Sec Form 13D Filing - TCM Strategic Partners L.P. filing for Digimarc CORP (DMRC) - 2020-10-05

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. )*

CUSIP No. 25381B101

Page 2 of 10 Pages

 

1	NAMES OF REPORTING PERSONS
	TCM Strategic Partners L.P.
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☐
				(b)	☐
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			0
		8	SHARED VOTING POWER
			2,542,079 (1)
		9	SOLE DISPOSITIVE POWER
			0
		10	SHARED DISPOSITIVE POWER
			2,542,079 (1)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	2,542,079 (1)
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)				☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	16.6%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	PN

 

1. This amount excludes 1,180,932 shares of Common Stock (as defined herein) underlying the 16,970 shares of Series B Preferred Stock (as defined herein) directly owned by the Reporting Person that is not convertible until Shareholder Approval (as defined herein) is obtained.

 

CUSIP No. 25381B101

Page 3 of 10 Pages

1. This amount excludes 1,180,932 shares of Common Stock underlying the 16,970 shares of Series B Preferred Stock indirectly owned by the Reporting Person that is not convertible until Shareholder Approval is obtained.

 

 

1. This amount excludes 1,180,932 shares of Common Stock underlying the 16,970 shares of Series B Preferred Stock indirectly owned by the Reporting Person that is not convertible until Shareholder Approval is obtained.

 

This Schedule 13D relates to the shares of common stock, par value $0.001 per share (the “Common Stock”), of Digimarc Corporation (the “Issuer” or the “Company”). The address of the principal executive offices of the Issuer is 9405 SW Gemini Drive, Beaverton, Oregon 97008.

 

This Schedule 13D is being filed by the following persons (each a “Reporting Person” and together the “Reporting Persons”):

On September 29, 2020, in connection with the Subscription Agreement (defined and described in Item 4 of this Schedule 13D), TCM Partners agreed to purchase directly from the Company 2,542,079 shares of Common Stock and 16,970 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”), for an aggregate purchase price of approximately $53.5 million, using funds from its working capital.  No borrowed funds were used to purchase any of the shares of Common Stock or Series B Preferred Stock reported herein. A total of $36,529,675.23 was paid to acquire the 2,542,079 shares of Common Stock, effective September 29, 2020, and a total of $16,970,000 was paid to acquire the 16,970 shares of Series B Preferred Stock, effective October 1, 2020.

 

On September 29, 2020, TCM Partners entered into a Subscription Agreement (the “Subscription Agreement”) with the Company pursuant to which the Company agreed to issue and sell to TCM Partners (i) 2,542,079 shares of Common Stock and (ii) 16,970 shares of the Company’s newly designated Series B Preferred Stock for an aggregate purchase price of approximately $53.5 million (the “Private Placement”).  The purchase of the shares of Common Stock occurred on September 29, 2020, and the purchase of the Series B Preferred Stock occurred on October 1, 2020 (the “Preferred Closing Date”).

Pursuant to the terms of the Subscription Agreement, so long as TCM Partners and its affiliates continue to own at least 5% of the outstanding Common Stock, TCM Partners will have the right to designate, and the Company will be obligated to nominate or appoint, Mr. McCormack to the Company’s board of directors (the “Board”).  So long as Mr. McCormack is serving on the Board, TCM Partners may not enter into any hedging transactions to the extent directors of the Company are prohibited from entering into such hedging transactions pursuant to a policy applicable to all directors of the Company.

In addition, (i) for one year following the Preferred Closing Date in the case of (a) the shares of Common Stock acquired under the Subscription Agreement and (b) shares of the Common Stock issued upon conversion of the Series B Preferred Stock acquired under the Subscription Agreement (the “Conversion Shares”), and (ii) for six months following the Preferred Closing Date in the case of the shares of Series B Preferred Stock acquired under the Subscription Agreement, TCM Partners may not transfer such shares without the prior written consent of the Company, except to an investment fund, investment vehicle or account controlled by Mr. McCormack. TCM Partners may also transfer such shares (i) pursuant to a tender or exchange offer, merger, consolidation, division, acquisition, reorganization or recapitalization involving the Company that has been recommended or approved by a majority of the Board, and (ii) following commencement by the Company of a voluntary case under Title 11 of the United States Bankruptcy Code.

