SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Section 240.14a-11(c)
or Section 240.14a-12
Rentrak Corporation
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RENTRAK CORPORATION
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
July 21, 2005
To Our Shareholders:
Our 2005 Annual Meeting of Shareholders will be held on Thursday, August
25, 2005, 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 2005 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,
PAUL A. ROSENBAUM
Chairman, President and Chief Executive Officer
RENTRAK CORPORATION
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held August 25, 2005
To the Shareholders of
Rentrak Corporation:
The Annual Meeting of Shareholders of Rentrak Corporation ("Rentrak") will
be held on Thursday, August 25, 2005, 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 or her
successor is duly elected and qualified;
2. To consider and approve the 2005 Stock Incentive Plan;
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, 2005 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 2005 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:
MARK L. THOENES
Senior Vice President, Chief Financial Officer
and Secretary
Portland, Oregon
July 21, 2005
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 25, 2005
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Date, Time and Place of Meeting
The board of directors of Rentrak Corporation ("Rentrak") is furnishing
this proxy statement and the accompanying 2005 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 2005 Annual Meeting of
Shareholders (the "Annual Meeting"). The Annual Meeting will be held Thursday,
August 25, 2005, 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 approval of the 2005 Stock Incentive 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 2005 Annual Report to
Shareholders are being mailed on or about July 21, 2005 to shareholders of
record on June 24, 2005.
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 or her
successor is duly elected and qualified;
o To consider and approve the 2005 Stock Incentive Plan;
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, 2005,
(the "Record Date"), are entitled to notice of, and to vote at, the Annual
Meeting. At the close of business on the Record Date, 10,550,395 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 2005 Stock Incentive Plan will be approved if the votes cast at the Annual
Meeting in favor of approving the plan, in person or by proxy, exceed the votes
cast opposing approval of the plan.
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 will also have no effect on the
outcome of the vote on the 2005 Stock Incentive 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 returns a duly executed proxy but does not vote on a proposal
because the nominee does not have discretionary voting power with respect to the
matter being considered and 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 2005 Stock Incentive
Plan.
2006 Shareholder Proposals
The deadline for shareholders to submit proposals to be considered for
inclusion in the proxy statement for the 2006 Annual Meeting of Shareholders is
March 23, 2006. To be considered at the 2006 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
26, 2006) and no earlier than 90 calendar days prior to the first anniversary of
the date of the 2005 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.
Our current directors, Judith Allen, Cecil Andrus, George Kuper, Paul
Rosenbaum, Ralph Shaw and Stanford Stoddard, have been nominated to stand for
re-election as directors. Directors are re-elected annually to serve until the
next annual meeting of shareholders and until their successors are duly elected
and qualified.
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The board of directors has determined that each of the nominees for
director named below, other than Mr. Rosenbaum, is an "independent director"
under Rule 4200(a) (15) of the Nasdaq listing standards.
The board of directors recommends a vote "FOR" the election of each of the
following nominees for director:
JUDITH G. ALLEN (age 48). Ms. Allen is president of Allen Strategies, a
media marketing and strategy consulting firm located in Englewood, Colorado. Ms.
Allen has been involved in the cable television industry for sixteen years,
holding positions as senior vice president of MediaOne Group, Inc., senior vice
president of marketing and programming of Century Communications, and vice
president, affiliate relation at USA Network. She was named one of the twelve
most powerful women in cable by Cablevision Magazine in 1999. She received an
A.B. in history from Brown University and an M.B.A. from Harvard Business
School. Ms. Allen has served as a director of Rentrak since 2004.
CECIL D. ANDRUS (age 73). Beginning in 1995, Mr. Andrus founded and
continues to serve as the chairman of the Andrus Center for Public Policy at
Boise State University. Mr. Andrus has also been of counsel to the Gallatin
Group, a public policy consulting firm in Boise, Idaho, since 1995. 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 has served as a director of Rentrak since 2000 and is
also a director of Coeur d'Alene Mines Corporation and PCS Edventures!.com, Inc.
GEORGE H. KUPER (age 64). Mr. Kuper is an independent consultant in the
areas of productivity improvement, environmental and energy issues, and public
policy and provides advice to small and start-up companies in the chemical,
electronics, and software industries. Since 1994, Mr. Kuper has also served as
president and CEO of the Council of Great Lake Industries in Ann Arbor,
Michigan. During his career, he has held positions as director of productivity
programs at the General Electric Company (1978-83); executive director of the
Manufacturing Studies Board of the National Academy of Science (1983-88); and
CEO of the U.S.'s largest applied research laboratory for manufacturing
technologies, the Industrial Technology Institute (1988-94). He has served with
the Office of the Secretary of Defense, the Committee for Economic Development,
the National Association of Manufacturers, and the U.S. Chamber of Commerce in
various capacities. Mr. Kuper was a founder of the National Center for
Manufacturing Sciences and executive director of the National Center for
Productivity, a Presidential appointment. Mr. Kuper has served as a director of
Rentrak since 2000. PAUL A. ROSENBAUM (age 62). A significant shareholder in
Rentrak since 1994, Paul Rosenbaum was elected in September 2000 to serve as the
company's Chairman of the Board and Chief Executive Officer. During his career
as a legislator and in private practice, Mr. Rosenbaum acquired extensive
knowledge of U.S. banking and insurance law. He served in the Michigan
Legislature from 1972 to 1978, during which he chaired the House Judiciary
Committee, was legal counsel to the Speaker of the House and wrote and sponsored
the Michigan Administrative Procedures Act. Additionally, Mr. Rosenbaum also
served on the National Conference of Commissioners on Uniform State Laws, as
vice chairman of the Criminal Justice and Consumer Affairs Committee of the
National Conference of State Legislatures, and on a committee of the Michigan
Supreme Court responsible for reviewing local court rules. From 1980 to 1986 he
served on the Board of Trustees of Springfield College. Mr. Rosenbaum also is
the CEO of SWR Corp., which he founded in 1994. SWR Corp. is based in Michigan
and designs, sells, and markets specialty industrial chemicals.
RALPH R. SHAW (age 66). Mr. Shaw has been president of Shaw Management
Company, an investment counseling firm located in Portland, Oregon, since 1980,
and general partner of a succession of four venture capital funds beginning in
1983. Mr. Shaw received a B.A. in public accounting from Hofstra University and
a J.D. from New York University's School of Law. Mr. Shaw is a trustee of the
Tax-Free Trust of Oregon. He is also a director of Schnitzer Steel Industries,
Inc., and chairs its audit committee. Mr. Shaw served as an outside director of
one of Rentrak's subsidiaries from 2000 through 2003. He also served as an
adviser to the Rentrak board from 2001 until his election as a director of
Rentrak in 2004.
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STANFORD C. "BUD" STODDARD (age 74). 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. He is currently chairman of MTC Capital Corporation, the
holding company for Michigan Trust Bank. He graduated from the University of
Michigan with a B.A. in business administration. Mr. Stoddard has served as a
director of Rentrak since 2001.
PROPOSAL 2
APPROVAL OF 2005 STOCK INCENTIVE PLAN
Background
Our board of directors adopted the Rentrak Corporation 2005 Stock
Incentive Plan (the "Plan") in June 2005, subject to shareholder approval at the
Annual Meeting. The Plan is intended to replace the 1997 Non-Officer Employee
Stock Option Plan (the "Non-Officer Plan") and the 1997 Equity Participation
Plan (the "Equity Plan" and, together with the Non-Officer Plan, the "Prior
Plans"). If the Plan is approved by the shareholders, it will become effective
on August 25, 2005. A copy of the Plan is attached to this proxy statement as
Appendix A.
As with the Prior Plans, the Plan is intended to promote the
interests of Rentrak and its shareholders by enabling us to attract, retain and
reward officers and other key employees, nonemployee directors and outside
consultants and to align their interests with the interests of our shareholders.
