Corporation, where he was responsible for leading domestic and international organizations, launching new products and leading business development initiatives in the areas of professional services and business process outsourcing within Xerox's high-volume database printing, publishing and electronic document management businesses. From 2000 to 2001, Mr. Gorriarán was vice president and general manager of Xerox's Industry Solutions and Services Organization in England, where he managed a $340 million business unit serving clients in seven countries throughout Northern and Central Europe. From 1997 to 1999, he was the vice president and general manger of a $230 million business unit serving clients throughout the Carolinas and Eastern Georgia.Mr. Gorriaran holds a BS in Marketing from the University of Rhode Island and an MM/MBA from Northwestern University.

12


        J. Scott Carr has served as our vice president and general manager of secure documents since June 1999. Prior to that, he served as our vice president of marketing and business development from January 1998 to May 1999, and director of business development from May 1996 to December 1997. Prior to joining us, Mr. Carr served as vice president of marketing at nCUBE Corporation, a manufacturer of video servers, from July 1995 to May 1996. Prior to that, Mr. Carr worked as a staff architect at Sequent Computer Systems, Inc., a computer equipment manufacturer, from August 1992 to July 1995. Mr. Carr received his B.S. in computer science from Oregon State University.

        Reed Stager has served as our vice president, Global Licensing since October 2001 and as our vice president of Media Commerce from May 2000 to October 2001. Prior to joining Digimarc, Mr. Stager was vice president of marketing and business development for the PVCS Division of MERANT, Inc. from April 1997 to May 2000. From April 1993 through March 1997, Mr. Stager was General Manager of In Focus Systems Services businesses and Director of Worldwide Marketing In Focus Systems. Prior to that, Mr. Stager held management positions at Tektronix and Mentor Graphics. Mr. Stager has over 20 years experience in high technology marketing, e-commerce, business development, strategic planning, services and operations. Mr. Stager holds an M.B.A. from Portland State University and a B.S. in Business from Lewis and Clark College.

        John Munday has served as president of Digimarc ID Systems, LLC since December 2001. Before joining Digimarc, he held the equivalent position in the identification systems business, a division of Polaroid Corporation, from November 1995 through December 2001 during which time the division transitioned from film products to digital systems while building market share in the US and internationally. Previously, Mr. Munday led development of fast-growing high technology businesses for Inchcape PLC. in environmental chemistry, the DuPont Company in digital graphics and imaging and for Allied-Signal Corporation in portable computing devices. Mr. Munday has a B.Sc (honors) degree in theoretical chemistry from La Trobe University in Melbourne, Australia and an MBA from the Harvard Graduate School of Business.

        Indraneel Paul has served as Chief Operating Officer of Digimarc ID Systems, LLC since January 2002. Prior to that, Mr. Paul served as vice president and general manager of MediaBridge since November 1999. From January 1995 through October 1999, Mr. Paul held various positions with TV Guide Networks, a provider of electronic television program guides for the cable television industry. His last position at TV Guide Networks was executive vice president of operations. Prior to that, he served as vice president of engineering and operations at Vyvx, a provider of fiber optic transmission services for the broadcast television industry. Mr. Paul received a B.Tech. in electrical engineering from the Indian Institute of Technology and an M.S. in electrical engineering from Rensselaer Polytechnic Institute.

Corporate Officers

        Burt W. Perry has served as our vice president of engineering since July 1996 and interim co-president from August 1997 through December 1997. Prior to that, Mr. Perry worked as an engineering manager at Intel, designing and managing technology and software development, from June 1993 to July 1996. Mr. Perry received a B.S. in computer science from the University of Delaware.

        William Y. Conwell has served as our vice president of intellectual property since July 1999. Prior to joining us, Mr. Conwell was a patent attorney at Klarquist Sparkman Campbell Leigh & Whinston, LLP since 1984, and became a partner in January 1990. Mr. Conwell received a bachelor's degree in Electrical Engineering from Georgia Institute of Technology and a J.D. from Emory University School of Law.

13


EXECUTIVE COMPENSATION

Summary Compensation Table

        The following table contains information in summary form concerning the compensation paid to our chief executive officer and four other most highly compensated executive officers (each, a Named Executive Officer), whose total salary and bonus exceeded $100,000 during the year ended December 31, 2001.

