UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
RENTRAK CORPORATION
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(Name of Registrant as Specified in Its Charter)
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RENTRAK CORPORATION
ONE AIRPORT CENTER
7700 N.E. AMBASSADOR PLACE
PORTLAND, OREGON 97220
July 8, 2002
To Our Shareholders:
Our 2002 Annual Meeting of Shareholders will be held on Thursday, August
22, 2002, at 10:00 a.m., Pacific Daylight Time, at our executive offices,
located at One Airport Center, 7700 N.E. Ambassador Place, Portland, Oregon,
97220. On the following pages you will find the formal Notice of Annual Meeting
and Proxy Statement. Our 2002 Annual Report is also enclosed.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted at the meeting. ACCORDINGLY, PLEASE
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. If you attend the
meeting, and the Board of Directors joins me in hoping that you will, there will
be an opportunity to revoke your proxy and to vote in person if you prefer.
Sincerely yours,
/s/ Paul A. Rosenbaum
PAUL A. ROSENBAUM
Chairman of the Board
RENTRAK CORPORATION
ONE AIRPORT CENTER
7700 N.E. AMBASSADOR PLACE
PORTLAND, OREGON 97220
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 22, 2002
To the Shareholders of
Rentrak Corporation:
The Annual Meeting of Shareholders of Rentrak Corporation ("Rentrak") will
be held on Thursday, August 22, 2002, at 10:00 a.m., Pacific Daylight Time, at
Rentrak's executive offices, located at One Airport Center, 7700 N.E. Ambassador
Place, Portland, Oregon, 97220, for the following purposes:
1. To elect a Board of Directors consisting of six members, each to serve
until the next annual meeting of shareholders and until his successor
is duly elected and qualified;
2. To consider and approve an amendment to the 1997 Equity Participation
Plan to increase the number of shares of common stock from 1,600,000
to 2,075,000;
3. To hear reports from various officers of Rentrak; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on June 24, 2002 as
the record date for determining shareholders entitled to notice of, and to vote
at, the meeting and any adjournments or postponements thereof. The proxy
statement, proxy card and 2002 Annual Report to Shareholders accompany this
Notice.
Whether or not you plan to attend the Annual Meeting, please fill out,
sign, date and promptly return the enclosed proxy in the enclosed postage paid
envelope. You may revoke your proxy in writing or at the Annual Meeting if you
wish to vote in person.
By Order of the Board of Directors:
/s/ F. Kim Cox
F. KIM COX
President and Secretary
Portland, Oregon
July 8, 2002
RENTRAK CORPORATION
ONE AIRPORT CENTER
7700 N.E. AMBASSADOR PLACE
PORTLAND, OREGON 97220
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 22, 2002
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DATE, TIME, PLACE OF MEETING
The board of directors of Rentrak Corporation ("Rentrak") is furnishing
this proxy statement and the accompanying 2002 Annual Report to Shareholders,
notice of annual meeting, and the enclosed proxy card in connection with the
board's solicitation of proxies for use at Rentrak's 2002 Annual Meeting of
Shareholders (the "Annual Meeting"). The Annual Meeting will be held Thursday,
August 22, 2002, at 10:00 a.m. Pacific Daylight Time, at Rentrak's executive
offices, located on the fourth floor at One Airport Center, 7700 N.E. Ambassador
Place, Portland, Oregon 97220.
SOLICITATION AND REVOCATION OF PROXIES
Shares represented by a proxy card that is properly dated, executed and
returned will be voted as directed on the proxy. If no direction is given,
proxies will be voted FOR each of the director nominees selected by the board of
directors and FOR the amendment to the 1997 Equity Participation Plan. If other
matters properly come before the Annual Meeting, the persons named in the
accompanying proxy will vote in accordance with their best judgment with respect
to such matters. Any proxy given by a shareholder may be revoked at any time
prior to its use by execution of a later-dated proxy delivered to Rentrak's
Secretary, by vote in person at the Annual Meeting, or by written notice of
revocation delivered to Rentrak's Secretary.
Rentrak's board of directors has selected the two persons named on the
enclosed proxy card to serve as proxies in connection with the Annual Meeting.
These proxy materials and the accompanying Rentrak 2002 Annual Report to
Shareholders are being mailed on or about July 8, 2002 to shareholders of record
on June 24, 2002.
PURPOSES OF THE ANNUAL MEETING
The Annual Meeting has been called for the following purposes:
o To elect a board of directors consisting of six members, each to serve
until the next annual meeting of shareholders and until his successor
is duly elected and qualified;
o To consider and approve an amendment to the 1997 Equity Participation
Plan to increase the number of shares of common stock from 1,600,000
to 2,075,000;
o To hear reports from various officers of Rentrak; and
o To transact such other business as may properly come before the
meeting or any adjournments thereof.
Section 2.3.1 of Rentrak's 1995 Restated Bylaws, as amended, sets forth
procedures to be followed for introducing business at a shareholders meeting.
Rentrak has no knowledge of any other matters that may be properly presented at
the Annual Meeting. If other matters do properly come before the Annual Meeting
in accordance with the 1995 Restated Bylaws, the persons named in the proxy card
will vote your proxy in accordance with their judgment on such matters in the
exercise of their sole discretion.
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RECORD DATE AND SHARES OUTSTANDING
Only shareholders of record at the close of business on June 24, 2002 (the
"Record Date"), are entitled to notice of, and to vote at, the Annual Meeting.
At the close of business on the Record Date, 9,827,231 shares of Rentrak common
stock were outstanding. For information regarding the ownership of Rentrak
common stock by holders of more than five percent of the outstanding shares and
by Rentrak's directors and executive officers, see "Security Ownership of
Certain Beneficial Owners and Management."
VOTING; QUORUM; VOTE REQUIRED
Each share of common stock outstanding on the Record Date is entitled to
one vote per share at the Annual Meeting. Shareholders are not entitled to
cumulate their votes. The presence, in person or by proxy, of the holders of a
majority of Rentrak's outstanding shares of common stock is necessary to
constitute a quorum at the Annual Meeting. Assuming the existence of a quorum,
the affirmative vote of a plurality of the votes cast at the Annual Meeting, in
person or by proxy, will be required to elect persons nominated to be directors.
The amendment to the 1997 Equity Participation Plan will be approved if the
votes cast at the Annual Meeting in favor of the amendment, in person or by
proxy, exceed the votes cast opposing the amendment.
EFFECT OF ABSTENTIONS
If you abstain from voting, your shares will be deemed present at the
Annual Meeting for purposes of determining whether a quorum is present. However,
only votes cast in favor of a nominee for director will have an effect on the
outcome of the election of directors. Abstention also will have no effect on the
outcome of the vote on the amendment to the 1997 Equity Participation Plan.
EFFECT OF BROKER NON-VOTES
If a broker holds your shares in street name, you should instruct your
broker how to vote. A broker non-vote occurs when a nominee holding shares for a
beneficial owner does not vote on a proposal because the nominee does not have
discretionary voting power with respect to the matter being considered and they
did not receive voting instructions from the beneficial owner. Broker non-votes
are deemed present at the Annual Meeting for purposes of determining whether a
quorum is present, but will have no effect on the outcome of the election of
directors or the vote on the amendment to the 1997 Equity Participation Plan.
2003 SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the proxy statement for the 2003 Annual Meeting of Shareholders is
March 10, 2003. To be considered at the 2003 Annual Meeting of Shareholders,
Section 2.3.1 of Rentrak's 1995 Bylaws, as amended, requires shareholders to
deliver notice of all proposals, nominations for director and other business to
Rentrak's principal executive office no later than 60 calendar days (or by June
23, 2003) and no earlier than 90 calendar days prior to the first anniversary of
the date of the 2002 Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Rentrak's 1995 Restated Bylaws, as amended, provide that its board of
directors shall consist of six members. The board of directors has nominated the
individuals named below to fill the six positions. If for any reason any of the
nominees named below should become unavailable for election (an event that the
board does not anticipate), proxies will be voted for the election of such
substitute nominee as the board in its discretion may recommend. Proxies cannot
be voted for more than six nominees. If a vacancy occurs after the Annual
Meeting, the board of directors may elect a replacement to serve for the
remainder of the unexpired term.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES FOR DIRECTOR:
CECIL D. ANDRUS (age 70). In 1995, Mr. Andrus founded and serves as the
chairman of the Andrus Center for Public Policy at Boise State University. Since
1995, Mr. Andrus has also been of counsel to the Gallatin Group, a public policy
consulting firm in Boise, Idaho. He was elected governor of the state of Idaho
for four terms (beginning in 1970, 1974, 1986, and 1990). Mr. Andrus also was
the U.S. Secretary of the Interior from 1977 to 1981. Mr. Andrus serves as a
director of Albertsons, Inc., KeyCorp, and Coeur d'Alene Mines.
GEORGE H. KUPER (age 61). Since April 2001, Mr. Kuper served as Chief
Operating Officer of Rentrak's e-fulfillment subsidiary 3PF.COM, Inc., through
December 2002, on a part-time consulting basis. For several years, Mr. Kuper has
been an independent consultant in the areas of public policy, environmental and
energy issues and provides advice to small and start-up companies in the
chemical, electronics, and software industries. Mr. Kuper has also served as
president, chief executive officer, and a director of the Council of Great Lake
Industries ("CGLI") located in Ann Arbor, Michigan, since 1994. CGLI is
affiliated with the World Business Council for Sustainable Development located
in Geneva, Switzerland and is a not-for-profit association consisting of more
than two dozen U.S. and Canadian companies. Since 1994, Mr. Kuper has also
served as the chairman of the Office of the Secretary of Defense Working Group
on Dual-Use Technology Policy. Prior to 1994, Mr. Kuper's activities included
serving for three years as the executive director of the National Center for
Productivity and Quality of Working Life, a Presidential appointment, working
for General Electric Company for five years to enhance its productivity
programs, and serving as executive director of the Manufacturing Studies Board
of the National Academy of Sciences, National Research Council, for five years.
Mr. Kuper received a B.A. in political science from The Johns Hopkins University
and an M.B.A. from the Harvard School of Business Administration.
JOON S. MOON, Ph.D. (age 64). Dr. Moon has served as the chairman of Rooto
Corporation, a manufacturer of industrial and household chemicals, for more than
the past five years. Dr. Moon's background is as a research chemist with E.I.
duPont de Nemours Company and Celanese Corporation. Dr. Moon received a B.S. in
chemical engineering from Michigan State University and a Ph.D. in chemical
engineering from the University of California at Berkeley. Dr. Moon serves as a
member of the board of directors of Thomas Jefferson University, and has
previously served as a director of Michigan State University Foundation,
Michigan Bank, Independence One Mutual Fund, Michigan General Corporation, Maxco
Energy, and Progressive Dynamics Corporation.
JAMES G. PETCOFF (age 46). Mr. Petcoff has served as president and chief
executive officer of North Pointe Financial Services, Inc., a provider of
insurance and other financial services, since 1986. Since 1999, Mr. Petcoff has
also served as president and chief executive officer of Queensway Financial
Holdings Limited, a Canadian holding company affiliated with North Pointe
Financial Services, Inc. He received an M.B.A. and a J.D. from the University of
Detroit. Mr. Petcoff is a director of Lease Corporation of America.
PAUL A. ROSENBAUM (age 59). Mr. Rosenbaum serves Rentrak as its current
Chairman and Chief Executive Officer since his election on September 19, 2000.
Prior to his current position at Rentrak, Mr. Rosenbaum founded SWR Corporation
in 1994 and continues to serve as its chief executive officer. SWR Corporation
designs, tests, and markets industrial chemicals. Mr. Rosenbaum has also been
engaged in the private practice of law through his own firm specializing in
corporate and administrative law since 1978. He received a B.S. in American
studies from Springfield College and a J.D. from The George Washington
University Law School.
STANFORD C. STODDARD (age 71). Mr. Stoddard has been chairman of LaGrande
Capital, L.L.C., a financial consulting firm with offices in Southfield,
Michigan, since his retirement more than five years ago. During his 30-year
banking career, Mr. Stoddard was President of Michigan National Bank of Detroit,
Chairman of the out state Michigan National Bank, and Founder, President and
Chairman of Michigan National Corporation, the parent bank holding company of
the banks. Mr. Stoddard is currently chairman of MTC Capital Corporation, the
holding company for Michigan Trust Bank. Mr. Stoddard is a former director of
Chatham Supermarkets, Inc., Michigan National Corporation, Michigan National
Bank, Michigan National Bank of Detroit, Florida Leasing and
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Capital Corporation, Federal Home Life Insurance Company, FHF Life Insurance
Company and the Chamber of Commerce of the United States of America. Mr.
Stoddard graduated from the University of Michigan with a B.A. in business
administration.
See "CERTAIN RELATIONSHIPS AND TRANSACTIONS" for a discussion of certain
agreements and relationships between Rentrak and its directors.
PROPOSAL 2
AMENDMENT OF THE 1997 EQUITY PARTICIPATION PLAN
BACKGROUND
The 1997 Equity Participation Plan (the "Plan") was approved by Rentrak's
shareholders at the 1997 annual meeting, and amended at the 1998 and 1999 annual
meetings. At this year's annual meeting, the shareholders are being asked to
approve an amendment to the Plan to increase the number of shares of Rentrak
common stock available for issuance under the Plan by 475,000 shares, to a total
of 2,075,000 shares. The amendment was adopted by the board of directors on May
8, 2002, subject to shareholder approval. If the proposed amendment is not
approved, the Plan will continue in effect as if the amendment had not been
made.