Although the Plan is similar to the Equity Plan, incentive stock options (the
type of award most often granted under the Equity Plan) will no longer be
available for grant after February 27, 2007 (ten years after adoption of the
Equity Plan) under applicable provisions of the Internal Revenue Code of 1986,
as amended (the "Code"). Also, although the Non-Officer Plan is not subject to
these limitations, the only awards authorized for grant are nonqualified stock
options and the only persons eligible to receive grants are non-officer
employees. Due to these limitations, the board decided to seek shareholder
approval of a new equity-based compensation plan at the Annual Meeting to assure
Rentrak's continued ability to offer appropriate stock-based incentive
compensation to eligible participants.
The Plan provides for awards of both incentive and nonqualified
stock options, stock appreciation rights ("SARs"), restricted stock or units
with time-based vesting, and performance shares with vesting tied to attainment
of performance goals. It also authorizes the creation of other awards with
characteristics to be determined, allowing for development of new types of
equity-based awards in response to changes in tax laws, accounting rules, or the
compensation structures of peer companies. Stock options, SARs, and performance
awards may be designed, in the discretion of the committee administering the
Plan, to qualify as performance-based compensation under Section 162(m) of the
Code. Section 162(m) provides that compensation, other than performance-based
compensation, paid to the five highest-paid executive officers of a public
company in excess of $1,000,000 per individual per year is not deductible for
purposes of federal income tax. The Plan also includes provisions to address
recently enacted tax legislation relating to deferred compensation, codified as
Section 490A of the Code.
Up to a total of 1,000,000 shares of Rentrak common stock may be
issued pursuant to awards granted under the Plan, subject to adjustment for
changes in capitalization. In addition, shares covered by outstanding stock
options under the Prior Plans that are cancelled, terminate, or otherwise expire
without being exercised will become available for grants of new awards under the
Plan. At June 15, 2005, there were approximately 1,595,381 shares subject to
outstanding options under the Prior Plans. If the Plan is approved by Rentrak's
shareholders, no further awards will be made under the Prior Plans, under which
a total of approximately 385,000 shares are presently available for future
grants. Additional information regarding the Prior 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.
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Plan Highlights
Independent Committee Administration. The Plan will be administered
by a committee of non-employee directors all of whom satisfy the criteria to be
an independent director under Rule 4350(c) (3) of the Nasdaq listing standards,
a "non-employee director" under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and an "outside director" under Section
162(m) of the Code.
No Option Repricing. The Plan prohibits the repricing of stock
options other than in connection with adjustments for a change in Rentrak's
capitalization.
No Discount Options or SARs. Stock options or SARs may not be
granted with an exercise or base price less than the fair market value of
Rentrak's common stock on the date of grant. The closing sale price for
Rentrak's common stock reported on The Nasdaq Stock Market on June 15, 2005, was
$8.81.
Shares Available For Restricted Share and Restricted Stock Unit
Awards Are Limited. The Plan limits the total number of shares available for
restricted share and restricted stock unit awards over the life of the Plan to
500,000 shares. Due to changes in the accounting treatment of stock options that
will go into effect at the beginning of Rentrak's next fiscal year, the
Committee intends to explore alternatives to option grants in considering future
awards of equity-based compensation, which may result in a shift in whole or in
part to restricted share awards or performance awards.
Amendment of the Plan. Rentrak's board of directors may amend,
suspend or terminate the Plan or any portion of the Plan at any time, except
that no amendment may be made without shareholder approval if such approval is
required by applicable law or the listing requirements of an applicable stock
exchange or registered securities association.
General Information
Plan Administration. The Plan will be administered by the
Compensation Committee of Rentrak's board of directors (the "Committee"), unless
the board appoints a different committee to administer the Plan. The Committee
will establish the terms and conditions of awards granted under the Plan,
subject to limitations set forth in the Plan. The Committee may delegate to an
Option Committee made up of one or more directors, who may also be officers or
other employees of Rentrak, certain authority under the Plan, including the
authority to grant awards to eligible employees who are not subject to stock
ownership reporting requirements under Section 16(a) of the Exchange Act.
Eligible Participants. The Plan provides for the grant of stock
options and other stock-based awards to Rentrak's officers, other key employees,
and non-employee directors of Rentrak or one of its subsidiaries. Outside
consultants or advisers who provide services to Rentrak or a subsidiary, other
than services of a capital-raising nature, are also eligible to receive awards
under the Plan. No awards have been allocated or granted under the Plan as of
the date of this proxy statement. At June 15, 2005, approximately 215 employees
and five non-employee directors were considered eligible to participate in the
Plan. Unlike the Equity Plan, the Plan does not provide for automatic annual
grants of nonqualified stock options to non-employee directors; awards to
non-employee directors under the Plan will be made in the Committee's sole
discretion.
Shares Available for Grant. Up to a total of 1,000,000 shares of
Rentrak's common stock, plus a number of shares equal to the shares covered by
outstanding options under the Prior Plans that are cancelled, terminate, or
otherwise expire without being exercised, may be issued to eligible participants
in the Plan.
If there is a stock split, stock dividend or other relevant change
affecting Rentrak's shares, the Committee, in its sole discretion, may make
appropriate adjustments in the number of shares that may be issued in the future
and in the number of shares and exercise or base price of all awards then
outstanding. Options or SARs granted under the Plan to a single individual in
any fiscal year may cover up to a total of 200,000 shares.
If all or a portion of an award granted under the Plan is cancelled,
terminates or otherwise expires without being exercised or shares being issued,
the shares covered by that award or applicable portion will become available for
future awards. In addition, shares subject to an award that is paid in cash or
exchanged for another award may be used for future awards under the Plan. Shares
will not be added back to the Plan if a participant pays the exercise price of
an award or his or her tax withholding obligations by delivering shares of
Rentrak common stock he or she already owns, by surrendering other outstanding
vested awards under the Plan, or by reducing the number of shares otherwise
vested under the award.
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Types of Awards
The types of awards that may be granted by the Committee under the
Plan include:
Options. Options to purchase Rentrak common stock may be incentive
stock options ("ISOs") meeting the requirements of Section 422 of the Code, or
nonqualified options which are not eligible for such tax-favored treatment. ISOs
may be granted only to employees of Rentrak or one of its subsidiaries. The Plan
does not specify a maximum term for nonqualified options, but under current law
ISOs must expire not more than ten years from the date of grant. For all
options, the exercise price per share must be not less than 100% of the fair
market value of a share of Rentrak common stock on the date the option is
granted. The award agreement relating to an option may, in the Committee's
discretion, provide that if an option is exercised using shares already owned by
the participant in payment of the exercise price, the recipient will
automatically be granted a replacement option (a "reload option") for a number
of shares equal to the number (or a portion of the number) of shares surrendered
with an exercise price equal to the fair market value of Rentrak common stock on
the date of grant.
Stock Appreciation Rights ("SARs"). A recipient of SARs will
receive upon exercise an amount equal to the excess (or specified portion
thereof) of the fair market value of a share of Rentrak common stock on the date
of exercise over the base price, multiplied by the number of shares as to which
the rights are exercised. The base price will be designated by the Committee in
the award agreement and must be equal to or greater than the fair market value
of a share of Rentrak common stock on the date of grant. Payment may be in cash,
in shares of common stock, or in any other form approved by the Committee,
provided that payment may be made in a form other than shares of common stock
only if the Committee determines that such form of payment will comply with the
requirements of Section 409A of the Code relating to deferred compensation. SARs
may be granted in connection with options or other awards or may be granted as
independent awards.
Restricted Awards. Restricted awards may take the form of restricted
shares or restricted stock units. Restricted shares are shares of Rentrak common
stock that are subject to such limitations as the Committee deems appropriate,
including restrictions on sale or transfer. Restricted shares may be subject to
forfeiture in the event the recipient terminates employment or service as a
director or consultant during a specified period. Stock certificates
representing restricted shares are issued in the name of the recipient but are
held by Rentrak until the expiration of any restrictions. From the date of
issuance of restricted shares, the recipient is entitled to the rights of a
shareholder with respect to such shares, including voting and dividend rights.