Further, subject to certain exceptions, including the ability for TCM Partners and its affiliates to make additional purchases that would not increase their aggregate holdings above 27.5% of the outstanding Common Stock (excluding for purposes of this calculation, dividends paid on any shares or equity compensation paid to Mr. McCormack), for one year following the Preferred Closing Date, TCM Partners is subject to restrictions on, among other things, (i) acquiring securities, assets or indebtedness of the Company, or (ii) effecting a tender or exchange offer, merger or other business combination involving the Company or its assets.

Also under the Subscription Agreement, so long as TCM Partners continues to own at least 5% of the outstanding Common Stock, the Company will deliver to TCM Partners audited and consolidated balance sheets, income statements and cash flows of the Company and its subsidiaries as of the end of each fiscal year and each of the first three quarters of each fiscal year.  So long as TCM Partners continues to own the Series B Preferred Stock, TCM Partners will have the right to receive upon request (i) a brief statement of the nature of the business of the Company and its subsidiaries and the products and services they offer and (ii) the most recent consolidated balance sheets and profit and losses retained earnings statements, and similar financial statements of the Company for the two most recent fiscal years.

The Subscription Agreement requires the Company to file, as promptly as practicable following the Preferred Closing Date (and in any event within 60 business days following the Preferred Closing Date), a proxy statement with the U.S. Securities and Exchange Commission (“SEC”) that includes a proposal for holders of Common Stock to approve the issuance of shares of Common Stock upon conversion of the Series B Preferred Stock, as required under the listing rules of the Nasdaq Stock Market, including Nasdaq Listing Rule 5635(b) and Nasdaq Listing Rule 5635(d) (the “Shareholder Approval”). Neither the shares of Common Stock nor the shares of Series B Preferred Stock issued pursuant to the Subscription Agreement will be entitled to vote in connection with the Shareholder Approval.

The foregoing description of the Subscription Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Subscription Agreement, which is filed as Exhibit 99.2 to this Schedule 13D and is incorporated by reference herein.

On September 29, 2020, TCM Partners and the Company also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company is required to register the shares of Common Stock issued under the Subscription Agreement and the Conversion Shares.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is filed as Exhibit 99.3 to this Schedule 13D and is incorporated by reference herein.

In connection with the Private Placement, the Company established the rights and preferences of the shares of the Series B Preferred Stock pursuant to an amendment to its Articles of Incorporation (the “Articles of Amendment”) to designate the Series B Preferred Stock.

Among other things, the designation provides that upon a liquidation, dissolution or winding up of the Company, each share of Series B Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) $1,000 per share, plus all accumulated dividends (the “Liquidation Preference”), plus accrued and unpaid dividends and (ii) the amount that the holder of Series B Preferred Stock (each, a “Holder” and collectively, the “Holders”) would have been entitled to receive at such time if the Series B Preferred Stock were converted into Common Stock (without regard to any limitations on conversion in the Articles of Amendment).

The Holders are entitled to dividends on the Liquidation Preference at the rate of 7.5% per annum, payable in cash or, at the option of the Company, accumulated and added to the Liquidation Preference. The Holders are also entitled to participate in dividends declared or paid on the Common Stock and in offers to repurchase or exchange the Common Stock, in each case, on an as-converted basis (without regard to any limitations on conversion in the Articles of Amendment).

Following receipt of the Shareholder Approval and subject to satisfaction of stock exchange listing requirements, the Series B Preferred Stock will automatically convert into fully paid and non-assessable shares of Common Stock at a conversion price equal to $14.37. The conversion price is subject to customary anti-dilution adjustments in the event of any stock split, stock dividend or distribution, or stock combination.

The Holders generally will be entitled to vote with the holders of the shares of Common Stock on all matters submitted to a vote of holders of shares of Common Stock (voting together with the holders of shares of Common Stock as one class) on an as-converted basis, applying a voting conversion price of $17.01 (subject to customary anti-dilution adjustments in the event of any stock split, stock dividend or distribution, or stock combination); provided that, until the Shareholder Approval has been obtained, no Holder shall be entitled to cast a number of votes with respect to the Holder’s shares of Series B Preferred Stock and any shares of Common Stock beneficially owned by such Holder in excess of 19.9% of the outstanding shares of capital stock then entitled to vote.

Item 5.

Interest in Securities of the Issuer

 

 

The response to Item 4 of this Schedule 13D is incorporated by reference herein.

 

 

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

October 5, 2020

	TCM STRATEGIC PARTNERS L.P.
	By:	TCM Strategic GP LLC, its general partner
	By:	/s/ Riley McCormack
		Name: Riley McCormack
		Title:   Manager

	TCM STRATEGIC GP LLC
	By:	/s/ Riley McCormack
		Name: Riley McCormack
		Title:   Manager