Over the past five years, Rentrak has granted stock options as an incentive
to attract, retain, and reward key employees, including officers, nonemployee
directors, and outside consultants, and to strengthen the mutuality of interests
between its employees and shareholders. The board of directors believes that its
ability to make grants of stock-based incentive awards is essential to enable
Rentrak to continue to attract, retain, and reward key employees, as well as to
attract and retain qualified nonemployee directors.
DESCRIPTION OF THE PLAN
The summary set forth below outlines the material features of the Plan. For
the complete provisions of the Plan, please refer to the copy of the Plan, as
amended, attached to this proxy statement as Appendix B.
ELIGIBILITY; TYPES OF AWARDS
Under the Plan, employees, including officers, nonemployee directors, and
consultants of Rentrak, including its subsidiaries, are eligible to receive, as
determined by the Compensation Committee of the board of directors (the
"Committee") (the board with respect to grants to nonemployee directors), (1)
stock options (either incentive stock options ("ISOs") or nonstatutory stock
options), (2) restricted stock awards, (3) performance awards, (4) stock
payments, (5) deferred stock awards, and (6) dividend equivalents. On April 1 of
each year during which the Plan is in effect, all nonemployee directors of
Rentrak receive an automatic annual grant of options for 10,000 shares, and any
nonemployee chairman of the board, as well as each nonemployee board committee
chair, receives an additional automatic annual grant of options for 2,500
shares.
As of June 15, 2002, approximately 15 employees and five nonemployee
directors of Rentrak were eligible to participate in the Plan. Consultants who
provided services to Rentrak, other than services of a capital-raising nature,
are also eligible to receive stock-based awards under the Plan. As of June 15,
2002, options for 237,950 shares of Rentrak common stock granted under the Plan
had been exercised, options to purchase a total of 1,278,112 shares were
outstanding, and 83,938 shares of common stock were available for future awards
under the Plan (prior to the May 2002 amendment). Also as of June 15, 2002,
options had been granted under the Plan, as follows: Paul A. Rosenbaum, Chairman
and Chief Executive Officer, 300,000 shares; F. Kim Cox, President, 96,428
shares; Michael Lightbourne, Executive Vice President, 246,000 shares; Mark
Thoenes, Chief Financial Officer, 70,000 shares; Amir Yazdani, Vice President
and Chief Information Officer, 210,000 shares; all executive officers as a group
(including the persons named above), 1,199,928 shares; all then non-employee
directors as a group, 128,500 shares; and all non-executive employees and
consultants as a group, 108,634 shares. Additional
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information regarding Rentrak's equity compensation plans is set forth in the
tables under the headings "Option Grants in Last Fiscal Year," "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values," and
"Equity Compensation Plan Information" below.
ADMINISTRATION
The Committee administers the Plan, other than with respect to option
grants to nonemployee directors, in its sole discretion. The Committee must be
comprised of at least two directors, each of whom qualifies as both a
"nonemployee director" for purposes of the exemptions from short-swing profit
liability contained in Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act") and an "outside director" for purposes of Section 162(m) of the
Internal Revenue Code, which limits the deductibility of executive compensation.
The Committee selects the participants to receive awards under the Plan,
determines the types of awards to be granted to participants, determines the
number of shares or share units subject to such awards and determines the terms
and conditions of individual award agreements. Each award under the Plan is
nontransferable, other than by will or the laws of descent and distribution. The
Committee has the authority to interpret the Plan with respect to awards, to
establish, amend, and revoke any rules and regulations relating to the Plan, and
to make all other determinations necessary or advisable for the Plan's
administration. The full board of directors administers the Plan with respect to
option grants to nonemployee directors and has the same authority of the
Committee as described above.
The Plan was adopted effective February 27, 1997, and will remain in effect
until awards have been granted covering all available shares and all outstanding
awards under the Plan have been exercised, settled, or terminated, or until the
Plan is otherwise terminated. The board or the Committee may amend, modify,
suspend or terminate the Plan at any time, but no such action may materially and
adversely impact the rights of the holder of an outstanding award under the
Plan. Shareholder approval will be required as to any amendment that increases
the limit on the maximum number of shares issuable under the Plan or the number
of shares that may be subject to an individual award or as otherwise required by
applicable law, rule, regulation, or listing standards of a securities exchange
or quotation system.
TYPES OF AWARDS
STOCK OPTION GRANTS. The Committee may grant ISOs to Rentrak employees and
nonstatutory options to employees, consultants, and nonemployee directors of
Rentrak. ISOs must be granted at or above 100% of fair market value of Rentrak's
common stock on the date of grant. But if the participant already owns 10% of
the total combined voting power of all outstanding shares of all classes of
stock of Rentrak, including subsidiaries of Rentrak, the exercise price of an
ISO must be at least 110% of the fair market value on the date of grant. In the
case of nonstatutory options (other than automatic grants to nonemployee
directors, which must have an exercise price equal to 100% of fair market
value), the Committee will establish the exercise price, which may be more, less
or equal to the fair market value of the common stock. On June 24, 2002, the per
share closing price of the common stock on the Nasdaq Stock Market was $5.39.
Stock options are exercisable for the period specified by the Committee in
the award agreement, except that ISOs may not have a term of more than 10 years
from the grant date, or five years from the grant date if the participant
already owns more than 10% of the total combined voting power of all outstanding
shares of all classes of stock of Rentrak, including subsidiaries. The Committee
may establish a vesting period or schedule, if any, for the exercisability of
stock options. The Committee also may, in its discretion, accelerate the
exercisability of any stock option subject to any conditions imposed by the
Committee.
The maximum number of shares subject to options granted under the Plan to
any individual participant during any calendar year may not exceed 400,000
shares of common stock. The aggregate fair market value of shares for which an
employee may be granted ISOs that become exercisable for the first time during
any calendar year may not exceed $100,000. No ISOs may be granted under the Plan
after February 27, 2007. The recipient must agree to remain as an employee,
director or consultant of Rentrak or a subsidiary for at least one year, unless
the Committee provides for a shorter period.
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RESTRICTED STOCK. Restricted stock awards may be granted by the Committee
to employees or consultants. Restricted stock awards will be subject to such
terms and conditions as the Committee deems appropriate, including restrictions
on voting rights and transferability, as well as the right of Rentrak to
repurchase the shares upon termination of the recipient's employment or
consultancy. The Committee may grant restricted stock awards that vest upon the
attainment of performance targets qualifying as "performance-based compensation"
under Section 162(m) of the Internal Revenue Code. The maximum number of shares
subject to restricted stock awards granted under the Plan to any individual
participant during any fiscal year may not exceed 400,000 shares of common
stock. Potential categories of performance goals are described below. As
consideration for the issuance of restricted stock, in addition to the payment
of any purchase price, the participant must agree to remain as an employee or
consultant of Rentrak for a period of at least one year after the grant date.
PERFORMANCE AWARDS, DEFERRED STOCK, STOCK PAYMENTS AND DIVIDEND
EQUIVALENTS. The Committee may grant "performance awards" to employees or
consultants under the Plan. Performance awards may be linked to, or based on the
appreciation in, the market value, book value, net profits, or other measure of
the value of Rentrak's common stock or other performance criteria as determined
by the Committee, in each case on a date or dates or over any period or periods
determined by the Committee. In making such determinations, the Committee will
consider the contributions, responsibilities and other compensation of the
participant, and any other such factors as the Committee deems relevant in light
of the specific type of award. Payment of any performance award may be made in
cash, in common stock, or a combination of both, as determined by the Committee.
The Committee also may grant awards of "deferred stock" to employees or
consultants under the Plan. Deferred stock entitles the participant to receive
shares of Rentrak common stock upon the satisfaction of specified conditions.
The number of shares of common stock subject to a deferred stock award will be
determined by the Committee and may be linked to the market value, book value,
net profits or other measure of value of the common stock or other performance
criteria as determined by the Committee, in each case on a date or dates or over
any period or periods determined by the Committee. Unless otherwise provided by
the Committee, a recipient of a deferred stock award will have no rights as a
shareholder with respect to such deferred stock until the award vests.
"Stock payments" may be granted to employees or consultants under the Plan.
The number of shares will be determined by the Committee and may be based upon
the fair market value, book value, net profits or other measure of value of
Rentrak common stock or other specific performance criteria deemed appropriate
by the Committee, determined on the date the stock payment is made or on any
date thereafter.
The Committee may also grant "dividend equivalents" to employees or
consultants in connection with any other award (other than restricted stock)
under the Plan. Dividend equivalents provide a participant with cash payments
equal to the dividend amount paid on the shares of common stock subject to
unvested or unexercised options, unvested deferred stock awards, and unvested
performance awards. Dividend equivalents are payable in cash or additional
shares of common stock in accordance with a formula and are subject to
limitations imposed by the Committee. Dividend equivalents granted with respect
to stock options intended to qualify as performance-based compensation for
purposes of Section 162(m) of the Internal Revenue Code will be payable
regardless of whether the stock options are exercised.
If the Committee intends that particular restricted stock awards,
performance awards, deferred stock awards or stock payments will qualify as
"performance based compensation" under Section 162(m), the awards or payments
will be subject to any other required restrictions. These additional
restrictions will include the achievement of specific performance goals related
to one or more of the following: pre-tax income, operating income, cash flow,
earnings per share, return on equity, return on invested capital or assets, and
cost reductions or savings. During the first 90 days of each fiscal year, the
Committee must select those persons, if any, who will be granted awards or
payments qualifying under Section 162(m), select the performance goal or goals
applicable to the relevant period, establish the various targets and bonus
amounts which may be earned during the fiscal period in question, and specify
the relationship between the targets and amounts to be earned by each
participant. Following the completion of the relevant period, the Committee must
certify in writing whether the applicable performance targets have been achieved
for such period. The Committee may, in its discretion, reduce (but not increase)
the
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amount payable at a given level of performance to take into account additional
factors that the Committee deems relevant to the assessment of individual or
corporate performance during the relevant period.
The Committee will establish the exercise and vesting period of any
performance award, deferred stock award, stock payment or dividend equivalent.
Performance awards, deferred stock awards and stock payments may not cover more
than 400,000 shares of common stock per participant per fiscal year. The
participant must agree to remain as an employee or consultant of Rentrak or any
subsidiary for a period of at least one year, unless the Committee provides for
a shorter period.
CERTAIN ADJUSTMENTS
In the event of any change in capitalization affecting Rentrak's common
stock, such as a stock dividend, stock split, recapitalization, merger,
consolidation, split-up, spin-off, combination or exchange of shares, or other
form of reorganization, or any other distribution with respect to the common
stock other than regular cash dividends, the Committee may make such
substitution or adjustment, if any, that it deems to be equitable as to the
number and kind of shares or other securities issued or reserved for issuance
under the Plan, the limits on awards to individual participants, and outstanding
awards under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of participation in the Plan for
Rentrak and participants will depend upon the types of awards that are granted
from time to time. In the case of nonstatutory stock options, in general, a
participant will recognize ordinary compensation income at the time of exercise
in an amount equal to the difference between the value of the shares subject to
the option at the date of exercise and the exercise price. Any gain upon sale of
the shares in excess of the fair market value of the shares on the date of
exercise will be capital gain and any loss will be a capital loss.
In the case of ISOs that meet the requirements of Section 422 of the
Internal Revenue Code, a participant will not realize taxable income upon the
grant of an ISO or upon the issuance of shares when the option is exercised. The
amount realized on the sale or taxable exchange of the shares in excess of the
exercise price will be a capital gain and any loss will be a capital loss.
However, if the sale or exchange occurs less than one year after exercise of the
option or two years after grant of the option, the participant will recognize
compensation taxable at ordinary income tax rates measured by the amount by
which the lesser of (1) the fair market value on the date of exercise or (2) the
amount realized on sale of the shares, exceeds the exercise price. For purposes
of determining alternative minimum taxable income, an ISO is treated as a
nonstatutory stock option.
In the case of performance-contingent awards and restricted stock awards,
in general, a participant will not recognize any income upon issuance of an
award. Generally, the participant will be required to recognize ordinary
compensation income at the date or dates, if any, that shares vest in an amount
equal to the value of such shares plus any cash received at the date of vesting.
With respect to awards of restricted stock, a participant may file an election
with the Internal Revenue Service pursuant to Section 83(b) of the Internal
Revenue Code within 30 days of the receipt of the stock. In that event, the
participant will recognize ordinary income in the year the stock is received on
the difference between the fair market value of the stock at the time of receipt
and the amount paid for the stock, if any. The participant will not recognize
additional income when the restricted shares vest.
To the extent participants qualify for capital gains treatment with respect
to the sale of shares acquired pursuant to exercise of an ISO, Rentrak will not
be entitled to any tax deduction. In all other cases, Rentrak will be entitled
to receive a federal income tax deduction at the same time and in the same
amount as the amount which is taxable to participants as ordinary income with
respect to awards.
The information in this proxy statement concerning federal income tax
consequences is intended only for the general information of shareholders.
Participants in the Plan should consult their own tax advisors as federal
7
income tax consequences may depend upon the particular terms of individual
awards and the specific circumstances of individual participants.
NEW PLAN BENEFITS
As of the date of this proxy statement, no awards had been made with
respect to the 475,000 additional shares authorized under the May 2002 amendment
of the Plan.