Restricted stock units are awards of units equivalent in value to a
share of Rentrak common stock, which similarly may be subject to forfeiture if
the recipient terminates employment or service as a director or consultant
during a specified period. At the expiration of such period, payment is made
with respect to restricted stock units in an amount equal to the value of the
number of shares covered by the units. Payment may be in cash or unrestricted
shares of Rentrak common stock or in any other form approved by the Committee.
The Committee will establish the terms and conditions of restricted stock units
so that they will comply with the requirements of Section 409A of the Code.
Performance Awards. Performance awards are granted in units
equivalent in value to a share of Rentrak common stock. A performance award is
subject to forfeiture if or to the extent the recipient fails to meet certain
performance goals during a designated performance cycle. Performance awards
earned by attaining performance goals are paid at the end of a performance cycle
in cash or shares of Rentrak common stock or in any other form approved by the
Committee.
In the case of performance awards granted to executive officers, the
Committee, in its sole discretion, may impose performance goals relating to
corporate performance, business unit performance, or a combination of both, in
order to qualify the awards as performance-based compensation under Section
162(m) of the Code. Such corporate performance goals will be based on financial
performance goals related to the performance of Rentrak as a whole, and may
include one or more measures related to earnings, profitability, efficiency, or
return to shareholders, such as earnings per share, operating profits, stock
price, or costs of production. Business unit performance goals will be based on
a combination of financial goals and strategic goals related to the performance
of an identified business unit for which a participant has responsibility.
Strategic goals for a business unit may include one or a combination of
objective factors relating to success in implementing strategic plans or
initiatives,
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introducing products, constructing facilities, or other identifiable objectives.
Financial goals for a business unit may include the degree to which the business
unit achieves one or more objective measures related to its revenues, earnings,
profitability, efficiency, operating profit, or costs of production. Any
corporate or business unit goals may be expressed as absolute amounts or as
ratios or percentages. Success in achieving such goals may be measured against
various standards, including budget targets, improvement over prior periods, and
performance relative to other companies, business units, or industry groups.
Approval of the Plan by the shareholders at the Annual Meeting will constitute
approval of the foregoing performance goals under Section 162(m) of the Code, if
required.
Other Stock-Based Awards. The Committee may grant other awards that
involve payments or grants of shares of Rentrak common stock or are measured by
or in relation to shares of common stock. The Plan provides flexibility to
design new types of stock-based or stock-related awards to attract and retain
employees, directors and consultants in a competitive environment.
Adjustments for Changes in Capitalization; Change in Control
In the event of a change in capitalization, the Committee may make
such proportionate adjustments in the aggregate number of shares for which
awards may be granted under the Plan, the maximum number of shares that may be
awarded to any participant, and the number of shares covered by, and the
exercise or base price of, any outstanding awards, as the Committee in its sole
discretion deems appropriate.
The Committee, in its discretion, may provide in any award agreement
for acceleration of vesting of the award if a change in control (as defined in
the award agreement or, if not so defined, as defined in the Plan) of Rentrak
occurs. An award agreement may also include provisions to deal with outstanding
awards in the event of a significant corporate transaction involving Rentrak,
such as a merger, sale of substantially all of Rentrak's assets, or dissolution
or liquidation of Rentrak.
Duration, Termination and Amendment of the Plan
The Plan will remain in effect until awards have been granted
covering all available shares under the Plan or the Plan is otherwise terminated
by the board of directors. The board may terminate the Plan at any time, but any
such termination will not affect any outstanding awards. The board may also
amend the Plan from time to time, provided that no amendment may be made without
shareholder approval if such approval is required by applicable rules and
regulations of a stock exchange or registered securities association.
New Plan Benefits
No determinations regarding awards to be made to eligible
participants under the Plan have been made as of the date of this proxy
statement.
Federal Income Tax Consequences of Awards
The following discussion summarizes the principal anticipated
federal income tax consequences of grants of awards under the Plan to
participants and to Rentrak.
Tax Consequences to Participants
Incentive Stock Options. ISOs granted under the Plan are intended to
meet the requirements of Section 422 of the Code. No taxable income results to a
participant upon the grant of an ISO or upon the issuance of shares when the ISO
is exercised. The amount realized on the sale or taxable exchange of such shares
in excess of the exercise price will be considered a capital gain and any loss
will be a capital loss, except that if the sale or exchange occurs within one
year after exercise of the ISO or two years after grant of the ISO, the
participant will recognize compensation taxable at ordinary income tax rates
measured by the amount by which either (a) the fair market value on the date of
exercise or (b) the amount realized on the sale of the shares, whichever is
less, exceeds the exercise price. For purposes of determining alternative
minimum taxable income, an ISO is treated as a nonqualified option.
-7-
Nonqualified Options. No taxable income is recognized upon the grant
of a nonqualified option. In connection with the exercise of a nonqualified
option, a participant will generally realize ordinary compensation income
(self-employment income for non-employee directors) measured by the difference
between the fair market value of the shares acquired on the date of exercise and
the exercise price. The participant's cost basis in the acquired shares is the
fair market value of the shares on the exercise date. Any gain upon sale of the
shares is capital gain and any loss will be a capital loss.
Payment of Exercise Price in Shares. The Committee may permit
participants to pay all or a portion of the exercise price of an option using
previously-acquired shares of Rentrak common stock. If an option is exercised
and payment is made in previously held shares, there is no taxable gain or loss
to the participant other than any gain recognized as a result of exercise of the
option, as described above.
Stock Appreciation Rights. The grant of a SAR to a participant will
not cause the recognition of income by the participant. Upon exercise of a SAR,
the participant will recognize ordinary income equal to the amount of cash
payable to the participant plus the fair market value of any shares delivered to
the participant.
Restricted Awards and Performance Awards. In the case of restricted
awards and performance 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.
Tax Consequences to Rentrak
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 connection with ISOs. 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 advisers, as federal
income tax consequences may depend on the particular terms of individual awards
and the specific circumstances of individual participants.
Board Recommendation and Vote Required
The board of directors recommends a vote for approval of the Plan.
If a quorum is present at the Annual Meeting, the Plan will be approved upon the
affirmative vote of a majority of the total votes cast upon the proposal at the
meeting. Abstentions and shares represented by duly executed and returned
proxies of brokers or other nominees which are expressly not voted on Proposal 2
will have no effect on the required vote.
COMMITTEES AND MEETINGS OF THE BOARD
The board of directors has established several standing committees,
including an Audit Committee, a Compensation Committee, a Finance Committee, and
a Nominating and Governance Committee. During the fiscal year ended March 31,
2005, the board of directors held six meetings. Each director attended at least
75% of the total number of meetings held by the board of directors and the board
committees on which he or she served during fiscal 2005.
The board of directors has adopted corporate governance guidelines, which
state that directors are expected to attend all meetings of the board of
directors, including our annual meetings of shareholders. All directors attended
the annual meeting held in August 2004.
-8-
Audit Committee
The Audit Committee's activities are governed by a formal written charter
revised by the board of directors on June 25, 2004. A copy of the Audit
Committee charter is available on Rentrak's website under "Investor Relations"
at www.rentrak.com. The Audit Committee held six meetings during the fiscal year
ended March 31, 2005.
The Audit Committee is currently comprised of Mr. Andrus (Chair), Mr. Shaw
and Mr. Stoddard, each of whom meets the financial literacy and independence
requirements for audit committee membership specified in the Nasdaq listing
standards. The board of directors has determined that Mr. Shaw is qualified to
be an "audit committee financial expert" as defined in the rules of the
Securities and Exchange Commission (the "SEC").
The Audit Committee makes decisions regarding the engagement or discharge
of Rentrak's independent auditors, reviews and pre-approves audit and
legally-permitted non-audit services provided by the independent auditors, and
oversees the integrity of Rentrak's financial statements and other financial
information, its systems of internal accounting and financial controls, and the
independence and performance of Rentrak's independent auditors. The Audit
Committee is also responsible for establishing procedures for the receipt and
handling of complaints about accounting and auditing matters and for reviewing
potential conflicts of interest and reports of ethical violations regarding
Rentrak's directors, officers and employees.