 
    
   Annual
Compensation
   Long-Term
Compensation
    
Name and Principal Position
   Year
   Salary($)
   Bonus($)
   Securities
Underlying
Options(#)
   (1)
All Other
Compensation ($)
Bruce Davis(2)
Chief Executive Officer		   2001
2000
1999		   300,000
250,000
250,000		   65,625
60,000
133,500		   150,000
550,000
262,500		   —
—
3,631

E. K. Ranjit
Chief Financial Officer
 
2001
2000
1999
 
170,000
150,000
50,500
 
22,313
30,625
18,300
 
39,000
153,000
120,000
 
—
—
—

Geoffrey Rhoads
Chief Technology Officer
 
2001
2000
1999
 
180,000
160,000
125,000
 
23,625
34,375
81,250
 
40,000
205,500
50,000
 
—
—
—

J. Scott Carr
Vice President and General Manager—Secure Documents
 
2001
2000
1999
 
170,000
150,000
125,000
 
22,313
24,375
78,750
 
37,000
120,500
87,500
 
—
—
—

Indraneel Paul(2)
Chief Operating Officer, Digimarc ID Systems, LLC
 
2001
2000
1999
 
200,000
200,000
33,333
 
25,000
29,375
50,000
 
38,000
128,000
75,000
 
1,463
—
—
(1)
In accordance with the rules of the Securities and Exchange Commission, the compensation described in this table does not include certain perquisites and other personal benefits received by the Named Executive Officers that do not exceed the lesser of $50,000 or 10% of any such officer's salary and bonus disclosed in this table.

(2)
The other compensation shown for Mr. Davis and Mr. Paul reflects reimbursements for relocation allowance.

Employment Arrangements

        In July 1999, we adopted a policy regarding the vesting of stock options, including prior grants, for all existing officers at such date. This policy was amended in January 2000 to include all our officers. All shares subject to their options that have not vested will immediately vest if the following two conditions are met:

14

Stock Options

        The following table sets forth certain information with respect to stock options granted during the year ended December 31, 2001 to each of the Named Executive Officers. In accordance with the rules of the Securities and Exchange Commission, also shown below is the potential realizable value over the term of the options (the period from the grant date to the expiration date) based on assumed rates of stock appreciation of 5% and 10%, compounded annually. These amounts are based on certain assumed rates of appreciation and do not represent our estimate of future stock price. Actual gains, if any, on stock option exercises will be dependent on the future performance of our Common Stock and overall stock market conditions. There can be no assurance that the amounts reflected in this table will be achieved.

Option Grants In Last Fiscal Year

 
   Individual Grants
    
    
 
    
    
    
    
   Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Option Term($)
 
    
   Percent of
Total Options
Granted to
Employees
in 2001(%)
    
    
Name
   Options
Granted(1)
   Exercise
Price
($/Sh)
   Expiration
Date
  5%
   10%
Bruce Davis   150,000   5.38   18.16   12/18/11   1,713,109   4,341,354

E. K. Ranjit
 
39,000
 
1.40
 
18.16
 
12/18/11
 
445,408
 
1,128,752

Geoffrey Rhoads
 
40,000
 
1.43
 
18.16
 
12/18/11
 
456,829
 
1,157,695

J. Scott Carr
 
37,000
 
1.33
 
18.16
 
12/18/11
 
422,567
 
1,070,867

Indraneel Paul
 
38,000
 
1.36
 
18.16
 
12/18/11
 
433,988
 
1,099,810
(1)
Stock options are granted at an exercise price equal to the fair market value of our Common Stock on the date of grant. Options granted generally vest ratably over a four-year period and have a ten year term.

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Values

        The following table provides summary information, as to the Named Executive Officers, concerning stock options exercised during 2001 and the number of shares subject to both exercisable and unexercisable stock options as of December 31, 2001.

 
    
    
   Number of Securities
Underlying Options at
Fiscal Year-End(#)
   Value of Unexercised
In-the-Money Options at
Fiscal Year-End($)(2)
Name
   Shares
Acquired on
Exercise(#)
   Value
Realized($)(1)
  Exercisable
   Unexercisable
   Exercisable
   Unexercisable
Bruce Davis   231,000   $ 3,546,630   328,399   586,701   $ 2,260,769   $ 2,777,396
Geoffrey Rhoads   18,750   $ 188,203   82,725   194,025   $ 375,935   $ 810,123
J. Scott Carr   22,500   $ 353,151   101,371   149,629   $ 1,130,308   $ 848,164
E. K. Ranjit   —     —   88,924   193,076   $ 734,906   $ 1,199,663
Indraneel Paul   10,000   $ 201,100   73,079   157,921   $ 579,504   $ 852,820
(1)
The value realized upon the exercise of the stock options is equal to the fair market value of the purchased shares on the option exercise date less the exercise price paid.