SHAREHOLDER APPROVAL
The amendment to the Plan to increase the shares issuable under the Plan by
475,000 shares will be approved if the votes cast in person or by proxy at the
annual meeting in favor of the amendment exceed the votes cast opposing
approval. If a broker or nominee submits a proxy on behalf of a beneficial
holder of common stock that expressly does not cast a vote on this proposal, the
proxy will not be counted and, as a result, will have no effect on the outcome
of the vote on this proposal. Abstentions also have no effect on results of the
voting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF
APPROVAL OF THE AMENDMENT TO THE PLAN.
COMMITTEES AND MEETINGS OF THE BOARD
The board of directors has a standing Finance Committee, Audit Committee
and Compensation Committee. The board of directors does not have a nominating
committee.
The Finance Committee is comprised of Joon Moon, Chair, George Kuper and
Paul Rosenbaum and is responsible for evaluating strategic financial issues
facing Rentrak.
The Audit Committee is presently comprised of Cecil Andrus, Chair, James
Petcoff and Stanford Stoddard and is responsible for evaluating the integrity of
Rentrak's financial reporting to shareholders. During the fiscal year ended
March 31, 2002, the Audit Committee held five meetings.
The Compensation Committee is presently comprised of James Petcoff, Chair,
and Cecil Andrus and is responsible for evaluating the performance of Rentrak's
management and making compensation decisions regarding Rentrak's executive
employees. During the fiscal year ended March 31, 2002, the Compensation
Committee met two times.
During the fiscal year ended March 31, 2002, the board of directors held
four regular meetings, each of which were conducted in person. While in office,
each director nominated for reelection above attended at least 75 percent of the
total number of meetings held by the board of directors and the committees of
the board of directors on which he served during the fiscal year ended March 31,
2002.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 24, 2002, certain information
regarding the beneficial ownership of Rentrak common stock by (i) each person
known to be the beneficial owner of 5 percent or more of Rentrak's outstanding
shares of common stock, (ii) each director of Rentrak, (iii) Rentrak's Chief
Executive Officer and the next four most highly compensated executive officers
who were employed by Rentrak at March 31, 2002 (the "Named Executive Officers"),
and (iv) the present directors and executive officers of Rentrak as a group.
SHARES BENEFICIALLY OWNED
----------------------------------- ------------------ ------------------
NAME NUMBER (1) PERCENTAGE (1)
----------------------------------- ------------------ ------------------
Cecil Andrus 18,500 *
F. Kim Cox 363,942 3.6%
George Kuper 21,500 *
Michael Lightbourne 178,000 1.8%
Joon Moon 18,500 *
James Petcoff 15,000 *
Paul Rosenbaum 312,220 3.1%
Stanford Stoddard 89,500 *
Mark Thoenes 5,000 *
Amir Yazdani 119,984 1.2%
All executive officers and 1,324,562 12.4%
directors as a group (15 persons)
Dimension Fund Advisors, Inc. 506,070 (2) 5.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Walt Disney Company 1,234,562 (3) 11.2%
500 South Buena Vista St.
Burbank, California
* Less than 1%
----------------------------------
(1) Unless otherwise indicated, each person has sole voting and dispositive
power over the shares listed opposite his name. All percentages have been
calculated assuming that 9,827,231 shares of Rentrak common stock are
issued and outstanding as of June 24, 2002. In accordance with SEC
regulations, the number of shares and percentage calculation with respect
to each shareholder assumes the exercise of all outstanding options such
shareholder holds and that can be exercised within 60 days after June 24,
2002, as follows: Cecil Andrus, 17,500 shares; F. Kim Cox, 315,036
shares; George Kuper, 17,500 shares; Michael Lightbourne, 84,000 shares;
Joon Moon, 17,500 shares; James Petcoff, 15,000 shares; Paul Rosenbaum,
100,000 shares; Mark Thoenes, 5,000 shares; Amir Yazdani, 108,478 shares;
and all executive officers and directors as a group, 850,319 shares.
(2) Dimension Fund Advisors, Inc., a registered investment advisor, filed a
Schedule 13K on February 12, 2002, reporting sole voting and dispositive
power as to 506,070 shares.
(3) Represents shares of common stock subject to warrants that are currently
exercisable.
9
EXECUTIVE OFFICERS
The names, ages, positions and backgrounds of Rentrak's present executive
officers in addition to Paul Rosenbaum are as follows:
POSITION
NAME AGE HELD SINCE CURRENT POSITION(S) WITH RENTRAK AND BACKGROUND
---- --- ---------- -----------------------------------------------
F. Kim Cox 49 2000 President and Secretary. From 1999 until 2000, Mr. Cox served
as Executive Vice President, Secretary and Treasurer. From 1995
until 1999, Mr. Cox served as Executive Vice President, Chief
Financial Officer, Secretary and Treasurer. Prior to joining
Rentrak in 1985, Mr. Cox was an attorney in private practice and,
prior to that, an accountant with Arthur Andersen LLP.
Craig Berardi 44 1998 Vice President, International. Mr. Berardi served in various
operational roles at Rentrak from 1994 to 1998. Prior to that he
served as Director of Finance at Warner Brothers Studios.
Timothy Erwin 33 2000 Vice President, Customer Relations. Mr. Erwin has been with
Rentrak for 15 years and, prior to his promotion in June 2000,
held positions including Manager of Customer Services and Key
Accounts and Director of Customer Relations.
Marty Graham 44 2002 Senior Vice President, Studio Relations. Mr. Graham was Vice
President, Product Development from 1991 to May 2002. Prior to
joining Rentrak in October 1988 as Director of Product
Development, Mr. Graham served as General Manager and
Secretary/Treasurer of Pacific Western Video Corporation.
Michael Lightbourne 55 1997 Executive Vice President. Mr. Lightbourne was Senior Vice
President, Marketing, of Rentrak from 1992 to 1996, Vice
President, Marketing, from 1991 to 1992, and Director of Sales
from 1988 to 1991.
Richard Nida 55 1998 Vice President, Investor Relations. Prior to joining Rentrak in
September 1998, Mr. Nida served as the Director of Corporate
Communications and Investor Relations for Payless ShoeSource from
1988 to August 1998.
Christopher Roberts 34 1994 Vice President, Sales. Prior to becoming Vice President, Sales
in 1994, Mr. Roberts was Rentrak's National Director of Sales, a
position he held beginning in September 1992.
Mark Thoenes 49 2001 Chief Financial Officer. From July 1, 2000, to December 31,
2000, Mr. Thoenes was engaged as an outside consultant to serve
as Rentrak's Chief Financial Officer. Prior to that, Mr. Thoenes
served as Chief Financial Officer for PhyCor of Vancouver, Inc.,
and served as Chief Operating Officer for Physician Partners,
Inc., both health care companies, from 1996 until joining Rentrak.
Amir Yazdani 42 2001 Vice President and Chief Information Officer. Mr. Yazdani was
Vice President, Management Information Systems of Rentrak's
subsidiary 3PF.COM, Inc., from 1999 to June 2001 and Vice
President, Management Information Systems of Rentrak from 1993 to
1999.
10
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by Rentrak to the
Named Executive Officers during the fiscal years ended March 31, 2002, 2001 and
2000.
SUMMARY COMPENSATION TABLE
Long-Term
ANNUAL COMPENSATION Compensation
-----------------------------------
-----------------
Awards
-----------------
Fiscal Year Securities
Ended Other Annual Underlying All Other
Name and March 31, Salary Bonus Compensation Options/SARs Compensation
Principal Position (1) ($) ($) ($)(2) (#) ($)(3)
---------------------------- ------------ ------------- ------------ ----------------- ----------------- ----------------
Paul Rosenbaum, Chairman 2002 $391,186 $87,500 $55,095 200,000 $1,500
and Chief Executive Officer 2001 152,500 0 23,703 100,000 0
F. Kim Cox, President and 2002 209,601 20,000 0 0 6,198
Secretary 2001 201,044 40,000 0 5,000(4) 5,647
2000 191,029 85,000 0 32,623 5,571
Michael Lightbourne, 2002 207,551 6,630 0 0 9,399
Executive Vice President 2001 196,132 0 0 10,000 8,951
2,500(4)
2000 188,255 50,000 0 10,000 8,201
Mark Thoenes, 2002 191,606 5,000 0 0 1,500
Chief Financial Officer 2001 42,000 0 0 20,000 99,373
Amir Yazdani, 2002 205,074 30,000 0 120,000 3,220
Vice President and Chief 2001 197,959 30,000 0 10,000 2,911
Information Officer 15,000(4)
2000 188,255 12,500 0 10,000 2,939
(1) Reflects principal position as of March 31, 2002.
(2) Amounts disclosed in this column include monthly lease and maintenance
payments on automobiles of $11,692 in 2002 and $3,302 in 2001 to Mr.
Rosenbaum and payments to Mr. Rosenbaum for housing in Portland, Oregon, of
$37,931 in 2002 and $17,762 in 2001.
(3) Amounts disclosed in this column reflect the following matching
contributions during fiscal 2002 on behalf of the Named Executive Officers
under Rentrak's 401(k) plan: Paul Rosenbaum $1,500; F. Kim Cox, $1,500;
Michael Lightbourne, $1,500; Mark Thoenes, $1,500; and Amir Yazdani,
$1,500. Rentrak also made payments to supplemental disability and life
insurance plans during fiscal 2002 for the following Named Executive
Officers: F. Kim Cox, $4,698; Michael Lightbourne, $7,899; and Amir
Yazdani, $1,720.
(4) Represents options to purchase shares of 3PF.COM, Inc. ("3PF"), common
stock.
11
STOCK OPTION GRANTS
The following table sets forth information concerning stock option grants
to each of the Named Executive Officers during the fiscal year ended March 31,
2002. Rentrak did not grant any stock appreciation rights to executive officers
during the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS (1) FOR OPTION TERM (2)
------------------------------------------------------------------------------------------- ------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% ($) 10% ($)
---------------------------- --------------- ------------------ ------------ -------------- -------------- ---------------
Paul Rosenbaum 200,000(3) 57.47% $3.160 (4) 9/11/2011 $397,462 $1,007,245
F. Kim Cox - - - - - -
Michael Lightbourne - - - - - -
Mark Thoenes - - - - - -
Amir Yazdani 120,000(5) 34.48% 3.400 (6) 7/11/2011 256,589 650,247
-------------------------------
(1) Options granted include both incentive stock options and nonqualified stock
options.
(2) These calculations are based on certain assumed annual rates of
appreciation as required by SEC rules and regulations governing the
disclosure of executive compensation. Under these rules, an assumption is
made that the market price of the shares underlying the stock options shown
in this table could appreciate at rates of 5% and 10% per annum on a
compounded basis over the ten-year term of the stock options. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the common stock of Rentrak, and overall stock market conditions. There
can be no assurance that the gains reflected in this table will be
achieved.
(3) Option vests in full on August 30, 2002.
(4) The exercise price per share equals the fair market value of Rentrak's
common stock based on the closing sales price on the last trading day
preceding the date of grant.
(5) Option vests in three equal annual installments.
(6) The exercise price per share equals the value of Rentrak's common stock
based on the closing sales price on the next trading day following the date
of grant.
12
STOCK OPTION EXERCISES
The following table sets forth certain information concerning stock option
exercises by each of the Named Executive Officers during the fiscal year ended
March 31, 2002, and the value of in-the-money options (e.g., options as to which
the market value of Rentrak common stock exceeds the exercise price of the
options) held by such individuals on March 31, 2002. The value of in-the-money
options is based on the difference between the exercise price of such options
and the closing price of Rentrak common stock on March 28, 2002, which was $7.00
per share. As 3PF's common stock is not publicly traded, outstanding options are
not deemed to be in-the-money as the current value of the stock is not presently
ascertainable. Unless otherwise indicated, the options listed below are for
Rentrak common stock.
AGGREGATED OPTION EXERCISES IN FISCAL 2002 AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)
------------------------------ ------------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------- --------------- -------------- --------------- -------------- ------------------------------
Paul Rosenbaum 0 $ 0 100,000 200,000 $ 350,000 $ 768,000
318,701 45,096 686,707 87,560
F. Kim Cox 0 0 0 5,000 (1) 0 0
Michael Lightbourne 0 0 48,000 48,000 160,123 160,997
0 2,500 (1) 0 0
Mark Thoenes 0 0 5,000 15,000 24,060 72,180
79,317 120,000 215,404 432,000
Amir Yazdani 0 0 0 15,000 (1) 0 0
(1) Option to purchase shares of 3PF's common stock.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth additional information as of March 31, 2002,
about shares of Rentrak's common stock that may be issued upon the exercise of
options, warrants, and other rights under its existing equity compensation plans
and arrangements, divided between plans approved by Rentrak's shareholders and
plans or arrangements not submitted to the shareholders for approval. The
information includes the number of shares covered by, and the weighted average
exercise price of, outstanding options, warrants, and other rights and the
number of shares remaining available for future grants excluding the shares to
be issued upon exercise of outstanding options, warrants, and other rights. The
table does not reflect the additional shares covered by an amendment to the 1997
Equity Participation Plan being submitted for shareholder approval which is
discussed in Proposal 2 of this proxy statement.
13
Number of Securities
Remaining Available for
Number of Securities to be Weighted-Average Exercise Future Issuance Under
Issued Upon Exercise of Price of Outstanding Equity Compensation Plans
Outstanding Options, Options, (excluding securities
PLAN CATEGORY Warrants and Rights Warrants and Rights reflected in first column
------------- -------------------- ------------------- -------------------------
Equity compensation plans
approved by shareholders(1) 1,458,765 $4.0638 584,711
Equity compensation plans or
arrangements not approved by 1,401,256 $6.1685 457,092
shareholders(2) --------- ------- ---------
Total 2,860,021 $5.0950 1,041,803
--------- ------- ---------
(1) Equity compensation plans approved by shareholders include the 1986 Second
Amended and Restated Stock Option Plan, as amended, the 1997 Equity
Participation Plan, as amended, and the 1992 Employee Stock Purchase Plan.