Compensation Committee
The Compensation Committee is currently comprised of Ms. Allen (Chair),
Mr. Andrus and Mr. Shaw. The Compensation Committee is responsible for approving
and evaluating Rentrak's director and officer compensation plans, policies and
programs, evaluating the performance of Rentrak's management, and making
compensation decisions regarding Rentrak's executive employees. During the
fiscal year ended March 31, 2005, the Compensation Committee held two meetings.
James G. Petcoff served on the Compensation Committee until his retirement from
the board of directors as of the annual meeting held in August 2004, following
which Ms. Allen and Mr. Shaw joined the Committee.
Nominating and Governance Committee
The Nominating and Governance Committee (the "Nominating Committee") is
comprised of Mr. Kuper as Chair and Ms. Allen and Mr. Andrus as its two other
members. The board of directors has determined that each of these directors is
independent as defined in Rule 4200(a)(15) of the Nasdaq listing standards. The
Nominating Committee is governed by a written charter approved by the board of
directors on June 25, 2004. The charter is available on Rentrak's website under
"Investor Relations" at www.rentrak.com. The Nominating Committee held two
meetings during the fiscal year ended March 31, 2005.
The Nominating Committee is responsible for identifying individuals
qualified to become directors of Rentrak and recommending to the board of
directors candidates for election and for recommending individuals to serve on
each board committee. It is also responsible for developing for board approval a
set of corporate governance guidelines addressing board organizational issues,
committee structure and membership, and succession planning for Rentrak's chief
executive officer position.
The Nominating Committee has not adopted any specific, minimum
qualifications for director candidates. In evaluating potential director
nominees, the Nominating Committee will take into account all factors that it
considers appropriate, including strength of character, maturity of judgment,
career specialization, relevant technical skills or financial acumen, diversity
of viewpoints, industry knowledge, and the highest personal and professional
ethics, integrity and sound business judgment.
In determining whether to recommend nomination of current directors for
re-election, the Nominating Committee will perform periodic evaluations of
individual directors. Non-employee directors are generally expected to retire
upon reaching age 75 or completing ten years of service, whichever is later.
Directors who are also employees will generally be expected to resign upon
termination of employment, although the board of
-9-
directors may make an exception to this policy for a former chief executive
officer if it believes it to be in the best interests of Rentrak.
When the Nominating Committee is required to identify new director
candidates, because of a vacancy or a desire to expand the board, the Nominating
Committee will poll current directors for suggested candidates. The Nominating
Committee has not hired a third-party search firm to date, but has the authority
to do so if it deems such action to be appropriate. Once potential candidates
are identified, the Nominating Committee will conduct interviews with the
candidates and perform such investigations into the candidates' background as
the Nominating Committee deems appropriate.
The Nominating Committee will consider director candidates suggested by
shareholders for nomination by the board of directors. Shareholders wishing to
suggest a candidate to the Nominating Committee should do so by sending the
candidate's name, biographical information, and qualifications to: Chair of
Nominating Committee, in care of Mark L. Thoenes, Senior Vice President, Chief
Financial Officer and Secretary, Rentrak Corporation, P.O. Box 18888, Portland,
Oregon 97218-0888. Candidates suggested by shareholders will be evaluated by the
same criteria and process as candidates from other sources.
Finance Committee
The Finance Committee is comprised of Mr. Shaw (Chair) and Messrs. Kuper
and Rosenbaum. It is responsible for evaluating strategic financial issues
facing Rentrak. During the fiscal year ended March 31, 2005, the Finance
Committee met three times.
CODE OF ETHICS
Rentrak has adopted a Code of Ethics for Senior Financial Officers ("Code
of Ethics"), which is applicable to its chief executive officer, president,
principal financial officer, and principal accounting officer. The Code of
Ethics focuses on honest and ethical conduct, the adequacy of disclosure in
Rentrak's financial reports, and compliance with applicable laws and
regulations. The Code of Ethics is included as part of our Code of Business
Conduct approved by the board of directors, which is generally applicable to all
directors, officers, and employees of Rentrak. The Code of Business Conduct and
Code of Ethics are available on Rentrak's website under "Investor Relations" at
www.rentrak.com and are administered by the Audit Committee.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Communications by shareholders to the board of directors should be sent to
the attention of the Chair of the Nominating and Governance Committee, in care
of Mark L. Thoenes, Senior Vice President, Chief Financial Officer and
Secretary, Rentrak Corporation, P.O. Box 18888, Portland, Oregon 97218-0888.
Such communications will be forwarded unopened to the individual occupying that
position. The Chair of the Nominating Committee will be responsible for
responding to or forwarding such communications as appropriate, including
communications directed to individual directors or board committees.
Communications will not be forwarded if the Chair of the Nominating and
Governance Committee determines that they do not appear to be within the scope
of the board's (or such other intended recipient's) responsibilities or are
otherwise inappropriate or frivolous.
-10-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 24, 2005, certain information
regarding the beneficial ownership of Rentrak common stock by (i) each person
known to be the beneficial owner of 5% or more of Rentrak's outstanding shares
of common stock, (ii) each director and nominee for election as a director of
Rentrak, (iii) Rentrak's Chief Executive Officer, the next four most highly
compensated executive officers who were employed by Rentrak at March 31, 2005,
and a former officer included in the table under applicable SEC rules (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)
Judith Allen -- --
Cecil Andrus 46,000 *
F. Kim Cox 121,809 1.1%
Ron Giambra 10,000 *
Cathy Hetzel 20,000 *
George Kuper 47,500 *
Kenneth Papagan 68,800 *
Paul Rosenbaum 531,700 4.8%
Ralph Shaw 10,762(2) *
Stanford Stoddard 89,650(3) *
Amir Yazdani 195,790 1.8%
All Officers and Directors as a group (14 persons) 1,218,928 10.5%
Mark Cuban 605,300(4) 5.7%
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Neil Gagnon 565,123(5) 5.4%
1370 Avenue of the Americas, Suite 2002
New York, New York 10019
* Less than one percent
(1) Unless otherwise indicated, each person has sole voting and dispositive
power over the shares listed opposite his name. All percentages have been
calculated based on 10,550,395 shares of Rentrak's common stock issued and
outstanding as of June 24, 2005. 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,
2005, as follows: Cecil Andrus, 45,000 shares; F. Kim Cox, 96,428 shares;
Ron Giambra, 10,000 shares; Cathy Hetzel, 20,000; George Kuper, 47,500
shares; Kenneth Papagan, 68,800 shares; Paul Rosenbaum, 450,000 shares;
Stanford Stoddard, 10,000 shares; Amir Yazdani, 178,129 shares; and all
executive officers and directors as a group, 1,027,294 shares.
(2) Represents shares held by Mr. Shaw's wife.
(3) Includes 1,000 shares held by Mr. Stoddard as Trustee of the S.C. Stoddard
CRAT and 38,500 shares held by Mr. Stoddard as Trustee of the S.C.
Stoddard Trust.
-11-
(4) Mark Cuban filed a Schedule 13G reporting as of December 31, 2004, sole
voting and dispositive power as to 605,300 shares.
(5) Neil Gagnon filed a Schedule 13G reporting as of December 31, 2004, sole
voting power as to 207,191 shares, shared voting power as to 109,405
shares, sole dispositive power as to 179,946 shares, and shared
dispositive power as to 385,177 shares.
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 10% of the
outstanding shares of Rentrak's common stock ("10% shareholders") to file with
the SEC initial reports of beneficial ownership (Form 3s) and reports of changes
in beneficial ownership (Forms 4 and 5) of such shares. 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 or publicly available,
all of Rentrak's officers, directors, and 10% shareholders complied in a timely
manner with all applicable Section 16(a) filing requirements during fiscal 2005
and the first three months of fiscal 2006, except as follows: Cecil Andrus,
George Kuper, Paul Rosenbaum, Ralph Shaw, Stanford Stoddard, and Mark Thoenes,
each with one late filing on Form 4 relating to one option grant; Judith G.
Allen, one late filing on Form 4 relating to one option grant and one late
filing on Form 3; Craig Berardi, one late filing on Form 4 relating to one
option exercise and two stock sales; and Timothy Erwin, one late filing on Form
4 relating to one option exercise and five stock sales.