(2)
The value of unexercised "in-the-money" options is calculated based on the closing price of our Common Stock on December 31, 2001, which was $18.9050 per share. Amounts reflected are

15


COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act, or the Securities Exchange Act, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following report shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such report be incorporated by reference into any such filings, nor be deemed to be incorporated by reference into any future filings under the Securities Act or the Exchange Act.

        We have a compensation committee of the Board of Directors (the Compensation Committee) which has the authority and responsibility to approve the overall compensation strategy, administer our annual and long-term compensation plans, and review and make recommendations to the Board of Directors with respect to executive compensation. The Compensation Committee consists of independent, non-employee Board of Director members.

General Compensation Policy

        The Compensation Committee's overall policy is to offer our executive officers competitive compensation opportunities. The Compensation Committee utilizes competitive data and summaries provided by iQuantic Buck, Radford Associates and the American Electronics Association to develop compensation recommendations competitive with other companies in the communications industry. The Compensation Committee's objectives are to:

        The Compensation Committee is authorized to establish and maintain compensation guidelines for salaries and merit pay increases throughout the Company. The compensation committee also makes specific recommendations to the Board of Directors concerning the compensation of our executive officers, including the Chief Executive Officer. The Compensation Committee also administers our 1995 Stock Incentive Plan, our 1999 Stock Incentive Plan and our 1999 Employee Stock Purchase Plan.

Factors

        The primary factors considered in establishing the components of each executive officer's compensation package for the year ended December 31, 2001 are summarized below. The Compensation Committee may in its discretion apply entirely different factors, such as different measures of financial performance, for future fiscal years.

        Base Salary.    The base salary for each officer is set on the basis of personal performance, the salary levels in effect for comparable positions with other companies in the industry, and internal comparability considerations. Generally, the Company's performance and profitability are not taken into account in establishing base salary. Salaries paid to the our executive officers for the year ended December 31, 2001 ranged from the 50th percentile at the low end to the 75th percentile at the high end of the compensation data surveyed for the industry. A number of adjustments were made to the surveyed compensation data for the industry to reflect differences in management style, organizational

16


structure and corporate culture, geographic location, product development stage and market capitalization between us and the surveyed entities. As a result of these adjustments, there is not a meaningful correlation between the companies in the industry which were taken into account for comparative compensation purposes and the companies included in the industry group index which appears later in this Proxy Statement for purposes of evaluating the price performance of the Company's Common Stock. See "Stock Performance Graph."

        Annual Incentive Compensation.    For the year ended December 31, 2001, specific financial and organizational objectives, including revenue and orders targets, were established as the basis for the incentive bonuses to be paid to the executive officers of the Company.

        Under the supervision of the Compensation Committee, the Company has established an incentive program for executive and corporate officers pursuant to which cash bonuses are payable to such executives. These executives are responsible for establishing strategic direction or are responsible for major functional or operating units and have an impact on bottom-line results. The Company has tied executive compensation to the achievement of Company goals, putting a substantial portion of executive compensation at risk. For 2001, the performance measures were based on the achievement of the Company's earnings per share goal, revenue growth and other specific financial objectives for business unit participants, as well as measures directly tied to stockholder value creation. Each element of the performance expectations and the target incentive amounts are established at the start of the year for each executive, stated as a dollar amount. Final payout is calculated based upon the results attained relative to the preset performance targets. If performance is below the threshold amount established, the payout is reduced accordingly. If the targeted results and Company goals are attained, the target incentive amounts are payable.

        The amounts shown on the Executive Compensation table reflect the amounts paid under the guidelines stated above.

        Long-Term Stock-Based Incentive Compensation.    Generally, the Compensation Committee awards stock options to each of our executive officers following their initial hiring and from time to time thereafter. The option grants are designed to align the interests of the executive officer with those of the stockholders and to provide each individual with a significant incentive to manage the Company from the perspective of an owner with an equity stake in the business.

        Generally, the size of the option grant made to each executive officer is set at a level which the Compensation Committee deems appropriate to create a meaningful opportunity for stock ownership based upon the individual's current position with the Company, but the Compensation Committee also takes into account comparable awards to individuals in similar positions in the industry, as reflected in external surveys, the individual's potential for future responsibility and promotion, the individual's performance in recent periods and the number of unvested options held by the individual at the time of the grant. The relative weight given to each of these factors will vary from individual to individual in the Compensation Committee's discretion. Each of Mr. Davis, Mr. Rhoads, Mr. Ranjit, Mr. Carr, Mr. Paul, Mr. Gifford, Mr. Stager and Mr. Munday received stock option grants in 2001.

