DIGIMARC CORPORATION SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

1.                                        General.

1.1                                  Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

“Designated IPO” means the same thing as that term is defined to mean in Section 4.2.3(a)(3) of the Company’s Third Restated Articles of Incorporation, as amended (“Third Restated Articles”).

“Holder” means any Preferred Holder or other holder owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 3.9 hereof.

“Initial Offering” means the Company’s first firm commitment underwritten public offering of its Common Stock pursuant to a registration statement filed under the Securities Act.

“Register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

“Registrable Securities” means (i) Common Stock of the Company issued or issuable upon conversion of the Shares; and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above-described securities. Notwithstanding the foregoing, Registrable Securities shall not include any securities (i) sold by a person to the public either pursuant to a registration statement or Rule 144 or (ii) sold in a private transaction in which the transferor’s rights under Section 3 of this Agreement are not assigned.

“Registrable Securities then outstanding” shall be the number of shares determined by calculating the total number of shares of the Company’s Common Stock that are Registrable Securities and either (1) are then issued and outstanding or (2) are issuable pursuant to then exercisable or convertible securities.

“Registration Expenses” shall mean all expenses incurred by the Company in complying with Sections 3.1, 3.2 and 3.3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company and the underwriters, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company).

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Selling Expenses” shall mean all underwriting discounts, selling commissions and stock transfer taxes, if any, applicable to the sale.

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“Shares” shall mean shares of the Company’s Series A Preferred Stock, Series B Preferred Stock,  Series C Preferred Stock, Series D Preferred Stock and Series D-X Preferred Stock.

“Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

“SEC” or “Commission” means the Securities and Exchange Commission.

2.                                        Restrictions on Transfer.

2.1                                  Transfer Only Under These Conditions. Each Holder agrees not to make any disposition of all or any portion of such Holder’s Registrable Securities unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 2, provided and to the extent such Section is then applicable and:

2.1.1                         Unless Registration Statement Then Effective. There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

2.1.2                         Unless Exemption Exists. (i) Such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require Registration of such shares under the Securities Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances.

2.1.3                         Unless Affiliated Transaction. Notwithstanding the provisions of paragraphs 2.1.1 and 2.1.2 above, no such registration statement or opinion of counsel shall be necessary for a transfer by a Holder which is (i) a partnership to its partners or former partners in accordance with partnership interests, (ii) a corporation to its shareholders in accordance with their interest in the corporation or to an entity directly or indirectly controlling, controlled by or under common control with such corporation, (iii) a limited liability company to its members in accordance with their membership interests, (iv) an individual Holder to a family member of such Holder or to a trust for the benefit of such Holder or (v) a partnership or limited liability company affiliated with and/or managed by the transferee or the same manager who manages the transferee, provided the transferee will be subject to the terms of this Section 2.1 to the same extent as if such transferee were an original Holder hereunder.

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2.1.4                         Legend. Each certificate representing Shares or Registrable Securities shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws or as provided elsewhere in this Agreement):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

2.2                                  Removal of ‘33 Act Legend. The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder thereof if the holder shall have obtained an opinion of counsel reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend.

2.3                                  Removal of Blue Sky Legends. Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

3.                                        Registration Rights.

3.1                                  Demand Registration.

3.1.1                         Obligation to Register. Subject to the conditions of this Section 3.1, if the Company shall receive at any time a written request from the Holders of more than fifty percent (50%) of the Registrable Securities then outstanding (the “Initiating Holders”) that the Company file a registration statement under the Securities Act having an aggregate offering price to the public in excess of $10,000,000 (excluding underwriting discounts and commissions), then the Company shall, within thirty (30) days of the receipt thereof, give written notice of such request to all Holders and subject to the limitations of this Section 3.1, shall use its best efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that the Holders request to be registered.

3.1.2                         Underwritten Demand Offerings. If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 3.1 and the Company shall include such information in the written notice referred to in Section 3.1.1. In such event, the right of any Holder to include his Registrable Securities in

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such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company). Notwithstanding any other provision of this Section 3.1, if the underwriter advises the Company in writing that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then the Company shall so advise all Holders which would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders). Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

3.1.3                         Limits on Obligation. The Company shall not be required to effect a registration pursuant to this Section 3.1:

(a)                                   Earliest Allowed Demand. prior to the earlier of (i) January 1, 2002; or (ii) the date one hundred eighty (180) days following the Initial Offering of the Company’s Common Stock; or

(b)                                  Maximum Limits. after the Company has effected two (2) registrations pursuant to this Section 3. 1 and such registrations have been declared or ordered effective; or

(c)                                   Upcoming Company Registration. during the period starting with the date 30 days prior to the Company’s good faith estimated date of filing of, and ending on the date 120 days following the effective date of, a registration statement pertaining to an offering of securities for the account of the Company, provided the Company is at all times during such period diligently pursuing such registration provided, however, that this right to delay any requested registration shall not be utilized more than once in any 12 month period; or

(d)                                  Company Deferral. if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 3.1, a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, in which event the Company shall have the right to defer initiation of the offering process for a single period of not more than ninety (90) days after receipt of the

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request of the Initiating Holders, provided that such right to delay a request shall be exercised by the Company no more than twice in any one-year period.