-12-
EXECUTIVE OFFICERS
The names, ages, positions and backgrounds of Rentrak's present executive
officers in addition to Paul Rosenbaum are as follows:
Position Current Position(s) with Rentrak and Background
Name Age Held
Since Vice President, Customer Relations. Mr. Erwin
Timothy Erwin 36 2000 has been with Rentrak for over 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.
Ron Giambra 43 2003 Senior Vice President, Theatrical. Mr. Giambra
joined Rentrak in 2001 as Vice President,
Theatrical and now serves as Senior Vice
President, Theatrical, since his promotion in
early 2003. Prior to joining Rentrak, Mr.
Giambra held various management positions with
motion picture distribution companies,
including Tribune Media from 2000 to 2001,
Destination Films in 1999 and 2000, Polygram
Film Entertainment from 1997 to 1999, and Orion
Films from 1983 to 1997.
Marty Graham 47 2002 Chief Operation Officer, PPT Division. Mr.
Graham served as Senior Vice President, Studio
Relations since May 2002 until he was promoted
to his current position in January 2005.
Previously, he served Rentrak as Vice
President, Product Development beginning in
1991. Mr. Graham joined Rentrak in October 1988
as Director of Product Development. Prior to
joining Rentrak, Mr. Graham served as general
manager and secretary/treasurer of Pacific
Western Video Corporation.
Cathy Hetzel 54 2004 Senior Vice President, OnDemand Essentials. Ms.
Hetzel joined Rentrak in March 2004, following
a one-year consulting relationship with
Rentrak. Previously, she was senior vice
president, business development at Concero, an
interactive television, VOD and electronic
commerce services company, beginning in March
2000. Prior to that, she was senior vice
president of Digital Cable Radio Associates, a
partnership of several music recording
companies and cable operators.
Kenneth Papagan 53 2002 Executive Vice President, Business Development
& Strategic Planning. Prior to joining Rentrak
in November 2002, Mr. Papagan held the position
as president for Delmar Media.Net, a digital
media consulting services firm. From 1997 to
2001, Mr. Papagan held several positions at iXL
Inc., an internet consulting firm, including
global general manager of one of the
enterprise's practice groups, Digital Media and
Broadband Solutions. Mr. Papagan's 25-year
career in media and entertainment includes
having been an executive member of the launch
teams of eight television networks including
Qube, Nickelodeon, MTV, The Movie Channel, ON
TV and The JCPenney Shopping Channel.
Christopher Roberts 37 2003 Senior Vice President, Sales & Marketing. Mr.
Roberts was promoted to his present position in
June 2003. Prior to becoming Vice President,
Sales in 1994, which position he held until
2003, Mr. Roberts was Rentrak's National
Director of Sales, a position he held beginning
in September 1992. Previously, Mr. Roberts
worked as an account executive for Rentrak.
Prior to that, he was an account executive for
National Video.
Mark Thoenes 52 2003 Senior Vice President and 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. He became Chief Financial
Officer of Rentrak on January 1, 2001 and was
promoted to his present
-13-
position in June 2003. Prior to joining
Rentrak, Mr. Thoenes worked in the healthcare
industry for 14 years beginning in 1996 in
various financial and operational management
positions, most recently as chief operating
officer for Physician Partners, Inc. and as
chief financial officer for PhyCor of
Vancouver, Inc., both health care companies.
Mr. Thoenes began his career serving as a CPA
with the accounting firm Ernst & Young LLP.
Amir Yazdani 45 2001 Executive Vice President, Information
Technology and Chief Information Officer. Mr.
Yazdani was promoted to his present position in
July 2001. Previously, Mr. Yazdani was Vice
President, Management Information Systems of
Rentrak's former subsidiary 3PF.COM, Inc., from
1999 to June 2001 and Vice President,
Management Information Systems of Rentrak from
1993 to 1999.
-14-
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by Rentrak to the
Named Executive Officers during the fiscal years ended March 31, 2005, 2004 and
2003.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------- ------------
Awards
------------
Securities
Fiscal Year All Other All Other
Ended Salary Bonus Options/SARs Compensation
Name and Principal Position (1) March 31, ($) ($) (#) ($)(2)
------------------------------- ----------- -------- ------- ------------- ------------
Paul Rosenbaum 2005 $450,000 $ -- 75,000 $1,500
Chairman, President and Chief 2004 459,038 -- 50,000 1,500
Executive Officer 2003 450,000 50,000 100,000 1,500
F. Kim Cox (3) 2005 272,917 -- -- 9,963
President and Secretary 2004 252,733 -- -- 5,303
2003 257,361 -- -- 5,187
Ron Giambra 2005 240,000 -- -- --
Senior Vice President, Theatrical 2004 223,852 -- 20,000 --
2003 144,833 7,500 10,000 --
Cathy Hetzel (4) 2005 219,168 54,667 -- --
Senior Vice President, 2004 -- 22,000 20,000 --
OnDemand Essentials
Kenneth Papagan 2005 250,000 42,500 -- 1,500
Executive Vice President, 2004 175,314 60,000 50,000 --
Business Development and 2003 75,000 -- 75,000 --
Strategic Planning
Amir Yazdani 2005 218,000 42,500 -- 3,195
Executive Vice President and 2004 218,210 -- 10,000 3,094
Chief Information Officer 2003 212,234 26,000 60,000 2,983
(1) Reflects principal position as of March 31, 2005.
(2) Amounts disclosed in this column reflect matching contributions during
fiscal 2005 in the amount of $1,500 to each of Messrs. Rosenbaum, Cox,
Papagan and Yazdani under Rentrak's 401(k) plan. Rentrak also made
payments with respect to a supplemental life insurance and long-term
disability plan for Mr. Cox in the amount of $3,899 and for Mr. Yazdani in
the amount of $1,695 during fiscal 2005. Amounts paid to Mr. Cox also
include $4,564 paid for accrued vacation and medical, dental, life, and
disability insurance premiums through March 31, 2005 under his separation
agreement dated January 25, 2005.
(3) Mr. Cox resigned his position as President and Secretary in January 2005.
(4) Ms. Hetzel joined Rentrak in March 2004.
-15-
Stock Option Grants
The following table sets forth information concerning stock option grants
to each of the Named Executive Officers during the fiscal year ended March 31,
2005. Rentrak did not grant any stock appreciation rights to executive officers
during the fiscal year.
Option Grants in Last Fiscal Year
Potential realizable value
at assumed annual rates
of stock price appreciation
Individual grants (1) for option term (2)
------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price Date 5%($) 10%($)
------------------------------------------------------------------------------------------------------
Paul Rosenbaum 75,000(3) 53.57% $ 10.50(4) 2/9/2012 $217,572 $480,777
F. Kim Cox -- -- -- -- -- --
Ron Giambra -- -- -- -- -- --
Cathy Hetzel -- -- -- -- -- --
Kenneth Papagan -- -- -- -- -- --
Amir Yazdani -- -- -- -- -- --
(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 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 five or 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 market conditions. There can be no assurance that the gains
reflected in this table will be achieved.
(3) Option vests in four equal annual installments.
(4) The exercise price per share is equal to the closing sales price on the date
of grant.
-16-
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, 2005, 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, 2005. 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 31, 2005, which was
$11.08 per share. Unless otherwise indicated, the options listed below are for
Rentrak common stock.
Aggregated Option Exercises in Fiscal 2005
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at Fiscal
Options at Fiscal Year End (#) Year End ($)
------------------------------ ----------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------------------------- ------------ ----------- ------------- ----------- -------------
Paul Rosenbaum -- $ -- 450,000 75,000 $ 3,134,500 $ 43,500
F. Kim Cox 242,593 1,375,767 96,428 -- 575,623 --
Ron Giambra 10,000 57,450 5,000 15,000 20,950 62,850
Cathy Hetzel -- -- 20,000 -- 20,600 --
Kenneth Papagan 18,700 99,746 68,800 37,500 206,804 228,000
Amir Yazdani 49,510 333,872 160,629 37,500 1,138,478 189,825
Equity Compensation Plan Information
The following table sets forth additional information as of March 31,
2005, about shares of Rentrak common stock that may be issued upon the exercise
of options, warrants, and other rights under 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 shares that may become issuable under the 2005
Stock Incentive Plan if it is approved at the Annual Meeting. If the plan is
approved, no additional grants will be made under the 1997 Equity Participation
Plan or the 1997 Non-Officer Employee Stock Option Plan, but shares subject to
awards outstanding under those plans that expire without exercise will become
available for new grants under the new plan. See "Proposal 2--Approval of 2005
Stock Incentive Plan" above.