        Each grant allows the executive officer to acquire shares of the Company's Common Stock at a fixed price per share (the market price on the grant date) over a specified period of time (up to 10 years). The option will generally become exercisable in installments over a four-year period, contingent upon the executive officer's continued employment with the Company. Accordingly, the option will provide a return to the executive officer only if he remains in the Company's employ, and then only if the market price of the Company's Common Stock appreciates over the option term.

17


CEO Compensation

        The Compensation Committee utilized the services of an outside consulting firm in 2001 to assist them in determining Mr. Davis' compensation. Mr. Davis's 2001 base salary and bonus target were set near the median range for the industry when compared with those of executives holding similar positions with other companies in the technology industries that are similar to Digimarc. Mr. Davis received a bonus of $65,625 and stock options to purchase 150,000 shares of Common Stock in 2001.

Compliance with Internal Revenue Code Section 162(m)

        Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to publicly held companies for compensation exceeding $1 million paid to certain executive officers. The limitation applies only to compensation which is not considered to be performance-based. The non-performance-based compensation paid to our executive officers in 2001 did not exceed the $1 million limit per officer.

        The Compensation Committee is aware of the limitations imposed by Section 162(m), and its exemptions, and will address the issue of deductibility when and if circumstances warrant.

        Submitted by the Compensation Committee of the Company's Board of Directors:

    PHILIP J. MONEGO, SR.
BRIAN J. GROSSI

18


STOCK PERFORMANCE GRAPH

        The following graph compares the performance of our Common Stock with the performance of the Nasdaq US Index and the companies included in SIC Code 7373—Computer Integrated Systems Design (our peer group) for the period ended December 31, 2001. We registered our Common Stock under the Securities Act of 1933, as amended, effective December 2, 1999. Accordingly, the following graph includes the required information from December 2, 1999 through December 31, 2001. The comparison assumes $100 was invested on December 2, 1999 in our Common Stock and in each of the other two indices and assumes reinvestment of any dividends. The comparisons in the graph below are based on historical data and are not indicative of, nor intended to forecast, future performance of our Common Stock.

LOGO

 
   INDEXED DATA
 
   Dec. 2,
1999
   Dec. 31,
1999
   Dec. 31,
2000
   Dec. 31,
2001
Digimarc Corporation   $ 100   $ 88.30   $ 29.14   $ 32.81
Nasdaq US Index   $ 100   $ 117.89   $ 70.91   $ 56.27
Peer Group   $ 100   $ 121.95   $ 51.77   $ 34.91

19

Companies included in the peer group index of the stock performance graph are as follows