(2) Equity compensation plans or arrangements approved by the board of
directors but not submitted for shareholder approval include the 1997
Non-Officer Employee Stock Option Plan and warrants to purchase an
aggregate of 1,234,562 shares of common stock issued by Rentrak to Walt
Disney Company in 1995 and 1998 with an exercise price of $6.578 per share
in connection with Disney's agreement to supply videocassettes to Rentrak.
The 1997 Non-Officer Employee Stock Option Plan was adopted by the board of
directors effective March 31, 1997, and, as amended, provides for the issuance
of up to 800,000 shares of common stock pursuant to nonstatutory options granted
to employees or consultants of Rentrak who are not officers or directors of the
Rentrak. The Compensation Committee determines the terms of each option grant,
including the number of shares covered, the exercise price, the expiration date,
and provisions regarding vesting and exercisability following termination of
employment.
COMPENSATION OF DIRECTORS
Rentrak compensates its non-employee directors for their services by
payment of $500 for each board meeting they attend in person or by telephone
conference call. Each director who serves on a board committee receives payment
of $500 for attending each in-person or telephone conference committee meeting.
In addition, three non-employee directors are each paid a retainer of $22,500
per year (including $2,500 for service on the Audit Committee) and two
non-employee directors are each paid a retainer of $20,000 per year. Rentrak
also reimburses directors for their travel expenses for each meeting attended in
person. See also "CERTAIN RELATIONSHIPS AND TRANSACTIONS."
14
Each non-employee director receives an automatic grant, at the beginning of
each fiscal year, of a ten-year option to purchase 10,000 shares of Rentrak
common stock, with a grant of an option for an additional 2,500 shares to each
chairman of a board committee. Accordingly, on April 1, 2002, Messrs. Andrus and
Petcoff and Dr. Moon each received an option for 12,500 shares; and Messrs.
Kuper and Stoddard each received an option for 10,000 shares; each at an
exercise price of $6.85 per share and exercisable in full one year after the
date of grant. In addition, on August 16, 2001, Mr. Stoddard was granted a
ten-year option to purchase 5,000 shares of Rentrak common stock at an exercise
price of $3.16 per share, which will become exercisable in full on August 16,
2002. All grants to non-employee directors are made under Rentrak's 1997 Equity
Participation Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
PAUL ROSENBAUM. Rentrak has entered into an employment agreement with Mr.
Rosenbaum relating to his employment as Chairman and Chief Executive Officer.
The agreement was initially effective for one year beginning October 1, 2001,
and has been extended for an additional 12 months to September 30, 2003. In the
event of a change in control of Rentrak, the term of the agreement will be
automatically extended to December 31 of the third calendar year following the
year in which the change in control occurs. A change in control includes (1) the
acquisition by a person or group of beneficial ownership of 25% or more of the
combined voting power of Rentrak's then outstanding capital stock, (2) the
election of directors a majority of whom are not individuals nominated by
Rentrak's then incumbent directors, and (3) the approval by Rentrak's
shareholders of a plan of complete liquidation, a sale of substantially all of
Rentrak's assets, or a merger or similar transaction other than a transaction in
which Rentrak's shareholders continue to hold at least 75% of the combined
voting power of the voting securities of the surviving entity immediately
following the transaction, in each case unless the event otherwise constituting
a change in control has been approved by two-thirds of Rentrak's directors then
in office. The agreement with Mr. Rosenbaum provides for an annual base salary
of $450,000, subject to annual review by the board of directors in its sole
discretion as to whether to increase (but not decrease) his base salary level.
The agreement also provides for the lease of an automobile for use by Mr.
Rosenbaum and for employee benefits available to officers and other management
employees generally. Upon termination of Mr. Rosenbaum's employment by reason of
death, his estate will be entitled to a lump sum payment of $500,000 less any
amounts payable under any life insurance policies purchased by Rentrak for the
benefit of Mr. Rosenbaum's dependents. Upon termination of Mr. Rosenbaum's
employment by Rentrak without cause or by Mr. Rosenbaum with good reason before
a change in control of Rentrak occurs, Mr. Rosenbaum will be entitled to an
additional 12 months' salary and benefits as long as Mr. Rosenbaum does not
compete with Rentrak during that 12-month period. Cause is defined as a material
breach of the agreement by Mr. Rosenbaum, his failure to comply with Rentrak's
general policies or standards or to perform any job duties, a felony conviction
or plea of no contest, or any act by Mr. Rosenbaum constituting fraud,
dishonesty involving Rentrak, or in competition with or materially detrimental
to Rentrak. Good reason is defined as Rentrak's failure to comply with the
agreement or an act or failure to act by Rentrak that constitutes a substantial
adverse change in Mr. Rosenbaum's position or responsibilities or a reduction in
his base salary. Upon termination without cause or for good reason following a
change in control and during the term of the agreement, Mr. Rosenbaum will be
entitled to a lump sum payment equal to three times his annual base salary plus
continuation of benefits for three years, subject to reduction to the extent
that Mr. Rosenbaum's after-tax benefit would be larger after taking into account
any excise tax payable on such severance as an excess parachute payment.
F. KIM COX. Effective April 1, 1998, Rentrak entered into a four-year
employment agreement with Mr. Cox. Under the agreement, Mr. Cox received an
annual salary of $206,636 for the fiscal year ended March 31, 2002. If Mr. Cox
is terminated for certain reasons other than for "cause" (as defined in the
agreement), he is entitled to receive one year's base salary, subject to
reduction should Mr. Cox find alternative employment of "comparable status" (as
defined in the agreement), or if he does not exercise his best efforts to find
such employment. If Mr. Cox is terminated for cause, he will receive only the
amount of compensation accrued through the date of termination. If Mr. Cox's
employment is terminated due to his death or disability, he (or his legal
representative) is entitled to receive all compensation accrued as of the date
of termination plus a lump sum severance payment equal to 180 days' base salary.
The agreement has been extended through March 31, 2003.
15
MICHAEL LIGHTBOURNE. Effective July 10, 1997, Rentrak entered into a
five-year employment agreement with Mr. Lightbourne under which he is employed
as Executive Vice President. Under the agreement, Mr. Lightbourne's initial
annual base salary was $170,000, subject to increase each year during the term
of the agreement in an amount equal to the greater of five percent or the change
in the Consumer Price Index for the preceding year. If Mr. Lightbourne's
employment is terminated by Rentrak without "cause" (as defined in the
agreement) or by Mr. Lightbourne due to a material breach of the agreement by
Rentrak, he is entitled to receive severance equal to all compensation payable
in installments as if still employed through the end of the agreement, subject
to reduction by the amount of any compensation received from all other
employment during the severance period. If terminated for cause, he will receive
only the full amount of all compensation accrued as of the date of termination.
If Mr. Lightbourne's employment is terminated due to his death or disability, he
(or his estate or legal representative) will receive, in a lump sum, all
compensation that would otherwise have been paid during the term of the
agreement, reduced by amounts payable under any life or disability insurance
coverage provided by Rentrak. If Mr. Lightbourne's employment is terminated by
death or by Rentrak other than for cause, all his outstanding stock options will
vest immediately. The agreement is scheduled to expire on July 9, 2002, at which
time he would be entitled to receive a $75,000 bonus. Finally, Mr. Lightbourne
is entitled to one year's salary continuance if his employment agreement is not
renewed or is terminated by Rentrak for any reason other than for cause, in
addition to any other amounts payable under other terms of his agreement.
Rentrak is currently negotiating with Mr. Lightbourne regarding the terms of an
extension of his agreement.
MARK THOENES. Effective January 1, 2001, Rentrak entered into an employment
agreement expiring December 31, 2005, with Mr. Thoenes providing for his
employment as Rentrak's Vice President and Chief Financial Officer. The
agreement provides for an annual base salary of $168,000, subject to a minimum
annual increase of 5% and other employee benefits provided from time to time to
Rentrak's executives. The agreement also provided for an initial option grant
with respect to 20,000 shares of Rentrak common stock and for option grants as
to an additional 7,500 shares each year. Upon termination of Mr. Thoenes's
employment by reason of death or disability, he or his estate will be entitled
to a lump sum severance payment equal to six months' salary. If Mr. Thoenes's
employment is terminated by Rentrak other than for cause within two years after
a change in control of Rentrak, or by Mr. Thoenes for good reason, he will be
entitled to receive a lump sum severance payment equal to one year's base salary
or all base salary payable during the remaining term of the agreement, whichever
is less. If his employment is terminated by Rentrak prior to a change in control
or more than two years after a change of control for reasons other than death,
disability or cause, he will be entitled to a lump sum severance payment equal
to one year's base salary. Upon termination for any reason other than cause, Mr.
Thoenes's options will vest in full to the extent not otherwise vested.
AMIR YAZDANI. Rentrak entered into a five-year employment agreement with
Mr. Yazdani effective July 1, 2001, relating to his employment as Rentrak's
Chief Information Officer. The term of the agreement will be extended
automatically for an additional 12 months unless either party gives notice that
the agreement will not be extended by December 31, 2004. The agreement provides
for an annual base salary of $206,634, subject to annual review for increase on
or before April 1 each year. Under the agreement, Mr. Yazdani also received an
option grant relating to 120,000 shares of Rentrak common stock. See the table
under "Option Grants in Last Fiscal Year" above. Upon termination of Mr.
Yazdani's employment by Rentrak without cause or by Mr. Yazdani for good reason,
prior to or more than two years following a change in control of Rentrak, Mr.
Yazdani will be entitled to receive severance payments equal to a continuation
of his base salary through the later of one year following the date of
termination and June 30, 2004. If Mr. Yazdani's employment is terminated during
the term of the agreement without cause or for good reason within two years
following a change in control, the severance payments to which he would
otherwise be entitled as described in the preceding sentence will be reduced if
his after-tax benefit would thereby be larger after taking into account all
income and excise taxes.
16
REPORT OF THE AUDIT COMMITTEE
The "Report of the Audit Committee" shall not be deemed incorporated by
reference by any general statement incorporating this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that Rentrak specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The Audit Committee of the board of directors reports to the board and is
responsible for overseeing Rentrak's financial reporting process, the systems of
internal accounting and financial controls established by management, and the
annual independent audit of Rentrak's financial statements. The Audit Committee
is comprised of three directors, each of whom meets the independence
requirements under current National Association of Securities Dealers corporate
governance standards. The Audit Committee's activities are governed by a written
charter adopted by the board on May 19, 2000. A copy of the Audit Committee
charter is attached to this proxy statement as Appendix A.
In discharging its responsibilities, the Audit Committee and its individual
members have met with management and Rentrak's independent auditors (through May
9, 2002, Arthur Andersen LLP and since May 9, 2002, KPMG LLP), the successor
accounting firm selected by the board of directors at the Audit Committee's
recommendation (see "Independent Accountants" below) to review Rentrak's
accounting functions and the audit process. The Audit Committee discussed and
reviewed with its independent auditors all matters that the independent auditors
were required to communicate and discuss with the Audit Committee under
applicable auditing standards, including those described in Statement on
Auditing Standards No. 61, as amended, regarding communications with audit
committees. Audit Committee members also discussed and reviewed the results of
the independent auditors' examination of the financial statements, the quality
and adequacy of the Company's internal controls, and issues relating to auditor
independence. The Audit Committee has received the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and has
discussed with the independent auditors their independence.
Based on its review and discussions with management and the independent
auditors, the Audit Committee recommended to the board of directors that the
audited financial statements for the fiscal year ended March 31, 2002, be
included in Rentrak's Annual Report on Form 10-K for filing with the Securities
and Exchange Commission.
Submitted by the Audit Committee of the Board of Directors:
Cecil Andrus (Committee Chair) James Petcoff Stanford Stoddard
17
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The "Report of the Compensation Committee on Executive Compensation" shall
not be deemed incorporated by reference by any general statement incorporating
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that Rentrak
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Compensation Committee of Rentrak is charged with determining the
compensation of all executive officers of Rentrak. These decisions are based on
Rentrak's executive compensation philosophy. This compensation philosophy has
four primary principles: (i) linking executive compensation to the creation of
sustainable increases in shareholder value; (ii) providing executive
compensation rewards contingent upon organizational performance; (iii)
differentiating compensation based on individual contribution; and (iv)
encouraging the retention of a sound management team.
To implement this philosophy, executive compensation has been comprised of
three primary components - annual salary, performance bonuses and a long-term
incentive program consisting of stock option grants. Ownership of shares of
Rentrak's common stock by executives is encouraged and forms a significant
component of the total executive compensation package. In addition, competitive
factors are considered in determining executive compensation.
ANNUAL SALARY
Rentrak has entered into employment agreements with its executive officers
other than its Chief Executive Officer which typically establish a base annual
salary rate and may provide for annual increases in salary during the term of
the agreement. Base salary rates reflect the level of duties and
responsibilities of each executive officer, the executive officer's experience
and prior performance, and competitive factors in Rentrak's industry.
PERFORMANCE BONUSES
In May 2002, the board of directors, at the Compensation Committee's
recommendation, established a bonus pool in the total amount of $560,000 to
recognize employee performance in fiscal 2002. Paul A. Rosenbaum was awarded and
paid a bonus in the amount of $100,000.