-17-
Number of Securities
Remaining Available for
Number of Securities to be Weighted-Average Future Issuance Under
Issued Upon Exercise of Exercise Price of Equity Compensation
Outstanding Options, Outstanding Options, Plans (excluding securities
Plan Category Warrants, and Rights Warrants, and Rights reflected in column (a))
------------- ------------------- -------------- -------------------
(a) (b) (c)
Equity compensation plans 1,456,435 $5.68 122,488
approved by shareholders (1)
Equity compensation plans 144,558 $5.07 355,579
or arrangements not ------- ----- -------
approved by shareholders (2)
Total 1,600,993 $5.62 478,067
========= ===== =======
(1) Equity compensation plans approved by shareholders include the 1986 Second
Amended and Restated Stock Option Plan, as amended, and the 1997 Equity
Participation Plan, as amended.
(2) Equity compensation plans or arrangements approved by Rentrak's board of
directors but not submitted for shareholder approval include (a) the 1997
Non-Officer Employee Stock Option Plan and (b) warrants to purchase 30,000
shares of Common Stock with a purchase price of $7.50 per share and an
expiration date of May 16, 2009, issued to an investment banking firm as partial
consideration for financial advisory services in connection with strategic
opportunities or financing transactions of potential interest to Rentrak.
The 1997 Non-Officer Employee Stock Option Plan 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
Rentrak. The Compensation Committee determines the terms of each option grant,
including the numbers of shares covered, the exercise price, the expiration
date, and provisions regarding vesting and exercisability following termination
of employment.
Compensation of Directors
Each non-employee director of Rentrak Corporation ("Rentrak") receives an
annual retainer of $20,000; non-employee directors who serve on the Audit
Committee receive an additional retainer of $2,500. Non-employee directors are
also paid $500 for each board meeting they attend in person or by telephone
conference call. Each director who serves on a board committee is paid $500 for
attending each in-person or telephone conference committee meeting. Rentrak also
reimburses directors for their travel expenses for each meeting attended in
person.
Under Rentrak's 1997 Equity Participation Plan, each non-employee director
receives an automatic grant, at the beginning of each fiscal year, of a stock
option exercisable for 10 years, subject to earlier termination if the director
ceases to be a director. The option entitles the director to purchase 10,000
shares of Rentrak common stock at a purchase price equal to the fair market
value of Rentrak's stock on the date of grant and becomes exercisable in full
one year after the date of grant. Each chair of a board committee simultaneously
receives an option to purchase an additional 2,500 shares on the same terms.
Accordingly, on April 1, 2004, Mr. Andrus received an option for 12,500 shares
and Messrs. Kuper and Stoddard each received an option for 10,000 shares. Each
of these options were granted at an exercise price of $9.00 per share and became
exercisable in full one year after the date of grant. On November 8, 2004, Ms.
Allen and Mr. Shaw each received a discretionary grant of an option for 5,000
shares at an exercise price of $10.13 per share exercisable in full one year
after grant.
-18-
If the 2005 Stock Incentive Plan is adopted, automatic option grants to
non-employee directors will cease and stock awards to non-employee directors
will be made in the discretion of the Compensation Committee.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
PAUL ROSENBAUM. Rentrak entered into an employment agreement effective
October 1, 2001, with Mr. Rosenbaum relating to his employment as Chairman and
Chief Executive Officer. The agreement has been extended pursuant to annual
renewal provisions to September 30, 2006. 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 as a result of the excise tax on excess parachute payments. No
severance benefits are payable if Mr. Rosenbaum's employment is terminated by
Rentrak for cause or voluntarily by Mr. Rosenbaum other than for good reason.
RON GIAMBRA. In July 2002, Rentrak entered into an employment agreement
with Mr. Giambra that provides for his employment as Senior Vice President,
Theatrical. As amended, the agreement will expire June 30, 2007. If a change in
control of Rentrak occurs during the term of the agreement, the term will be
extended to two years following the change in control. A change in control is
defined as described above with respect to Mr. Rosenbaum's employment agreement,
except that the exception for events approved by Rentrak's board of directors
does not apply, the beneficial ownership threshold is 50% rather than 25%, and
the sale of Rentrak's theatrical division to a third party also constitutes a
change in control, while a change in a majority of Rentrak's directors does not.
Mr. Giambra's agreement provides for an initial annual base salary of $135,000,
subject to review for increase each fiscal year by the Compensation Committee.
If Mr. Giambra dies, becomes disabled, or terminates his employment voluntarily
other than for good reason (as defined), he or his estate will be entitled to
accrued salary and other earned compensation through the date of termination and
other employee benefits then in effect, plus, in the case of death or
disability, accrued bonus for the prior fiscal year to the extent not paid. If
his employment is terminated before a change in control of Rentrak occurs, by
Rentrak without cause or by Mr. Giambra for good reason, in addition to the
compensation payable as described in the preceding sentence upon death or
disability, he will be entitled to severance payments equal to his monthly base
salary for either 24 months payable in installments or 18 months' base salary
payable in a lump sum, at Mr. Giambra's election. Severance payments are
conditioned upon Mr. Giambra's execution of a general release of claims against
Rentrak. Cause is defined as the commission of an act of fraud, embezzlement, or
theft constituting a felony or commission of an act (or failure to act) that is
intentionally against Rentrak's interests and causes Rentrak material injury, in
each case as determined by the board
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of directors after 60 days' prior written notice to Mr. Giambra of the
circumstances believed to constitute cause and an opportunity to make a
presentation on his behalf to the board accompanied by legal counsel. Good
reason is defined as any reduction in base salary, benefits, severance
compensation, the circumstances under which severance would be payable, or Mr.
Giambra's right to participate in Rentrak's bonus programs or stock-based
compensation plans, or any diminution in his title, position or
responsibilities. If Mr. Giambra's employment is terminated at any time within
two years after a change in control of Rentrak occurs, either without cause or
for good reason, he will be entitled to a lump sum payment equal to 2.99 times
his annual base salary, subject to reduction at Mr. Giambra's election to the
extent that his after-tax benefit would be larger as a result of the excise tax
on excess parachute payments.
CATHY HETZEL. Ms. Hetzel entered into an employment agreement with Rentrak
as of March 17, 2004, providing for her employment as Senior Vice President,
OnDemand Essentials. The agreement expires February 28, 2007. Ms. Hetzel's
agreement provides for an annual base salary of $220,000, subject to annual
review each fiscal year for increase by the Compensation Committee. Ms. Hetzel
was also entitled to incentive bonuses upon the attainment of specified
performance goals for each of the first two calendar quarters of 2004 and in a
discretionary amount as determined by the Compensation Committee for the last
six months of 2004, but not less than $22,000. For calendar 2005, Ms. Hetzel
will be eligible for an incentive bonus based upon mutually agreed performance
measures in a targeted amount equal to 40% of her base salary. If Ms. Hetzel
dies or becomes disabled (as defined), she or her estate will be entitled to
accrued salary and other earned compensation through the date of termination,
plus a pro rated portion of her target bonus amount, and other employee benefits
then in effect. If Ms. Hetzel's employment is terminated before a change in
control of Rentrak occurs, by Rentrak without cause or by Ms. Hetzel for good
reason, in addition to the compensation payable as described in the preceding
sentence, she will be entitled to severance payments equal to her monthly base
salary for the lesser of 24 months or the number of full calendar months
remaining in the term. Severance payments are conditioned upon Ms. Hetzel's
execution of a general release of claims against Rentrak. Severance payable to
Ms. Hetzel will also be reduced by amounts received from a new employer during
the severance period. The definition of cause in Ms. Hetzel's agreement is
similar to the definition in Mr. Rosenbaum's agreement. The circumstances
constituting good reason are also similar. If Ms. Hetzel's employment is
terminated during the term of the agreement and after a change in control of
Rentrak occurs, either without cause or for good reason, she will be entitled to
a lump sum payment equal to two times her annual base salary plus her total
bonus compensation for the most recent fiscal year ended prior to the change in
control, together with continuation of benefits for two years, subject to
reduction to the extent that her after-tax benefit would be larger as a result
of the excise tax on excess parachute payments. A change in control is defined
as described above with respect to Mr. Rosenbaum's employment agreement, except
that the exception for events approved by Rentrak's board of directors does not
apply. No severance benefits are payable if Ms. Hetzel's employment is
terminated by Rentrak for cause or voluntarily by Ms. Hetzel other than for good
reason.