1MAGE SOFTWARE INC   ELITE INFORMATION GROUP INC   NQL INC
3COM CORP   ELITE LOGISTICS INC   NVE CORP
3SI HOLDINGS INC   EMBARCADERO TECHNOLOGIES INC   NYFIX INC
5B TECHNOLOGIES CORP   ESOFT INC   O2WIRELESS SOLUTIONS INC
ACE COMM CORP   F5 NETWORKS INC   OSAGE SYSTEMS GROUP INC
ACS-TECH80 LTD   FAIR ISAAC & CO INC   PAMET SYSTEMS INC
ALADDIN KNOWLEDGE SYS LTD   FIRST CONSULTING GROUP INC   PATHWAYS GROUP INC
ALTRIS SOFTWARE INC   FONIX CORP   PATIENT INFOSYSTEMS INC
ANTEON INTL CORP -REDH   FORGENT NETWORKS INC   PDF SOLUTIONS INC
APPIANT TECHNOLOGIES INC   FORMULA SYS 1985 LTD -ADR   PEROT SYSTEMS CORP
APPLIED DIGITAL SOLUTIONS   FOURTHSTAGE TECHNOLOGIES INC   PROPHET 21 INC
AREL COMMUNICATIONS & SFTWRE   FUJITSU LTD -SPON ADR   QUALITY SYSTEMS INC
AROS CORP   FULLPLAY MEDIA SYSTEMS INC   RADIANT SYSTEMS INC
ASA INTL LTD   FUNDTECH LTD   RARE MEDIUM GROUP INC
ASIAINFO HLDGS INC   FUTURELINK CORP   REDBACK NETWORKS INC
AT ROAD INC   GENERAL MAGIC INC   REYNOLDS & REYNOLDS -CL A
AUTHENTIDATE HOLDING CORP   GREATE BAY CASINO CORP   ROBOCOM SYSTEMS INTL INC
AUTO-TROL TECHNOLOGY CORP   H T E INC   RSTAR CORP
AWARE INC   HALIFAX CORP   RWD TECHNOLOGIES INC
AXEDA SYSTEMS INC   HENRY (JACK) & ASSOCIATES   S1 CORP
AZTEC TECHNOLOGY PRTNRS INC   HYBRID NETWORKS INC   SABRE HLDGS CORP -CL A
AZUL HOLDINGS INC   IDENTIX INC   SAFELINK CORP
BE FREE INC   IDX SYSTEMS CORP   SEACHANGE INTERNATIONAL INC
BELL INDUSTRIES INC   IKOS SYSTEMS INC   SENTO CORP
BRAINTECH INC   IMAGEMAX INC   SEQUEL TECHNOLOGY CORP
BREAKAWAY SOLUTIONS INC   IMAGEWARE SYSTEMS INC   SM&A CORP
BROADVISION INC   IMAGICTV INC   SOCRATES TECHNOLOGIES CORP
BVR SYS LTD   INSCI CORP   SOFTECH INC
CACI INTL INC -CL A   INTEGRAL SYSTEMS INC/MD   SONIC SOLUTIONS
CAM COMM SOLUTIONS INC   INTEGRATED INFORMATION SYS   SONUS NETWORKS INC
CAVION TECHNOLOGIES INC   INTEGRATED SPATIAL INFO SOL   SSP SOLUTIONS INC
CELERITY SYSTEMS INC   INTELLIGROUP INC   STRATEGIC SOLUTIONS GRP INC
CERNER CORP   INTERACTIVE SYSTEMS WORLDWDE   SYSCOMM INTERNATIONAL CORP
CERTICOM CORP   INTERGRAPH CORP   TALX CORP
CEYONIQ AG -ADR   KNOWLEDGE MECHANICS GROUP   TANNING TECHNOLOGY CORP
CLARENT CORP   LANVISION SYSTEMS INC   TECHNOLOGY SOLUTIONS CO
COI SOLUTIONS INC   LATITUDE COMMUNICATIONS INC   TELOS CORP/MD -CL A
COMPUTRAC INC   MAI SYSTEMS CORP   TELTRONICS INC
CONDOR TECH SOLUTIONS INC   MANATRON INC   TITAN CORP
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth the beneficial ownership of our Common Stock as of March 15, 2002 by:

        The beneficial ownership is calculated based on 17,178,509 shares of our Common Stock outstanding as of March 15, 2002. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power, or shares voting and investment power with his or her spouse, with respect to all shares of capital stock listed as owned by that person. Shares issuable upon the exercise of options that are currently exercisable or become exercisable within sixty days of March 15, 2002 are considered outstanding for the purpose of calculating the percentage of outstanding shares of our Common Stock held by the individual, but not for the purpose of calculating the percentage of outstanding shares of our Common Stock held by any other individual. The address of each of the executive officers and directors is c/o Digimarc Corporation, 19801 S.W. 72nd Avenue, Suite 100, Tualatin, Oregon 97062.


5% Stockholders
 
 
 
 
 
Name and Address
   Number of
Shares Beneficially
Owned
   Percentage of
Shares Beneficially
Owned
  
Mazama Capital Management, LLC
One SW Columbia St—Suite 1860
Portland, OR 97258		   3,294,150   19.18 %
Kopp Investment Advisors
7701 France Avenue South
Edina, MN 55435		   2,140,565   12.46 %
Macrovision Corporation
1341 Orleans Drive
Sunnyvale, CA 94089		   2,014,458   11.73 %
Koninklijke Philips Electronics N.V.
Eindhoven
The Netherlands		   1,933,879   11.26 %
WM Advisors, Inc.
1201 third Avenue—22nd Floor
Seattle, WA 98101		   1,005,600   5.85 %
Philip Monego, Sr.(1)   405,340   2.36 %
Bruce Davis(2)   431,052   2.51 %
E. K. Ranjit(3)   126,657   *  
Geoffrey Rhoads(4)   538,347   3.13 %
J. Scott Carr(5)   146,287   *  
Indraneel Paul(6)   98,173   *  
Brian Grossi(7)   56,237   *  
William Krepick(8)   2,028,458   11.81 %
Alty van Luijt   12,500   *  
Peter Smith(9)   20,000   *  
John Taysom(10)   276,600   1.61 %
All Executive officers and directors as a group (16 persons)(11)   4,322,932   25.16 %
*
Less than 1%.

21

(1)
Includes options for 191,125 shares of Common Stock exercisable within 60 days of March 15, 2002 and 10,250 shares owned by Mr. Monego's spouse.

(2)
Includes options for 322,917 shares of Common Stock exercisable within 60 days of March 15, 2002.

(3)
Includes options for 113,530 shares of Common Stock exercisable within 60 days of March 15, 2002.