LONG-TERM INCENTIVE PROGRAM
Stock option grants are used to motivate employees to focus on Rentrak's
long-term performance, and Rentrak has long maintained stock option plans for
key employees, including all executive officers. In some instances, option
grants are specified in an officer's employment agreement. The size of each
option grant is based upon such factors as the employee's duties,
responsibilities, performance, experience and anticipated contribution to
Rentrak.
Stock options are typically awarded to executive officers on an annual
basis. Additional grants may be made in the event of an executive officer's
promotion. In fiscal 2002, Rentrak granted options to purchase a total of
320,000 shares of common stock to its executive officers, including a 200,000
share grant to Mr. Rosenbaum as discussed below.
COMPENSATION OF PAUL A. ROSENBAUM, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Paul A. Rosenbaum has served as Chairman and Chief Executive Officer of
Rentrak since September 19, 2000. Effective October 2001, Mr. Rosenbaum entered
into an employment agreement with Rentrak, expiring September 30, 2003. The
agreement with Mr. Rosenbaum provides for an initial annual base salary of
$450,000.
18
The salary level was established based on Mr. Rosenbaum's prior work experience
and expectations and compensation levels at companies of similar size and scope.
As part of the agreement, the board of directors granted an option to purchase
200,000 shares of Rentrak's common stock, fully vesting August 30, 2002, to Mr.
Rosenbaum in recognition of his service to Rentrak and to further align his
interests with those of Rentrak's other shareholders. In May 2002 Mr. Rosenbaum
was awarded and paid a bonus in the amount of $100,000.
Submitted by the Compensation Committee of the Board of Directors:
James Petcoff (Committee Chair) Cecil Andrus
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF RENTRAK
CORPORATION, NASDAQ MARKET INDEX, MG MEDIA INDUSTRY GROUP, AND PEER GROUP
The chart on the next page compares the five year cumulative total return
on Rentrak's common stock with that of the NASDAQ Market index, the MG Media
Industry Group, and a group of peer companies selected by Rentrak. The chart
assumes $100 was invested on April 1, 1996 in Rentrak's common stock, the NASDAQ
Market index, the media industry group, and the peer group, and that any
dividends were reinvested. The media industry group represents all public
companies reported by Media General Services as having the same company-level
Standard Industrial Classification (SIC) Code as Rentrak that are also generally
involved in the movie entertainment business. The peer group is composed of the
companies within the video distribution business and internet fulfillment
business reflected in the 2001 peer group appearing in last year's proxy
materials as follows: Hastings Entertainment, Inc., Blockbuster, Inc., Big Star
Entertainment, Inc., Hollywood Entertainment Corp., Movie Gallery, Inc., Valley
Media, Inc., and PFS Web, Inc.
19
The following chart shall not be deemed incorporated by reference by any
general statement incorporating this proxy statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that Rentrak specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
[PERFORMANCE GRAPH APPEARS HERE]
Measurement Period NASDAQ Rentrak-Selected
(FISCAL YEAR COVERED) RENTRAK CORP. MARKET INDEX PEER GROUP
--------------------- ------------- ------------ ----------
Measurement PT - 3/29/97 $100.00 $100.00 $100.00
3/31/98 $345.46 $151.57 $77.72
3/31/99 $102.27 $204.77 $78.45
3/31/00 $200.00 $380.94 $55.68
3/31/01 $134.09 $152.35 $48.74
3/30/02 $254.54 $153.23 $89.10
20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2002, members of the Compensation Committee included Cecil
Andrus, James Petcoff, and George Kuper. Mr. Kuper resigned from the
Compensation Committee effective April 24, 2001, when he was appointed Chief
Operating Officer of Rentrak's subsidiary 3PF.Com, Inc. ("3PF).
Rentrak Japan, a joint venture formed by Rentrak and Culture Convenience
Club Co., Ltd. ("CCC") to distribute video cassettes, DVDs, and video games on a
revenue-sharing basis throughout Japan, entered into a Business Cooperation
Agreement (Framework) with Rentrak in 1998. Under the agreement, Rentrak Japan
agreed to pay Rentrak an annual royalty equal to 1.67 percent of the first $47.9
million of Rentrak Japan's sales and 0.5 percent of Rentrak Japan's sales in
excess of $47.9 million, based on a June 1 to May 31 royalty year. Effective
April 2, 2001, Rentrak and Rentrak Japan entered into a restructuring of their
relationship as evidenced by execution of an Agreement Concerning Changes to the
Business Cooperation Agreement. Pursuant to the Agreement Concerning Changes,
Rentrak transferred exclusive rights to implement its Pay-Per-Transaction
(PPT(R)) system within specified countries in the Far East, including related
trademark and other intellectual property rights, to Rentrak Japan. In exchange
for the transfer, Rentrak Japan made a lump sum cash payment of $5.65 million to
Rentrak and released certain of Rentrak's payment obligations totaling $1.3
million. As a part of the transaction, Rentrak Japan's obligation to pay annual
royalties to Rentrak in connection with use of its PPT system was terminated.
Rentrak concurrently sold to So-Tsu Company ("So-Tsu"), an affiliate of CCC
and Rentrak Japan, 300,000 shares of Rentrak Japan stock, or approximately 5.6
percent of the outstanding Rentrak Japan shares, in exchange for a cash payment
of $4.0 million. Rentrak also repurchased from Rentrak Japan 614,000 shares of
Rentrak's common stock for a cash payment of $2.4 million, or $3.875 per share.
Rentrak repurchased an additional 390,000 shares of its common stock for the
same price per share, or a total of $1.5 million, from CCC. In October 2001,
Rentrak exercised its right under the Agreement Concerning Changes to sell its
remaining 180,000 shares of Rentrak Japan stock, representing approximately 3.4
percent of the outstanding Rentrak Japan shares for approximately $2.4 million
in cash. Rentrak also sold to So-Tsu 1 percent of Rentrak's equity interest in
3PF for a cash payment of $1 million at the end of April 2001.
In August 1999, Rentrak and Rentrak Japan formed Rentrak International, LLC
("RIC"), an Oregon limited liability company, for the purpose of developing the
PPT system in certain international markets. RIC was dissolved pursuant to a
dissolution agreement entered into by Rentrak and Rentrak Japan as of September
30, 2000, and Rentrak Japan relinquished its right to receive repayment of its
$180,000 capital contribution and other accrued amounts as part of the April
2001 restructuring transaction.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In June 2000, the then directors of Rentrak approved a program to make
loans available to those officers of Rentrak who were parties to an employment
agreement with Rentrak for the purpose of allowing them to exercise their
vested, unexercised "out of the money" employee stock options. Outstanding loans
under this program bear interest at the federal funds rate in effect on the date
of each loan (6.5 percent per annum) and interest is payable annually. The
principal amount of the loan is due on the earliest to occur of: (1) one year
prior to the expiration of the term of the borrower's current employment
agreement with Rentrak, (2) one year after the borrower leaves Rentrak's
employment unless such departure follows a "change of control" (which occurred
as a result of the replacement of Rentrak's board of directors on September 19,
2000), (3) five years from the date of the loan, or (4) one year from the date
of the borrower's death. The loans are secured by the stock purchased upon the
exercise of the options. The loans are without recourse (except as to the stock
securing the loans) as to principal and are with full recourse against the
borrower as to interest. The Rentrak board of directors discontinued the program
as to new loans in November 2000.
21
During fiscal 2001, several Rentrak officers obtained loans from Rentrak
under the option loan program. Ron Berger, then Chairman and Chief Executive
Officer of Rentrak, entered into three loan agreements, related promissory notes
in the aggregate amount of $7,350,624 and stock pledge agreements in connection
with his exercise of options to purchase a total of 1,495,750 shares of Rentrak
common stock During 2001, under the terms of his loan agreement, Mr. Berger
surrendered his option loan shares in full satisfaction of the outstanding
principal balance and accrued interest.
Two other officers have outstanding loans under the option loan program as
follows: Michael Lightbourne, Executive Vice President, entered into a loan
agreement, promissory note in the amount of $355,375, and stock pledge agreement
relating to his exercise of options on August 30, 2000, to purchase 94,000
shares of Rentrak common stock; and Richard Nida, Vice President, Investor
Relations, exercised options for a total of 5,000 shares in August and September
2000 and entered into loan agreements, promissory notes totaling $22,190, and
pledge agreements in connection with the exercises.
Dr. Joon S. Moon, a Rentrak director, received a fee totaling approximately
$241,500 for his services in negotiating the April 2001 transactions with
Rentrak Japan and related parties. Dr. Moon also received a fee in the amount of
approximately $48,000 in connection with the October 2001 sale of the remaining
180,000 shares of Rentrak Japan stock held by Rentrak.
On April 24, 2001, George Kuper, a Rentrak director, was appointed Chief
Operating Officer of 3PF with operational management responsibility for the
company. Mr. Kuper was compensated for his services to 3PF as an outside
consultant through December 2002 in the amount of $15,000 per month.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Rentrak's
directors and officers and persons who beneficially own more than ten percent of
the outstanding shares of Rentrak's common stock ("ten percent shareholders"),
to file with the SEC initial reports of beneficial ownership and reports of
changes in beneficial ownership of shares of common stock and other equity
securities of Rentrak. To Rentrak's knowledge, based solely upon a review of the
copies of Forms 3, 4 and 5 (and amendments thereto) furnished to Rentrak or
otherwise in its files, all of Rentrak's officers, directors and ten percent
shareholders complied in a timely manner with all applicable Section 16(a)
filing requirements, except as follows:
o Stanford C. Stoddard, a Rentrak director, filed his initial report of
beneficial ownership after it was due.
o James G. Petcoff, a Rentrak director, reported a sale of Rentrak common
stock after the report was due.
INDEPENDENT ACCOUNTANTS
Rentrak's independent public accountants for the fiscal year ended March
31, 2002, were Arthur Andersen LLP through May 9, 2002. On May 9, 2002 based on
a recommendation of the Audit Committee, the board of directors approved the
dismissal of Arthur Andersen LLP as its independent public accountants. Arthur
Andersen LLP's reports on the consolidated financial statements of Rentrak and
the subsidiaries for the fiscal years ended March 31, 2000, and March 31, 2001,
did not contain an adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles or
practices, financial statement disclosure or auditing scope or procedure, or any
reportable events as defined under Item 304(a)(1)(v) of Regulation S-K
promulgated by the Securities and Exchange Commission. A copy of a letter
addressed to the Securities and Exchange Commission from Arthur Andersen LLP
stating that it agrees with the above statements was attached as Exhibit 16 to
Form 8-K filed by the registrant with the Securities and Exchange Commission,
dated May 10, 2002.
Also on May 9, 2002, based upon a recommendation of the Audit Committee and
approval of the board of directors, the firm of KPMG LLP was engaged to be
Rentrak's independent public accountants. From March 31, 1999 until May 9, 2002,
Rentrak had not consulted KPMG LLP with respect to the application of accounting
22
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on Rentrak's financial statements, or
concerning any disagreement or reportable event with Arthur Andersen LLP.
The board of directors intends to continue to retain KPMG LLP during the
current fiscal year. No election, approval or ratification of the choice of
independent public accountants by the shareholders is required. A representative
of KPMG LLP is expected to be present at the Annual Meeting and will have the
opportunity to make a statement if he or she desires to do so. Such
representative is also expected to be available to respond to appropriate
questions.
AUDIT FEES
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for the audit of Rentrak's financial statements for the fiscal year
ended March 31, 2002, and their review of the interim financial statements
included in Rentrak's quarterly reports on Form 10-Q for that fiscal year
through May 9, 2002, were $56,478 Since May 9, 2002, the aggregate fees billed
by KPMG LLP for professional services rendered for the audit of Rentrak's
financial statements for the fiscal year ended March 31, 2002 were $78,142.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During fiscal 2002, neither Arthur Andersen LLP or KPMG LLP provided any
professional services to Rentrak with regard to financial information systems
design and implementation.
ALL OTHER FEES
Fees billed for services provided to Rentrak by Arthur Andersen LLP during
fiscal 2002, other than the services described above under "Audit Fees," were
$108,620. Such fees were for services rendered in connection with income tax
consulting, planning and return preparation and various other consulting
matters. The Audit Committee of the board has considered whether the provision
of these services to Rentrak is compatible with maintaining the independence of
Rentrak's independent public accountants.
FINANCIAL INFORMATION
A copy of Rentrak's 2002 Annual Report on Form 10-K, including audited
financial statements, is being sent to shareholders with this proxy statement.
INFORMATION CONCERNING THE SOLICITATION
Rentrak will bear all costs and expenses associated with this solicitation.
In addition to solicitation by mail, directors, officers, and employees of
Rentrak may solicit proxies from shareholders, personally or by telephone,
facsimile, or e-mail transmission, without receiving any additional
remuneration. Rentrak has asked brokerage houses, nominees and other agents and
fiduciaries to forward soliciting materials to beneficial owners of Rentrak
common stock and will reimburse all such persons for their expenses.
By Order of the Board of Directors,
F. Kim Cox
PRESIDENT AND SECRETARY
Portland, Oregon
July 8, 2002
23
APPENDIX A
RENTRAK CORPORATION
AUDIT COMMITTEE CHARTER
PURPOSE OF THE AUDIT COMMITTEE
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors of Rentrak Corporation (the "Board") in fulfilling its
responsibility to oversee management's conduct of the Company's financial
reporting process, including by overseeing (a) the financial reports and other
financial information the Company provides to any governmental or regulatory
body, the public or other users thereof, (b) the Company's systems of internal
accounting and financial controls and (c) the annual independent audit of the
Company's financial statements.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain outside
counsel, auditors or other experts for this purpose.