KENNETH PAPAGAN. Mr. Papagan entered into an amended and restated
employment agreement with Rentrak as of January 1, 2004, providing for his
continued employment as Executive Vice President, Business Development and
Strategic Planning. The agreement has an initial term expiring December 31,
2006, subject to automatic extension for two additional years unless Rentrak
gives notice of nonrenewal by June 30, 2006. Mr. Papagan's agreement provides
for an annual base salary of $250,000, subject to review for increase each
fiscal year by the Compensation Committee. Mr. Papagan was also entitled to
incentive bonuses upon the attainment of specified performance goals for each of
the first two calendar quarters of 2004 and in a discretionary amount as
determined by the Compensation Committee for the last six months of 2004, but
not less than $30,000. For calendar 2005, Mr. Papagan will be eligible for an
incentive bonus based upon mutually agreed performance measures in a targeted
amount equal to 45% of his base salary. If Mr. Papagan dies or becomes disabled
(as defined), he or his estate will be entitled to accrued salary and other
earned compensation through the date of termination, a lump sum payment equal to
50% of his annual base salary plus a pro rated portion of his target bonus
amount, and other employee benefits then in effect. If Mr. Papagan's employment
is terminated before a change in control of Rentrak occurs, by Rentrak without
cause or by Mr. Papagan for good reason, in addition to the compensation payable
as described in the preceding sentence, he will be entitled to severance
payments equal to his monthly base salary for six months plus an additional
number of months equal to the number of months remaining in the original term or
the renewal term, if applicable. Severance payments are conditioned upon Mr.
Papagan's execution of a general release of claims against Rentrak and will
terminate if he breaches noncompete provisions in the agreement. Severance
payable to Mr. Papagan will also be reduced by amounts received from a new
employer during the severance period. The definition of cause in Mr. Papagan's
agreement is similar to the definition in Mr. Rosenbaum's agreement. The
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circumstances constituting good reason are also similar, with the addition of
the failure by Mr. Rosenbaum to continue to be Rentrak's Chief Executive Officer
and the relocation of Rentrak's executive offices by more than 35 miles. If Mr.
Papagan's employment is terminated during the term of the agreement and after a
change in control of Rentrak occurs, either without cause or for good reason, he
will be entitled to a lump sum payment equal to three times his annual base
salary plus two times his total bonus compensation for the most recent fiscal
year ended prior to the change in control, together with continuation of
benefits for three years, subject to reduction to the extent that his after-tax
benefit would be larger as a result of the excise tax on excess parachute
payments. A change in control is defined as described above with respect to Mr.
Rosenbaum's employment agreement, except that the exception for events approved
by Rentrak's board of directors does not apply. No severance benefits are
payable if Mr. Papagan's employment is terminated by Rentrak for cause or
voluntarily by Mr. Papagan other than for good reason.
AMIR YAZDANI. Effective July 1, 2001, Rentrak entered into an employment
agreement with Mr. Yazdani providing for his employment as Rentrak's Chief
Information Officer. The agreement will expire June 30, 2007, subject to
automatic extension for one additional year unless notice of nonrenewal is given
by either party by December 31, 2005. The agreement provides for an annual base
salary of $206,636, subject to review for increase each fiscal year by the
President or CEO. If Mr. Yazdani dies or becomes disabled (as defined), he or
his estate will be entitled to accrued salary and other earned compensation
through the date of termination, plus the accrued portion of his target bonus
amount for that fiscal year, and other employee benefits then in effect. If Mr.
Yazdani's employment is terminated before a change in control of Rentrak occurs,
by Rentrak without cause or by Mr. Yazdani for good reason, in addition to the
compensation payable as described in the preceding sentence, he will be entitled
to severance payments equal to his monthly base salary for a period of one year
following the date of termination. Severance payments are conditioned upon Mr.
Yazdani's execution of a general release of claims against Rentrak. If Mr.
Yazdani's employment is terminated by Rentrak other than for cause within two
years after a change in control of Rentrak, he will be entitled to receive
payments equal to his monthly base salary for a period of one year following the
date of termination, subject to reduction to the extent that his after-tax
benefit would be larger as a result of the excise tax on excess parachute
payments. The terms "good reason" and "cause" have substantially the same
meaning as in Mr. Giambra's employment agreement described above. A change in
control is defined as described above with respect to Mr. Rosenbaum's employment
agreement, except that the exception for events approved by Rentrak's board of
directors does not apply.
Consulting and Separation Arrangements with Former President
In January 2005, Mr. Cox submitted his resignation as Rentrak's President
and Secretary. Simultaneously, Rentrak entered into a consulting arrangement
with Mr. Cox under which he agreed to provide up to 20 hours of consulting
services per month in exchange for a monthly fee of $25,000. The consulting
arrangement will terminate on March 31, 2007, unless terminated earlier by
Rentrak for cause (including breach of noncompete and confidentiality
obligations or material acts of dishonesty involving Rentrak) or by Mr. Cox for
any reason. If Mr. Cox dies or becomes disabled prior to March 31, 2007, Rentrak
will continue to pay monthly fees under the consulting arrangement until the
earlier of March 31, 2007, or a specified portion of the remaining term. Mr. Cox
agreed to receive the monthly payments described above in lieu of monthly and
lump sum amounts payable to him upon termination of his employment under his
employment agreement with Rentrak dated April 1, 2004. Rentrak will also pay the
premiums for medical, dental, life, and disability insurance comparable to
coverage provided to Mr. Cox while he was an employee through March 31, 2007,
unless the consulting arrangement is terminated earlier for cause. Rentrak also
provided accommodations to assist Mr. Cox in exercising a portion of his vested
options to purchase shares of Rentrak common stock. The accommodations included
the extension of a loan by Rentrak to Mr. Cox in the amount of $750,000 on
February 2, 2005. The loan, which bore interest at the annual rate of 2.78%, was
repaid in full with accrued interest of $5,198 on May 4, 2005. Sales of Mr.
Cox's shares of Rentrak common stock on the open market are subject to weekly
volume limits through the term of the consulting arrangement.
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.
-21-
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 an experienced 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 has formed a significant
component of the total executive compensation package. In addition, competitive
factors and Rentrak's ability to deduct compensation are considered in
determining executive compensation.
Deductibility of Compensation
In considering Rentrak's compensation structure, the Compensation
Committee takes into consideration Section 162(m) of the Internal Revenue Code.
This provision limits the deductibility of compensation in excess of $1 million
paid to any of a company's five most highly-paid executive officers in a single
tax year. Compensation that is "performance-based" or qualifies under certain
other exceptions is excluded from the calculation. For example, stock options
granted under Rentrak's 1997 Equity Participation Plan or, if approved by
Rentrak's shareholders, its 2005 Stock Incentive Plan are structured to qualify
as "performance-based compensation" under Section 162(m). Deductibility is,
however, only one factor considered by the Compensation Committee in structuring
executive compensation consistent with Rentrak's executive compensation
philosophy.
Employment Agreements
Rentrak has entered into employment agreements with several of its
executive officers. Employment Agreements with current executive officers named
in the Summary Compensation Table above are described in more detail above under
"Executive Compensation--Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."