(4)
Includes options for 108,367 shares of Common Stock exercisable within 60 days of March 15, 2002. Includes 10,400 shares owned by Amanda Rhoads Trust, 10,400 shares owned by Hudson Rhoads Trust, 100 shares owned by Nicole Rhoads-Trustee for the Children of Geoffrey and Nicole Rhoads, and 10,400 shares owned by Trevor Rhoads Trust. Mr. Rhoads disclaims beneficial ownership of these shares owned by his relatives. Also includes 12,222 shares held by the Myra Camille Holland Charitable Foundation. Mr. Rhoads and his spouse are Trustees of the Foundation.

(5)
Includes options for 121,287 shares of Common Stock exercisable within 60 days of March 15, 2002.

(6)
Includes options for 95,188 shares of Common Stock exercisable within 60 days of March 15, 2002.

(7)
Includes options for 17,500 shares of Common Stock exercisable within 60 days of March 15, 2002.

(8)
Includes options for 12,500 shares of Common Stock exercisable within 60 days of March 15, 2002. Includes 2,014,458 shares held by Macrovision. Mr. Krepick is the President, Chief Operating Officer and a director of Macrovision, and may be deemed to indirectly beneficially own Macrovision's shares. Mr. Krepick disclaims beneficial ownership of the shares held by Macrovision.

(9)
Includes options for 20,000 shares of Common Stock exercisable within 60 days of March 15, 2002.

(10)
Includes options for 17,500 shares of Common Stock exercisable within 60 days of March 15, 2002. Includes 241,700 shares held by Reuters Group. Mr. Taysom, the co-CEO of Reuters Greenhouse Fund, disclaims beneficial ownership of the shares held by Reuters Group.

(11)
Includes options for 1,214,322 shares of Common Stock exercisable within 60 days of March 15, 2002.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Private Placement Transactions

        During 2000, we issued in private placement transactions shares of our Common Stock as follows:

        In each instance, the issuance of shares was made on reliance on Section 4(2) of the Securities Act, and Regulation D promulgated thereunder.

        William Krepick, the President and Chief Executive Officer of Macrovision, was appointed to our Board of Directors on October 20, 2000.

        Alty van Luijt, the Senior Vice President for Strategy and Business Development with Philips Corporate Research, was appointed to our Board of Directors on December 1, 2000.

Investors' Rights Agreement

        On October 20, 2000, we entered into a Strategic Investment Agreement with Macrovision Corporation.

        Under the terms of this agreement, if we propose to register any of our securities under the Securities Act, we must give Macrovision 30 days' prior notice of registration and include a portion of its shares of Common Stock in the registration. Additionally, upon written demand of Macrovision, we will be required to file a registration statement on form S-3 or any similar short-form registration statement if requested to do so by Macrovision, provided that the aggregate offering price for the securities to be sold is more than $1,000,000. Furthermore, we are only required to effect two demand

22


registrations on form S-3 within any 12-month period. Macrovision cannot demand that we file a registration statement prior to the date 180 days following the effective date of any registration statement filed by us.

        On October 20, 2000, we entered into a Strategic Investment Agreement with Koninklijke Philips Electronics N.V.

        Under the terms of this agreement, if we propose to register any of our securities under the Securities Act, we must give Philips 30 days' prior notice of registration and include a portion of its shares of Common Stock in the registration. Additionally, upon written demand of Philips, we will be required to file a registration statement on form S-3 or any similar short-form registration statement if requested to do so by Philips, provided that the aggregate offering price for the securities to be sold is more than $1,000,000. Furthermore, we are only required to effect two demand registrations on form S-3 within any 12-month period. Philips cannot demand that we file a registration statement prior to the date 180 days following the effective date of any registration statement filed by us.

        All expenses in effecting these registrations will be borne by us, excluding underwriting discounts, selling commissions and stock transfer taxes, which shall be borne proportionately by the holders of the securities that have been registered. These registration rights are subject to conditions and limitations, among them the right of the underwriters of an offering to limit the number of shares included in the registration. We have agreed to indemnify each of Macrovision and Philips of these registration rights, and each of Macrovision and Philips has agreed to indemnify us, against liabilities under the Securities Act, the Securities Exchange Act or other applicable federal or state law.

Transactions with Directors and Executive Officers

        We have entered into indemnification agreements with each of our directors and executive officers. Such agreements require us to indemnify such individuals to the fullest extent permitted by Delaware law.

        All future transaction between us and our officers, directors, principal stockholders and affiliates will be approved by a majority of the Board of Directors, including a majority of the disinterested non-employee directors on the Board of Directors, and will be on terms no less favorable to us than could be obtained from unaffiliated third parties.