The Board and the Committee are in place to represent the Company's
shareholders; accordingly, the outside auditor is ultimately accountable to the
Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
MEMBERSHIP ON THE AUDIT COMMITTEE
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of the Audit
Committee Policy of the National Association of Securities Dealers.
Accordingly, all Committee members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the Committee.
In addition, at least one member of the Committee will have accounting
or related financial management expertise or background, including a current or
past position as a chief executive or financial officer or other senior officer
with financial oversight responsibilities.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management, as well as the outside auditors, have more time, knowledge and more
detailed information about the Company than do Committee members. Consequently,
in carrying out its oversight responsibilities, the Committee is not providing
any expert or special assurance as to the Company's financial statements or any
professional certification as to the outside auditor's work.
A-1
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
1. The Committee shall review with management and the outside auditors
the audited financial statements to be included in the Company's Annual Report
on Form 10-K (or the Annual Report to Shareholders if distributed prior to the
filing of Form 10-K) and review and consider with the outside auditors the
matters required to be discussed by Statement of Auditing Standards ("SAS") No.
61.
2. As a whole, or through the Committee chair, the Committee shall
review with the outside auditors the Company's interim financial results to be
included in the Company's quarterly reports to be filed with Securities and
Exchange Commission and the matters required to be discussed by SAS No. 61; this
review will occur prior to the Company's filing of the Form 10-Q. The Committee
shall discuss with management and the outside auditors the quality and adequacy
of the Company's internal controls.
3. The Committee shall:
o request from the outside auditors annually, a formal written
statement delineating all relationships between the auditor and
the Company consistent with Independence Standards Board Standard
Number 1;
o discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditor's
independence; and
o recommend that the Board take appropriate action to oversee the
independence of the outside auditor.
4. The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select (or
nominate for shareholder approval), evaluate and, where appropriate, replace the
outside auditor.
A-2
APPENDIX B
THE 1997 EQUITY PARTICIPATION PLAN
OF
RENTRAK CORPORATION
Rentrak Corporation, an Oregon corporation, has adopted The 1997 Equity
Participation Plan of Rentrak Corporation (the "Plan"), effective February 27,
1997, for the benefit of its eligible employees, consultants and directors. The
Plan consists of two plans, one for the benefit of Employees (as such term is
defined below) and consultants and one for the benefit of Independent Directors
(as such term is defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, Employees and
consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I.
DEFINITIONS
1.1 GENERAL. Wherever the following terms are used in this Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.
1.2 AWARD LIMIT. "Award Limit" shall mean 400,000 shares of Common
Stock.
1.3 BOARD. "Board" shall mean the Board of Directors of the Company.
1.4 CHANGE IN CONTROL. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions:
(a) Any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of securities possessing more than 50 percent of the total combined
voting power of the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's stockholders which the
Board does not recommend such stockholders to accept; or
(b) There is a change in the composition of the Board over a period of
thirty-six (36) consecutive months (or less) such that a majority of the
Board members (rounded up to the nearest whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
B-1
1.5 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.6 COMMITTEE. "Committee" shall mean the Stock Option Committee of the
Board, or another committee of the Board, appointed as provided in
Section 8.1.
1.7 COMMON STOCK. "Common Stock" shall mean the common stock of the
Company, par value $.001 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock. Debt
securities of the Company convertible into Common Stock shall be deemed equity
securities of the Company.
1.8 COMPANY. "Company" shall mean Rentrak Corporation, an Oregon
corporation.
1.9 CORPORATE TRANSACTION. "Corporate Transaction" shall mean any of
the following stockholder-approved transactions to which the Company is a party:
(a) A merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this Plan
and all Options are assumed by the successor entity;
(b) The sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or
(c) Any reverse merger in which the Company is the surviving entity but
in which securities possessing more than 50 percent of the total combined
voting power of the Company's outstanding securities are transferred or
issued to a person or persons different from those who held such securities
immediately prior to such merger.
1.10 DEFERRED STOCK. "Deferred Stock" shall mean Common Stock awarded
under Article VII of this Plan.
1.11 DIRECTOR. "Director" shall mean a member of the Board.
1.12 DIVIDEND EQUIVALENT. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VII of this Plan.
1.13 EMPLOYEE. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.14 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.15 FAIR MARKET VALUE. "Fair Market Value" as of a given date means
the value of a share of Common Stock which is equal to (i) the last sale price
of the Common Stock as reported on such date, or if no sales are reported on
that date, then the last preceding date on which a sale was reported, if the
Common Stock is listed on a national securities exchange or quoted on the Nasdaq
Stock Market ("Nasdaq"); (ii) the average of the closing representative bid and
asked prices of the Common Stock reported on such date, or if no prices are
reported on such date, then the last preceding date on which prices are
reported, if the Common Stock is not listed on any national securities exchange
or quoted on Nasdaq but is traded in the over-the-counter market; or (iii) the
fair market value of a share of Common Stock as determined by the Committee (or
the Board, in the case of Options granted to Independent Directors) acting in
good faith, if the Common Stock is not listed on a national securities exchange,
quoted on Nasdaq, or traded in the over-the-counter market.
B-2
1.16 GRANTEE. "Grantee" shall mean an Employee or consultant granted a
Performance Award, Dividend Equivalent, Stock Payment, or an award of Deferred
Stock, under this Plan.
1.17 INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.
1.18 INDEPENDENT DIRECTOR. "Independent Director" shall mean a member
of the Board who is not an Employee of the Company.
1.19 NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Committee.
1.20 OPTION. "Option" shall mean a stock option granted under Article
III of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
PROVIDED, HOWEVER, that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.
1.21 OPTIONEE. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.22 PERFORMANCE AWARD. "Performance Award" shall mean a cash bonus,
stock bonus or other performance or incentive award that is paid in cash, Common
Stock or a combination of both, awarded under Article VII of this Plan.
1.23 PLAN. "Plan" shall mean The 1997 Equity Participation Plan of
Rentrak Corporation.
1.24 QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.25 RESTRICTED STOCK. "Restricted Stock" shall mean Common Stock
awarded under Article VI of this Plan.
1.26 RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article VI of
this Plan.
1.27 RULE 16B-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.28 SECTION 162(M) PARTICIPANT. "Section 162(m) Participant" shall
mean any Employee designated by the Committee as an Employee whose compensation
for the fiscal year in which the Employee is so designated or a future fiscal
year may be subject to the limit on deductible compensation imposed by Section
162(m) of the Code.
1.29 STOCK PAYMENT. "Stock Payment" shall mean (i) a payment in the
form of shares of Common Stock, or (ii) an option or other right to purchase
shares of Common Stock, as part of a deferred compensation arrangement, made in
lieu of all or any portion of the compensation, including without limitation,
salary, bonuses and commissions, that would otherwise become payable to an
Employee or consultant in cash, awarded under Article VII of this Plan.
1.30 SUBSIDIARY. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken
B-3
chain then owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
1.31 TERMINATION OF CONSULTANCY. "Termination of Consultancy" shall
mean the time when the engagement of an Optionee, Grantee or Restricted
Stockholder as a consultant to the Company or a Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a Termination
of Consultancy resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Consultancy.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a consultant's service at
any time for any reason whatsoever, with or without cause, except to the
extent expressly provided otherwise in writing.
1.32 TERMINATION OF DIRECTORSHIP. "Termination of Directorship" shall
mean the time when an Optionee who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship with respect to Independent
Directors.
1.33 TERMINATION OF EMPLOYMENT. "Termination of Employment" shall mean
the time when the employee-employer relationship between an Optionee, Grantee or
Restricted Stockholder and the Company or any Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment or
continuing employment of an Optionee, Grantee or Restricted Stockholder by the
Company or any Subsidiary, (ii) at the discretion of the Committee, terminations
which result in a temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; PROVIDED, HOWEVER, that, unless otherwise determined by the
Committee in its discretion, a leave of absence, change in status from an
employee to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Options, awards of Restricted Stock,
Performance Awards, Dividend Equivalents, awards of Deferred Stock or Stock
Payments shall be Common Stock, initially shares of the Company's Common
Stock, par value $.001 per share. The aggregate number of such shares which
may be issued upon exercise of such options or rights or upon any such
awards under the Plan shall not exceed two million seventy-five thousand
(2,075,000). The shares of Common Stock issuable upon exercise of such
options or rights or upon any such awards may be either previously
authorized but unissued shares or treasury shares.
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(b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any fiscal year shall not
exceed the Award Limit. To the extent required by Section 162(m) of the
Code, shares subject to Options which are canceled continue to be counted
against the Award Limit and if, after grant of an Option, the price of
shares subject to such Option is reduced, the transaction is treated as a
cancellation of the Option and a grant of a new Option and both the Option
deemed to be canceled and the Option deemed to be granted are counted
against the Award Limit.
2.2 ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, or other right
to acquire shares of Common Stock under any other award under this Plan, expires
or is canceled without having been fully exercised, or is exercised in whole or
in part for cash as permitted by this Plan, the number of shares subject to such
Option or other right but as to which such Option or other right was not
exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Options or other awards which are
adjusted pursuant to Section 9.3 and become exercisable with respect to shares
of stock of another corporation shall be considered canceled and may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Shares of Common Stock which are delivered by the Optionee or Grantee or
withheld by the Company upon the exercise of any Option or other award under
this Plan, in payment of the exercise price thereof, may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1. If any
share of Restricted Stock is forfeited by the Grantee or repurchased by the
Company pursuant to Section 6.6 hereof, such share may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE III.
GRANTING OF OPTIONS
3.1 ELIGIBILITY. Any Employee or consultant selected by the Committee
pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 3.4(d).
3.2 DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock Option
shall be granted to any person who is not an Employee.
3.4 GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:
(i) Select from among the Employees or consultants (including
Employees or consultants who have previously received Options or other
awards under this Plan) such of them as in its opinion should be
granted Options;
(ii) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected Employees or
consultants;
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(iii) Subject to Section 3.3, determine whether such Options are
to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based compensation
as described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; PROVIDED, HOWEVER, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(b) Upon the selection of an Employee or consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to an
Employee or consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options, awards of Restricted
Stock or Deferred Stock, Performance Awards, Dividend Equivalents or Stock
Payments or other rights which have been previously granted to him under
this Plan or otherwise. An Option, the grant of which is conditioned upon
such surrender, may have an option price lower (or higher) than the
exercise price of such surrendered Option or other award, may cover the
same (or a lesser or greater) number of shares as such surrendered Option
or other award, may contain such other terms as the Committee deems
appropriate, and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive
stock option" under Section 422 of the Code.
(d) (i) During the term of the Plan, each person who is an Independent
Director shall automatically be granted an Option to purchase ten thousand
(10,000) shares of Common Stock (subject to adjustment as provided in
Section 9.3) on April 1st of each year; PROVIDED, HOWEVER, that each such
person who is Chairman of the Board or of any Board committee shall
automatically be granted an Option to purchase an additional two thousand
five hundred (2,500) shares of Common Stock (subject to adjustment as
provided in Section 9.3) on April 1st of each year. All the foregoing
Option grants authorized by this Section 3.4(d)(i) are subject to
stockholder approval of the Plan.
(ii) The Board may from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:
(1) Determine whether, in its opinion, the Independent Directors
(or any of them) should be granted Non-Qualified Stock Options in
addition to the Options granted pursuant to Section 3.4(d)(i);
(2) Subject to the Award Limit, determine the number of shares to
be subject to such Non-Qualified Stock Options granted to selected
Independent Directors; and
(3) Determine the terms and conditions of such Non-Qualified
Stock Options, consistent with this Plan.
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ARTICLE IV.
TERMS OF OPTIONS
4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall determine, consistent with this Plan. Stock Option Agreements
evidencing Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Stock Option Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2 OPTION PRICE. The price per share of the shares subject to each
Option shall be set by the Committee; PROVIDED, HOWEVER, that such price shall
be no less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and (i) in the case of Incentive Stock
Options and Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, such price shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted; (ii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code) such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted; and (iii) in the case
of Options granted to Independent Directors pursuant to Section 3.4(d)(i), such
price shall equal 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted.
4.3 OPTION TERM. The term of an Option shall be set by the Committee in
its discretion; provided, however, that, (i) in the case of Options granted to
Independent Directors pursuant to Section 3.4(d)(i), the term shall be ten (10)
years from the date the Option is granted, without variation or acceleration
hereunder, but subject to Section 5.6, and (ii) in the case of Incentive Stock
Options, the term shall not be more then ten (10) years from the date the
Incentive Stock Option is granted, or five (5) years from such date if the
Incentive Stock Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code). Except as
limited by requirements of Section 422 of the Code and regulations and rulings
thereunder applicable to Incentive Stock Options, the Committee may extend the
term of any outstanding Option in connection with any Termination of Employment
or Termination of Consultancy of the Optionee, or amend any other term or
condition of such Option relating to such a termination.