3.2                                  Piggyback Registrations. The Company shall notify all Holders in writing at least thirty (30) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to employee benefit plans and corporate reorganizations) and will use its best efforts to afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall, within fifteen (15) days after delivery of the above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

3.2.1                         Underwritten Offerings, Cutback. If the registration statement under which the Company gives notice under this Section 3.2 is for an underwritten offering, the Company shall so advise the Holders. In such event, the right of any Holder to be included in a registration pursuant to this Section 3.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of the Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of Registrable Securities to be underwritten, the number of Registrable Securities that may be included in the underwriting shall be reduced among the Holders on a pro rata basis based on the total number of Registrable Securities held by the Holders, provided no such reduction shall reduce to less than 25% of any offering the number of shares of the Holders requested to be registered. In no event will shares of any other selling shareholder be included in such registration which would reduce the number of Registrable Securities which may be included by Holders without the written consent of Holders of not less than a majority of the Registrable Securities proposed to be sold in the offering.

3.2.2                         Company’s Right to Terminate. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 3.4 hereof.

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3.3                                  Form S-3 Registration. In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 (or any successor to Form S-3) or any similar short- form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders the Company will:

3.3.1                         Notice. promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and

3.3.2                         Inclusion of Offered Shares. as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 3.3:

(a)                                   Unless S-3 not available. if Form S-3 (or such successor or similar form) is not available for such offering by the Holders; or

(b)                                  Unless total offered stock less than threshold. if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate offering price to the public of less than $1,000,000; or

(c)                                   Unless for Company Deferral. if the Company shall furnish to the Holders a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a single period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this Section 3.3 and provided that such right to delay a request shall be exercised by the Company no more than twice in any one-year period; or

(d)                                  Unless within 180 Days of Offering. during the period starting with the date of filing of, and ending on the date one hundred eighty (180) days following the effective date of any registration statement filed by the Company under the Securities Act; or

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(e)                                   One per 12 Months Limit. if the Company has already effected one (1) registration on Form S-3 for the Holders pursuant to this Section 3.3 within the previous 12 months.

3.3.3                         Prompt filing. Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders.

3.4                                  Expenses of Registration. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 3.1 or any registration under Section 3.2 or 3.3 herein shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 3.1 or 3.3, the request of which has been subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Initiating Holders were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree to forfeit their right to one requested registration pursuant to Section 3.1 or 3.3 (in which event such right shall be forfeited by all Holders). If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested.

3.5                                  Obligations of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall use its best efforts, as expeditiously and as reasonably possible, to:

3.5.1                         File And Keep Registration Statement Effective. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred eighty (180) days or, if earlier, until the Holders have completed the distribution related thereto.

3.5.2                         Update as Law Requires. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

3.5.3                         Supply Prospectus. Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the

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Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

3.5.4                         Blue Sky, within limits. Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

3.5.5                         Enter Underwriting Agreement. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

3.5.6                         Keep Holders Updated for Compliance. Notify each Holder of securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

3.5.7                         Opinion and Comfort Letters. Furnish, at the request of a majority of the Holders participating in the registration, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated as of such date, of counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and if permitted by applicable accounting standards, to the Holders requesting registration of Registrable Securities.

3.6                                  Termination of Registration Rights. All registration rights granted under this Section 3 shall terminate and be of no

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further force and effect ten (10) years after the Initial Offering, provided, however, that registration rights granted under this Section 3 shall terminate and be of no further force and effect as to each individual Holder (or transferee holding registration rights hereunder) prior to ten (10) years after the closing of the Initial Offering if such Holder and its affiliates or transferee and its affiliates can either (i) sell all of its Registrable Securities pursuant to Rule 144 of the Securities Act within any calendar quarter or (ii) sell its Registrable Securities pursuant to Rule 144K of the Securities Act.

3.7                                  Delay of Registration; Furnishing Information.

3.7.1                         No Injunctions. No Holder shall hav