        We are considering a transaction, or possibly a series of transactions, with GRP, Inc., a California corporation, which may involve joint marketing agreements to certain government entities and other customers relating to photogrammetric projects and the synthesis of satellite and terrain imagery into maps and geographically-keyed databases. The geospatial marketing opportunities may also require technology licensing agreements and joint development work by us and GRP. The following directors and executive officers of our company are investors in GRP: Geoff Rhoads, Bruce Davis, and E.K. Ranjit. Their aggregate ownership interest in GRP is approximately 40.12%. Discussions between GRP and us, and discussions with potential customers, are preliminary and so the amount involved in the potential transactions cannot be determined at this time. Mr. Rhoads is also a director and executive officer of GRP.


OTHER MATTERS

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act of 1934, as amended (Exchange Act), requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities (Reporting Persons), to file initial reports of ownership and changes in beneficial ownership of Common Stock and other of our equity securities with the Securities and Exchange

23


Commission and the Nasdaq Stock Market, Inc. Copies of these reports are also required to be delivered to us.

        To our knowledge, based solely on review of the copies of such reports furnished to us and written representations from certain Reporting Persons, during the year ended December 31, 2001, all of the Reporting Persons complied with applicable Section 16(a) filing requirements, except Geoff Rhoads and J. Scott Carr inadvertently failed to include one option exercise on a Form 4. These exercises were subsequently reported on an amended Form 4. John Munday inadvertently failed to file his Form 3 within the 10-day time limit. The Form 3 was subsequently filed.

Stockholder Proposals

        Requirements for Stockholder Proposals to be Brought Before an Annual Meeting.    For stockholder proposals to be considered properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice therefor to our Secretary. To be timely for the 2003 Annual Meeting of Stockholders, a stockholder's notice must be delivered to or mailed and received by our Secretary at our principal executive offices no earlier than January 22, 2003 and no later than February 21, 2003.

        Requirements for Stockholder Proposals to be Considered for Inclusion in the Company's Proxy Materials.    Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at our 2003 Annual Meeting of Stockholders must be received by us not later than December 5, 2002 in order to be considered for inclusion in our proxy materials for that meeting.

Form 10-K

        A copy of our Annual Report to Stockholders for the year ended December 31, 2001 accompanies this Proxy Statement. 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 as filed with the SEC for the year ended December 31, 2001. Written requests should be mailed to the Secretary, Digimarc Corporation, 19801 SW 72nd Avenue, Suite 100, Tualatin, Oregon 97062.

Other Business

        The Board of Directors is not aware of any other matter which may be presented for action at the Annual Meeting. Should any other matter requiring a vote of the stockholders arise, the enclosed proxy card gives authority to the persons listed on the card to vote at their discretion in the best interest of the Company.

        It is important that your shares be represented at the Annual Meeting, regardless of the number of shares you hold. We urge you to promptly execute and return the accompanying proxy in the envelope, which has been enclosed for your convenience. Stockholders who are present at the Annual Meeting may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person and allow their proxies to be voted.

    By Order of the Board of Directors,

 
 
LOGO

 
 
Bruce Davis
 Chief Executive Officer

Tualatin, Oregon
April 8, 2001
 
 

24


EXHIBIT A

DIGIMARC CORPORATION

RESTATED 1999 STOCK INCENTIVE PLAN

(amended and restated on May 26, 2000)
(amended and restated on                    , 2002)

        1.    Purposes of the Plan.    The purposes of this Stock Incentive Plan are to attract and retain the best available personnel, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company's business.

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

A-1

A-2

        3.    Stock Subject to the Plan.    

A-3

        4.    Administration of the Plan.    

A-4

        5.    Eligibility.    Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company, a Parent or a Subsidiary. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in foreign jurisdictions as the Plan Administrator may determine from time to time.

        6.    Terms and Conditions of Awards.    

A-5

A-6

        7.    Award Exercise or Purchase Price, Consideration, and Taxes.    

A-7

A-8

        8.    Exercise of Award.    

A-9

        10.    Adjustments Upon Changes in Capitalization.    Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Options and SARs may be granted to any Employee in any fiscal year of the Company, as well as any other terms that the Plan Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar event affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Plan Administrator may determine in its discretion, any other transaction with respect to Common Stock to which Section 424(a) of the Code applies or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Plan Administrator and its determination shall be final, binding and conclusive. Except as the Plan Administrator determines, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.