4.4 OPTION VESTING.
(a) The period during which the right to exercise an Option in whole or
in part vests in the Optionee shall be set by the Committee (or the Board,
in the case of Options granted to Independent Directors) and the Committee
(or the Board, in the case of Options granted to Independent Directors) may
determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; PROVIDED, HOWEVER, that, unless the
Committee (or the Board, in the case of Options granted to Independent
Directors) otherwise provides in the terms of the Option or otherwise, no
Option shall be exercisable by any Optionee who is then subject to Section
16 of the Exchange Act within the period ending six months and one day
after the date the Option is granted. At any time after grant of an Option,
the Committee (or the Board, in the case of Options granted to Independent
Directors) may, in its sole and absolute discretion and subject to whatever
terms and conditions it selects, accelerate the period during which an
Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become
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exercisable, except as may be otherwise provided by the Committee in
the case of Options granted to Employees or consultants either in the Stock
Option Agreement or by action of the Committee following the grant of the
Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section
422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company
and any Subsidiary) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options to the extent required by Section 422 of the
Code. The rule set forth in the preceding sentence shall be applied by
taking Options into account in the order in which they were granted. For
purposes of this Section 4.4(c), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such stock is granted.
4.5 CONSIDERATION. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in
the employ of (or to consult for or to serve as an Independent Director of,
as applicable) the Company or any Subsidiary for a period of at least one
year (or such shorter period as may be fixed in the Stock Option Agreement
or by action of the Committee following grant of the Option) after the
Option is granted (or, in the case of an Independent Director, until the
next annual meeting of stockholders of the Company). Nothing in this Plan
or in any Stock Option Agreement hereunder shall confer upon any Optionee
any right to continue in the employ of, or as a consultant for, the Company
or any Subsidiary, or as a director of the Company, or shall interfere with
or restrict in any way the rights of the Company and any Subsidiary, which
are hereby expressly reserved, to discharge any Optionee at any time for
any reason whatsoever, with or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the Option,
a partial exercise be with respect to a minimum number of shares.
5.2 MANNER OF EXERCISE. All or a portion of an exercisable Option shall
be deemed exercised upon delivery of all of the following to
the Secretary of the Company or his office:
(a) A written notice complying with the applicable rules established by
the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to
exercise the Option or such portion;
(b) Such representations and documents as the Committee (or the Board,
in the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any
other federal or state securities laws or regulations. The Committee or
Board may, in its absolute discretion, also take whatever additional
actions it deems appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing stop-transfer
notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to Section
9.1 by any person or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised.
However, the Committee (or the Board, in the case of Options
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granted to Independent Directors), may in its discretion (i) allow a delay
in payment up to 30 days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to
the Company with a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof; (iii)
allow payment, in whole or in part, through the surrender of shares of
Common Stock then issuable upon exercise of the Option having a Fair Market
Value on the date of Option exercise equal to the aggregate exercise price
of the Option or exercised portion thereof; (iv) allow payment, in whole or
in part, through the delivery of property of any kind which constitutes
good and valuable consideration; (v) allow payment, in whole or in part,
through the delivery of a promissory note (which may be without recourse or
of limited recourse as determined by the Committee or the Board) bearing
interest (at no less than such rate as shall then preclude the imputation
of interest under the Code) and payable upon such terms as may be
prescribed by the Committee or the Board; (vi) allow payment, in whole or
in part, through the delivery of a notice that the Optionee has placed a
market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed
to pay a sufficient portion of the net proceeds of the sale to the Company
in satisfaction of the Option exercise price; or (vii) allow payment
through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv), (v), and (vi). In the case of a promissory
note, the Committee (or the Board, in the case of Options granted to
Independent Directors) may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan from the Company
when or where such loan or other extension of credit is prohibited by law.
5.3 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee or Board shall, in its absolute
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee (or Board, in the case of Options granted to
Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5 OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates
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evidencing such shares. The Committee may require the Employee to give the
Company prompt notice of any disposition of shares of Common Stock acquired by
exercise of an Incentive Stock Option within (i) two years from the date of
granting such Option to such Employee or (ii) one year after the transfer of
such shares to such Employee. The Committee may direct that the certificates
evidencing shares acquired by exercise of an Option refer to such requirement to
give prompt notice of disposition.
5.6 LIMITATIONS ON EXERCISE OF OPTIONS GRANTED TO INDEPENDENT
DIRECTORS. Unless earlier terminated pursuant to Section 9.3(c)(ii) or
9.3(c)(viii), no Option granted to an Independent Director pursuant to Section
3.4(d)(i) may be exercised to any extent by anyone after the first to occur of
the following events:
(a) The expiration of twelve (12) months from the date of the
Optionee's death;
(b) The expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);
(c) The expiration of three (3) months from the date of the Optionee's
Termination of Directorship for any reason other than such Optionee's death
or his permanent and total disability, unless the Optionee dies within said
three-month period; or
(d) The expiration of ten years from the date the Option was granted.
ARTICLE VI.
AWARD OF RESTRICTED STOCK
6.1 AWARD OF RESTRICTED STOCK
(a) The Committee may from time to time, in its absolute discretion:
(i) Select from among the Employees or consultants (including
Employees or consultants who have previously received other awards
under this Plan) such of them as in its opinion should be awarded
Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this
Plan.
(b) The Committee shall establish the purchase price, if any, and form
of payment for Restricted Stock; PROVIDED, HOWEVER, that such purchase
price shall be no less than the par value of the Common Stock to be
purchased, unless otherwise permitted by applicable state law. In all
cases, legal consideration shall be required for each issuance of
Restricted Stock.
(c) Upon the selection of an Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company
to issue such Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.
6.2 RESTRICTED STOCK AGREEMENT. Restricted Stock shall be issued only
pursuant to a written Restricted Stock Agreement, which shall be executed by the
selected Employee or consultant and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with this Plan.
6.3 CONSIDERATION. As consideration for the issuance of Restricted
Stock, in addition to payment of any purchase price, the Restricted Stockholder
shall agree, in the written Restricted Stock Agreement, to remain in the employ
of, or to consult for, the Company or any Subsidiary for a period of at least
one year after the
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Restricted Stock is issued (or such shorter period as may be fixed in the
Restricted Stock Agreement or by action of the Committee following grant of the
Restricted Stock). Nothing in this Plan or in any Restricted Stock Agreement
hereunder shall confer on any Restricted Stockholder any right to continue in
the employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Restricted
Stockholder at any time for any reason whatsoever, with or without good cause.
6.4 RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; PROVIDED, HOWEVER,
that in the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 6.5.
6.5 RESTRICTION. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; provided, however,
that, unless the Committee otherwise provides in the terms of the Restricted
Stock Agreement or otherwise, no share of Restricted Stock granted to a person
subject to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date on
which the Restricted Stock was issued, and provided, further, that by action
taken after the Restricted Stock is issued, the Committee may, on such terms and
conditions as it may determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Restricted Stock Agreement. Restricted
Stock may not be sold or encumbered until all restrictions are terminated or
expire. Unless provided otherwise by the Committee, if no consideration was paid
by the Restricted Stockholder upon issuance, a Restricted Stockholder's rights
in unvested Restricted Stock shall lapse upon Termination of Employment or, if
applicable, upon Termination of Consultancy with the Company.
6.6 REPURCHASE OF RESTRICTED STOCK. The Committee shall provide in the
terms of each individual Restricted Stock Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a Termination of
Consultancy between the Restricted Stockholder and the Company, at a cash price
per share equal to the price paid by the Restricted Stockholder for such
Restricted Stock; PROVIDED, HOWEVER, that provision may be made that no such
right of repurchase shall exist in the event of a Termination of Employment or
Termination of Consultancy without cause, or following a change in control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
6.7 ESCROW. The Secretary of the Company or such other escrow holder as
the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8 LEGEND. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
6.9 PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS.
(a) Notwithstanding anything in the Plan to the contrary, the Committee
may grant Restricted Stock awards to a Section 162(m) Participant that vest
upon the attainment of performance
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targets for the Company which are related to one or more of the following
performance goals: (i) pre-tax income, (ii) operating income, (iii) cash
flow, (iv) earnings per share, (v) return on equity, (vi) return on
invested capital or assets, and (vii) cost reductions or savings.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(c) of the Code, with respect
to Restricted Stock which may be granted to one or more Section 162(m)
Participants, no later than 90 days following the commencement of any
fiscal year in question or any other designated fiscal period (or such
other time as may be required or permitted by Section 162(m) of the Code),
the Committee shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the performance goal or goals applicable to the
fiscal year or other designated fiscal period, (iii) establish the various
targets and bonus amounts which may be earned for such fiscal year or other
designated fiscal period and (iv) specify the relationship between
performance goals and targets and the amounts to be earned by each Section
162(m) Participant for such fiscal year or other designated fiscal period.
Following the completion of each fiscal year or other designated fiscal
period, the Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other
designated fiscal period. In determining the amount earned by a Section
162(m) Participant, the Committee shall have the right to reduce (but not
to increase) the amount payable at a given level of performance to take
into account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or
other designated fiscal period.
6.10 MAXIMUM AWARD PER FISCAL YEAR. The maximum number of shares of
Restricted Stock that may be awarded under the Plan to any individual during any
fiscal year shall not exceed the Award Limit.(i)
ARTICLE VII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 PERFORMANCE AWARDS. Any Employee or consultant selected by the
Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to the market value, book value, net profits or
other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, in each case on a specified
date or dates or over any period or periods determined by the Committee, or may
be based upon the appreciation in the market value, book value, net profits or
other measure of the value of a specified number of shares of Common Stock over
a fixed period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular Employee or
consultant.
7.2 DIVIDEND EQUIVALENTS. Any Employee or consultant selected by the
Committee may be granted Dividend Equivalents based on the dividends declared on
Common Stock, to be credited as of dividend payment dates, during the period
between the date an Option, Deferred Stock or Performance Award is granted, and
the date such Option, Deferred Stock or Performance Award is exercised, vests or
expires, as determined by the Committee. Such Dividend Equivalents shall be
converted to cash or additional shares of Common Stock by such formula and at
such time and subject to such limitations as may be determined by the Committee.
With respect to Dividend Equivalents granted with respect to Options intended to
be qualified performance-based compensation for purposes of Section 162(m) of
the Code, such Dividend Equivalents shall be payable regardless of whether such
Option is exercised.
7.3 STOCK PAYMENTS. Any Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee, determined on the date such Stock
Payment is made or on any date thereafter.
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7.4 DEFERRED STOCK. Any Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee. Common Stock underlying a Deferred Stock award will not be
issued until the Deferred Stock award has vested, pursuant to a vesting schedule
or performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award has
vested and the Common Stock underlying the award has been issued.
7.5 PERFORMANCE AWARD AGREEMENT, DIVIDEND EQUIVALENT AGREEMENT,
DEFERRED STOCK AGREEMENT, STOCK PAYMENT AGREEMENT. Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
7.6 TERM. The term of a Performance Award, Dividend Equivalent, award
of Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.
7.7 EXERCISE UPON TERMINATION OF EMPLOYMENT. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is exercisable
or payable only while the Grantee is an Employee or consultant; provided that
the Committee may determine that the Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment may be exercised or paid subsequent
to Termination of Employment or Termination of Consultancy without cause, or
following a change in control of the Company, or because of the Grantee's
retirement, death or disability, or otherwise.
7.8 PAYMENT ON EXERCISE. Payment of the amount determined under Section
7.1 or 7.2 above shall be in cash, in Common Stock or a combination of both, as
determined by the Committee. To the extent any payment under this Article VII is
effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 5.3.
7.9 CONSIDERATION. In consideration of the granting of a Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment, the
Grantee shall agree, in a written agreement, to remain in the employ of, or to
consult for, the Company or any Subsidiary for a period of at least one year
after such Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment is granted (or such shorter period as may be fixed in such
agreement or by action of the Committee following such grant). Nothing in this
Plan or in any agreement hereunder shall confer on any Grantee any right to
continue in the employ of, or as a consultant for, the Company or any Subsidiary
or shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
7.10 PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS.
(a) Notwithstanding anything in the Plan to the contrary, the Committee
may grant any performance or incentive awards described in Article VII to a
Section 162(m) Participant that vest or become exercisable upon the
attainment of performance targets for the Company which are related to one
or more of the following performance goals: (i) pre-tax income, (ii)
operating income, (iii) cash flow, (iv) earnings per share, (v) return on
equity, (vi) return on invested capital or assets, and (vii) cost
reductions or savings.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect
to performance or incentive awards
B-13
described in Article VII which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the commencement of
any fiscal year in question or any other designated fiscal period (or such
other time as may be required or permitted by Section 162(m) of the Code),
the Committee shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the performance goal or goals applicable to the
fiscal year or other designated fiscal period, (iii) establish the various
targets and bonus amounts which may be earned for such fiscal year or other
designated fiscal period and (iv) specify the relationship between
performance goals and targets and the amounts to be earned by each Section
162(m) Participant for such fiscal year or other designated fiscal period.
Following the completion of each fiscal year or other designated fiscal
period, the Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other
designated fiscal period. In determining the amount earned by a Section
162(m) Participant, the Committee shall have the right to reduce (but not
to increase) the amount payable at a given level of performance to take
into account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or
other designated fiscal period.
7.11 MAXIMUM AWARD PER FISCAL YEAR. The value of Performance Awards
that may be awarded under the Plan to any individual during any fiscal year
shall not exceed the Award Limit to the extent that the awards are based on the
value of a specified number of shares of Common Stock. The maximum number of
shares of Deferred Stock that may be awarded to any individual during any fiscal
year shall not exceed the Award Limit.
ARTICLE VIII.
ADMINISTRATION
8.1 STOCK OPTION COMMITTEE. The Stock Option Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
8.2 DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Dividend Equivalents or Stock Payments are granted or
awarded, and to adopt such rules for the administration, interpretation, and
application of this Plan as are consistent therewith and to interpret, amend, or
revoke any such rules. Notwithstanding the foregoing, the full Board, acting by
a majority of its members in office, shall conduct the general administration of
the Plan with respect to Options granted to Independent Directors. Any such
grant or award under this Plan need not be the same with respect to each
Optionee, Grantee or Restricted Stockholder. Any such interpretations and rules
with respect to Incentive Stock Options shall be consistent with the provisions
of Section 422 of the Code. In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and duties of the
Committee under this Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code, or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.
8.3 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. In administering the
Plan, the Committee shall act by a majority of its members in attendance at a
meeting at which a quorum is present or by a memorandum or other written
8.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Members
of the Committee shall receive such compensation for their services as members
as may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan
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shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Optionees, Grantees, Restricted Stockholders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan, Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Dividend Equivalents or Stock Payments, and all members of
the Committee and the Board shall be fully protected by the Company in respect
of any such action, determination or interpretation.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
9.1 NOT TRANSFERABLE. Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Dividend Equivalents or Stock Payments under this
Plan may not be sold, pledged, assigned, or transferred in any manner other than
by will or the laws of descent and distribution or pursuant to a QDRO, unless
and until such rights or awards have been exercised, or the shares underlying
such rights or awards have been issued, and all restrictions applicable to such
shares have lapsed. No Option, Restricted Stock award, Deferred Stock award,
Performance Award, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements of the Optionee,
Grantee or Restricted Stockholder or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may exercise an
Option or other right or award (or any portion thereof) granted to him under the
Plan, unless it has been disposed of pursuant to a QDRO. After the death of the
Optionee or Grantee, any exercisable portion of an Option or other right or
award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Stock Option Agreement or other agreement, be exercised
by his personal representative or by any person empowered to do so under the
deceased Optionee's or Grantee's will or under the then applicable laws of
descent and distribution.
9.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except as
otherwise provided in this Section 9.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within 12 months before or after the action by the
Board or the Committee, no action of the Board or the Committee may, except as
provided in Section 9.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Dividend Equivalents or Stock Payments, alter or
impair any rights or obligations under any Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Dividend Equivalents or Stock
Payments theretofore granted or awarded, unless the award itself otherwise
expressly so provides. No Options, Restricted Stock, Deferred Stock, Performance
Awards, Dividend Equivalents or Stock Payments may be granted or awarded during
any period of suspension or after termination of this Plan, and in no event may
any Incentive Stock Option be granted under this Plan after the first to occur
of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 9.4.
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9.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR
LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.
(a) Subject to Section 9.3(d), in the event that the Committee (or the
Board, in the case of Options granted to Independent Directors) determines
that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited
to, a Corporate Transaction), or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event, in the Committee's sole discretion (or in the case of
Options granted to Independent Directors, the Board's sole discretion),
affects the Common Stock such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the
Plan or with respect to an Option, Restricted Stock award, Performance
Award, Dividend Equivalent, Deferred Stock award or Stock Payment, then the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall, in such manner as it may deem equitable, adjust any or
all of
(i) The number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance
Awards, Dividend Equivalents or Stock Payments may be granted under the
Plan, or which may be granted as Restricted Stock or Deferred Stock
(including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be
issued and adjustments of the Award Limit),
(ii) The number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Performance
Awards, Dividend Equivalents, or Stock Payments, and in the number and
kind of shares of outstanding Restricted Stock or Deferred Stock, and
(iii) The grant or exercise price with respect to any Option,
Performance Award, Dividend Equivalent or Stock Payment.
(b) Subject to Sections 9.3(b)(vii) and 9.3(d), in the event of any
Corporate Transaction or other transaction or event described in Section
9.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board, in the case of Options
granted to Independent Directors) in its discretion is hereby authorized to
take any one or more of the following actions whenever the Committee (or
the Board, in the case of Options granted to Independent Directors)
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to any option, right or other
award under this Plan, to facilitate such transactions or events or to
give effect to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either
by the terms of the agreement or by action taken prior to the
occurrence of such transaction or event and either automatically or
upon the optionee's request, for either the purchase of any such
Option, Performance Award, Dividend Equivalent, or Stock Payment, or
any Restricted Stock or Deferred Stock for an amount of cash equal to
the amount that could have been attained upon the exercise of such
option, right or award or realization of the optionee's rights had such
option, right or award been currently exercisable or payable or fully
vested or the replacement of such option, right or award with other
rights or property selected by
B-16
the Committee (or the Board, in the case of Options granted to
Independent Directors) in its sole discretion;
(ii) In its sole and absolute discretion, the Committee (or the
Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, Performance Award,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event that it cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either
by the terms of such Option, Performance Award, Dividend Equivalent, or
Stock Payment, or Restricted Stock or Deferred Stock or by action taken
prior to the occurrence of such transaction or event, that for a
specified period of time prior to such transaction or event, such
option, right or award shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in (i) Section 4.4 or
(ii) the provisions of such Option, Performance Award, Dividend
Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock;
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either
by the terms of such Option, Performance Award, Dividend Equivalent, or
Stock Payment, or Restricted Stock or Deferred Stock or by action taken
prior to the occurrence of such transaction or event, that upon such
event, such option, right or award be assumed by the successor or
survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the stock
of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of
shares and prices;
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make adjustments
in the number and type of shares of Common Stock (or other securities
or property) subject to outstanding Options, Performance Awards,
Dividend Equivalents, or Stock Payments, and in the number and kind of
outstanding Restricted Stock or Deferred Stock and/or in the terms and
conditions of (including the grant or exercise price), and the criteria
included in, outstanding options, rights and awards and options, rights
and awards which may be granted in the future;
(vi) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide either by
the terms of a Restricted Stock award or Deferred Stock award or by
action taken prior to the occurrence of such event that, for a
specified period of time prior to such event, the restrictions imposed
under a Restricted Stock Agreement or a Deferred Stock Agreement upon
some or all shares of Restricted Stock or Deferred Stock may be
terminated, and, in the case of Restricted Stock, some or all shares of
such Restricted Stock may cease to be subject to repurchase under
Section 6.6 or forfeiture under Section 6.5 after such event; and
(vii) None of the foregoing discretionary actions taken under
this Section 9.3(b) shall be permitted with respect to Options granted
under Section 3.4(d) to Independent Directors to the extent that such
discretion would be inconsistent with the applicable exemptive
conditions of Rule 16b-3. In the event of a Change in Control or a
Corporate Transaction, to the extent that the Board does not have the
ability under Rule 16b-3 to take or to refrain from taking the
discretionary actions set forth in Section 9.3(b)(iii) above, each
Option granted to an Independent
B-17
Director shall be exercisable as to all shares covered thereby upon
such Change in Control or during the five days immediately preceding
the consummation of such Corporate Transaction and subject to such
consummation, notwithstanding anything to the contrary in Section 4.4
or the vesting schedule of such Options. In the event of a Corporate
Transaction, to the extent that the Board does not have the ability
under Rule 16b-3 to take or to refrain from taking the discretionary
actions set forth in Section 9.3(b)(ii) above, no Option granted to an
Independent Director may be exercised following such Corporate
Transaction unless such Option is, in connection with such Corporate
Transaction, either assumed by the successor or survivor corporation
(or parent or subsidiary thereof) or replaced with a comparable right
with respect to shares of the capital stock of the successor or
survivor corporation (or parent or subsidiary thereof).
(c) Subject to Section 9.3(d) and 9.8, the Committee (or the Board, in
the case of Options granted to Independent Directors) may, in its
discretion, include such further provisions and limitations in any Option,
Performance Award, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock agreement or certificate, as it may deem equitable
and in the best interests of the Company.
(d) With respect to Incentive Stock Options and Options intended to
qualify as performance-based compensation under Section 162(m), no
adjustment or action described in this Section 9.3 or in any other
provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of
the Code or would cause such option or stock appreciation right to fail to
so qualify under Section 162(m), as the case may be, or any successor
provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 of the Exchange Act or
violate the exemptive conditions of Rule 16b-3 unless the Committee (or the
Board, in the case of Options granted to Independent Directors) determines
that the option or other award is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any option,
right or award shall always be rounded to the next whole number.
9.4 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted for
the approval of the Company's stockholders within 12 months after the date of
the Board's initial adoption of this Plan. Options, Performance Awards, Dividend
Equivalents or Stock Payments may be granted and Restricted Stock or Deferred
Stock may be awarded prior to such stockholder approval, provided that such
Options, Performance Awards, Dividend Equivalents or Stock Payments shall not be
exercisable and such Restricted Stock or Deferred Stock shall not vest prior to
the time when this Plan is approved by the stockholders, and provided further
that if such approval has not been obtained at the end of said 12-month period,
all Options, Performance Awards, Dividend Equivalents or Stock Payments
previously granted and all Restricted Stock or Deferred Stock previously awarded
under this Plan shall thereupon be canceled and become null and void.
9.5 TAX WITHHOLDING. The Company shall be entitled to require payment
in cash or deduction from other compensation payable to each Optionee, Grantee
or Restricted Stockholder of any sums required by federal, state or local tax
law to be withheld with respect to the issuance, vesting or exercise of any
Option, Restricted Stock, Deferred Stock, Performance Award, Dividend Equivalent
or Stock Payment. The Committee (or the Board, in the case of Options granted to
Independent Directors) may in its discretion and in satisfaction of the
foregoing requirement allow such Optionee, Grantee or Restricted Stockholder to
elect to have the Company withhold shares of Common Stock otherwise issuable
under such Option or other award (or allow the return of shares of Common Stock)
having a Fair Market Value equal to the sums required to be withheld.
9.6 LOANS. The Committee may, in its discretion, extend one or more
loans to Employees in connection with the exercise or receipt of an Option,
Performance Award, Dividend Equivalent or Stock Payment granted under this Plan,
or the issuance of Restricted Stock or Deferred Stock awarded under this Plan.
The terms and conditions of any such loan shall be set by the Committee.
B-18
9.7 FORFEITURE PROVISIONS. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options or other
awards made under the Plan, or to require the recipient to agree by separate
written instrument, that (i) any proceeds, gains or other economic benefit
actually or constructively received by the recipient upon any receipt or
exercise of the award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the award shall
terminate and any unexercised portion of such award (whether or not vested)
shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date, or
within a specified time period following receipt or exercise of the award, or
(b) the recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).
9.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND PERFORMANCE-BASED
COMPENSATION. Notwithstanding any other provision of this Plan, this Plan, and
any Option, Performance Award, Dividend Equivalent or Stock Payment granted, or
Restricted Stock or Deferred Stock awarded, to any individual who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3) that are requirements for
the application of such exemptive rule. To the extent permitted by applicable
law, the Plan, Options, Performance Awards, Dividend Equivalents, Stock
Payments, Restricted Stock and Deferred Stock granted or awarded hereunder shall
be deemed amended to the extent necessary to conform to such applicable
exemptive rule. Furthermore, notwithstanding any other provision of this Plan,
any Option, Restricted Stock or performance or incentive award described in
Article VII intended to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any amendment to
Section 162(m) of the Code) or any regulations or rulings issued thereunder that
are requirements for qualification as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed
amended to the extent necessary to conform to such requirements.
9.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.
9.10 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Dividend Equivalents or Stock Payments under this Plan and the issuance and
delivery of shares of Common Stock and the payment of money under this Plan or
under Options, Performance Awards, Dividend Equivalents or Stock Payments
granted or Restricted Stock or Deferred Stock awarded hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan, Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Dividend Equivalents or Stock
Payments granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
9.11 TITLES. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Plan.
B-19
9.12 GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Oregon without regard to conflicts of laws thereof.
B-20
RENTRAK CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RENTRAK
CORPORATION (THE "COMPANY").
The undersigned hereby appoints each of Paul A. Rosenbaum and F. Kim Cox as
proxies, with full power of substitution, and hereby authorizes them to
represent and to vote as designated below, all the shares of the Company's
common stock held of record by the undersigned on June 24, 2002, at the annual
meeting of the shareholders to be held at the Company's executive offices, One
Airport Center, 7700 N.E. Ambassador Place, Portland, Oregon 97220, on August
22, 2002, at 10 a.m., Pacific Daylight Time, or any adjournments or
postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS PROVIDED, THE PROXIES NAMED
ABOVE WILL VOTE FOR EACH DIRECTOR NOMINEE NAMED IN PROPOSAL 1 AND FOR PROPOSAL
2.
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PROPOSAL 1: ELECTION OF DIRECTORS
The board of directors unanimously recommends a vote FOR each of the nominees
named in Proposal 1.
Nominees: Cecil D. Andrus, |_|FOR election |_|WITHHOLD
George H. Kuper, Joon S. Moon, election of vote from
James G. Petcoff, Paul A. Rosenbaum, all director all nominees
Stanford C. Stoddard nominees
(except as
noted below)
To withhold authority to vote for any individual nominee, identify the nominee
in the space below:
Exceptions:
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PROPOSAL 2: AMENDMENT OF 1997 EQUITY PARTICIPATION PLAN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2.
Approval of amendment of |_|FOR |_|AGAINST |_|ABSTAIN
1997 Equity Participation Plan
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In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please date and sign exactly as name appears hereon. When shares are held
as joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 2002
-------------
Signature Signature if held jointly
---------------- -----------------
Please mark, sign, date and return the proxy using the enclosed envelope.