        11.    Effective Date and Term of Plan.    The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. It shall continue in effect for a term of ten (10) years unless sooner terminated. Subject to Section 16, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

        12.    Amendment, Suspension or Termination of the Plan.    

        13.    Reservation of Shares.    

        14.    No Effect on Terms of Employment/Consulting Relationship.    The Plan shall not confer upon any Grantee any right with respect to the Grantee's Continuous Service, nor shall it interfere in any way with his or her right or the Company's right to terminate the Grantee's Continuous Service at any time, with or without cause.

A-10

        15.    No Effect on Retirement and Other Benefit Plans.    Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended.

        16.    Stockholder Approval.    The Plan became effective when adopted by the Board in October 1999. On May 26, 2000, the Board adopted and approved an amendment and restatement of the Plan (a) to increase the number of Shares available for issuance under the Plan, (b) to increase the maximum number of shares by which the aggregate number of Shares available for issuance under the Plan and the aggregate number of Shares available for grant of Incentive Stock Options may be increased each year and (c) to adopt a limit on the maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any fiscal year of the Company and certain other administrative provisions to comply with the performance-based compensation exception to the deduction limit of Section 162(m) of the Code, which amendments are subject to approval by the stockholders of the Company. On March 29, 2002, the Board adopted and approved an amendment and restatement of the Plan to increase the number of Shares available for issuance under the Plan, which amendment is subject to approval by the stockholders of the Company.

A-11


ON BEHALF OF THE BOARD OF DIRECTORS OF DIGIMARC CORPORATION

        The undersigned hereby constitutes and appoints Bruce Davis and E.K. Ranjit, and each of them, his true and lawful attorneys-in-fact and agents and proxies with full power of substitution in each, to represent the undersigned at the Annual Meeting of Stockholders of Digimarc Corporation to be held at the RiverPlace Hotel, 1510 SW Harbor Way, Portland, Oregon 97201 on Thursday, May 9, 2002 at 2:00 p.m. local time, and at any adjournment or postponement thereof, and to vote all shares of common stock that the undersigned would be entitled to vote if then and there personally present on the matters set forth below.

        This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this Proxy will be voted for the nominees to the board of directors named in Proposal No. 1, for the ratification of KPMG LLP as the independent auditors of Digimarc in Proposal No. 2, for the approval of the amendment and restatement of Digimarc's 1999 Stock Incentive Plan in Proposal No. 3 and as the proxy holder may determine in his discretion with regard to any other matter properly brought before the Annual Meeting.

1.
ELECTION OF A DIRECTOR:

o   FOR the nominees listed below
(except as indicated)		   o   WITHHOLD AUTHORITY to vote for the nominees listed below

Bruce Davis                Brian Grossi

The Board of Directors recommends a vote FOR the nominees named above. If you wish to withhold authority to vote for any nominee, strike a line through such nominee's name listed above.

2.
PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF DIGIMARC CORPORATION FOR THE YEAR ENDING DECEMBER 31, 2001:

o    FOR   o    AGAINST   o    ABSTAIN

The Board of Directors recommends a vote FOR Proposal No. 2.

3.
APPROVAL OF AMENDMENT AND RESTATEMENT OF THE COMPANY'S 1999 STOCK INCENTIVE PLAN. TO APPROVE THE INCREASE OF THE NUMBER OS AHRES OF COMMON STOCK RESERVED FFOR ISSUANCE UNDER THE 1999 STOCK INCENTIVE PLAN FROM 6,147,714 SHARES TO 6,897,714, AN INCREASE OF 750,000 SHARES:

o    FOR   o    AGAINST   o    ABSTAIN

The Board of Directors recommends a vote FOR Proposal No. 3.

    DATED: , 2002

 
 
(Signature)

 
 
(Signature)
    This Proxy should be marked, dated and signed by the shareholder(s) exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign.


QuickLinks

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 9, 2002
DIGIMARC CORPORATION PROXY STATEMENT FOR 2002 ANNUAL MEETING OF STOCKHOLDERS
ELECTION OF DIRECTORS (Proposal No. 1)
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (Proposal No. 2)
PROPOSAL THREE—AMENDMENT AND RESTATMENT OF DIGIMARC CORPORATION'S 1999 STOCK INCENTIVE PLAN (Proposal No. 3)
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
MANAGEMENT
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
STOCK PERFORMANCE GRAPH
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OTHER MATTERS
EXHIBIT A DIGIMARC CORPORATION RESTATED 1999 STOCK INCENTIVE PLAN (amended and restated on May 26, 2000) (amended and restated on , 2002)
ON BEHALF OF THE BOARD OF DIRECTORS OF DIGIMARC CORPORATION