Annual Salary
Base salary rates are generally established initially in each executive
officer's employment agreement and are subject to annual review by the
Compensation Committee. Factors considered by the Compensation Committee include
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
Rentrak has a discretionary bonus program pursuant to which performance
bonuses are considered following the end of each fiscal year. Discretionary
performance bonuses totaling $233,000 were awarded to eight executive officers
under this program for services during fiscal 2005. In addition, two executive
officers received bonuses of $60,000 and $44,000, respectively, in accordance
with the terms of their employment agreements. One-half of these amounts were
paid in connection with the attainment of specified performance goals for the
first quarter of fiscal 2005 relating to new product development, and the other
half represented minimum amounts to be paid under their agreements for services
during the last six months of calendar 2004.
Long-Term Equity 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, stock
options are granted as required by the terms of 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.
-22-
In fiscal 2005, Rentrak granted options to purchase a total of 82,500
shares of common stock to its executive officers, including the grant to Mr.
Rosenbaum described below.
In light of the importance of stock-based compensation to Rentrak's
compensation structure, in June 2005 the Compensation Committee recommended for
approval by the Board of Directors a new 2005 Stock Incentive Plan which is
being submitted for shareholder approval. See "Proposal 2--Approval of 2005
Stock Incentive Plan" above for additional details regarding this new
stock-based compensation plan.
Compensation of Paul A. Rosenbaum, Chairman, President, and Chief Executive
Officer
Effective October 2001, Rentrak entered into an employment agreement with
Paul Rosenbaum which, as extended annually, has a current expiration of
September 30, 2006. Mr. Rosenbaum's annual base salary for fiscal 2005 was
$450,000, the rate in effect for fiscal 2003 and 2% below his annual salary
level for fiscal 2004. The base salary rate was established based on Mr.
Rosenbaum's prior work experience and expectations, compensation levels at
companies of similar size and scope, and Rentrak's financial performance over
the past two fiscal years. At Mr. Rosenbaum's request, he was not paid an
incentive bonus for his services during fiscal 2005.
In February 2005, the Compensation Committee approved the grant to Mr.
Rosenbaum of a stock option for 75,000 shares with a seven-year term, vesting in
four equal annual installments beginning one year after the date of grant, and
an exercise price of $10.50 per share, which was equal to the fair market value
of Rentrak's common stock on the date of grant. The Compensation Committee
approved the option grant to Mr. Rosenbaum with the objective of aligning the
economic interests of Rentrak's executive officers with the interests of
shareholders, and in recognition of the views of the investment community that
the shareholders' interests are generally best served when top management has a
significant stake in the company's equity.
Submitted by the Compensation Committee of the Board of Directors:
Judith G. Allen (Committee Chair)
Cecil Andrus
Ralph R. Shaw
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF RENTRAK
CORPORATION, NASDAQ MARKET INDEX, 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, and a group of
peer companies selected by Rentrak. The chart assumes $100 was invested on March
31, 2000, in Rentrak's common stock, the NASDAQ Market index, and the peer
group, and that any dividends were reinvested. The peer group is composed of the
companies within the video distribution business as follows: Hastings
Entertainment, Inc., Blockbuster, Inc., Hollywood Entertainment Corp., and Movie
Gallery, Inc., the same companies included in Rentrak's 2004 proxy statement.
Movie Gallery acquired Hollywood Entertainment in April 2005.
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 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.
-23-
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
March 2005
[GRAPHIC OMITTED]
Measurement Period NASDAQ Rentrak-Selected
(Fiscal Year Covered) Rentrak Corp. Market Index Peer Group
--------------------- ------------- ------------ ----------
Measurement PT - 3/31/00 $100.00 $100.00 $100.00
3/31/01 $ 67.04 $ 40.34 $129.41
3/31/02 $127.26 $ 40.59 $248.96
3/31/03 $ 93.44 $ 29.64 $196.30
3/30/04 $159.43 $ 44.27 $197.48
3/31/05 $201.41 $ 44.65 $186.48
CERTAIN RELATIONSHIPS AND TRANSACTIONS
On February 2, 2005, following Mr. Cox's resignation as President and
Secretary of Rentrak, Rentrak extended to Mr. Cox a loan in the amount of
$750,000 to assist him in exercising a portion of his vested options to purchase
Rentrak common stock. The loan, which bore interest at the annual rate of 2.78%,
was repaid in full with accrued interest of $5,198 on May 4, 2005. See
"Consulting and Separation Arrangements with Former President" above.
-24-
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.
In discharging its responsibilities, the Audit Committee and its
individual members have met with management and Rentrak's independent auditors,
Grant Thornton LLP, to review Rentrak's accounting functions and the audit
process. The Audit Committee discussed and reviewed with Rentrak's independent
auditors the audited financial statements for fiscal 2005 and all other 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,
management's assessment of the Company's system of disclosure controls and
procedures, external financial reporting and internal control over financial
reporting, 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, 2005, 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) Ralph Shaw Stanford Stoddard
SELECTION OF INDEPENDENT AUDITORS
From May 9, 2002, until August 23, 2004, Rentrak's independent registered
public accountants were KPMG LLP. On August 23, 2004, Rentrak was advised by
KPMG LLP that it resigned as Rentrak's independent registered public accounting
firm. Rentrak's audit committee accepted KPMG's resignation. KPMG LLP's reports
on the consolidated financial statements of Rentrak and subsidiaries for the
fiscal years ended March 31, 2004, and March 31, 2003, 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 SEC, except
that KPMG's report dated July 9, 2004 contained a separate paragraph which made
reference to Rentrak's restatement of its consolidated financial statements for
the period ended March 31, 2003. A copy of a letter addressed to the SEC from
KPMG LLP stating that it agreed with the above statements was attached as
Exhibit 16.1 to Form 8-K filed by Rentrak with the SEC on August 27, 2004.
Upon the acceptance of KPMG's resignation, Rentrak began the search for a
new independent registered accounting firm for Rentrak's fiscal year ended March
31, 2005. On October 28, 2004, Rentrak engaged the firm of Grant Thornton LLP to
audit Rentrak's financial statements as its new principal independent auditors.
The Audit Committee directed the process of review of candidate accounting firms
and made the final decision to engage Grant Thornton LLP. During Rentrak's two
most recent fiscal years, and the subsequent interim period prior to engaging
Grant Thornton LLP, Rentrak did not consult with Grant Thornton LLP regarding
(1) the application of accounting principles to a specified transaction, whether
completed or proposed, (2) the type of audit opinion that might be rendered on
Rentrak's financial statements, or (3) any matter that was either the subject of
a "disagreement" or a "reportable event" (as such terms are defined in Item 304
(a) (1) (iv) and (v) of Regulation S-K).
The Audit Committee has appointed and engaged Grant Thornton LLP to be
Rentrak's independent auditors for the Company's fiscal year ending March 31,
2006. No approval or ratification of the choice of
-25-
independent auditors by the shareholders is required by applicable law or
regulation or Rentrak's governing documents. A representative of Grant Thornton
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.
MATTERS RELATING TO OUR AUDITORS
Fees Paid to Principal Independent Auditors
The following fees were billed by Grant Thornton LLP for professional
services rendered to Rentrak in fiscal 2005:
-----------------------------------------------
2005
-----------------------------------------------
Audit Fees(1) $182,000
-----------------------------------------------
Audit Related Fees(2) 225,000
-----------------------------------------------
Tax Fees --
-----------------------------------------------
All Other Fees (3) 2,500
-----------------------------------------------
(1) Consists of fees for professional services rendered for the audit of
Rentrak's annual financial statements for fiscal 2005 and for review of
financial statements included in quarterly reports on Form 10-Q for that
fiscal year.
(2) Refers to assurance and related services that are reasonably related to
the audit or review of Rentrak's financial statements or internal control
over financial reporting and that are not included in audit fees.
(3) Consists of consulting services related to the accounting for an
investment made by Rentrak.
Pre-Approval Policy
The Audit Committee has adopted a policy requiring pre-approval of all
fees and services of Rentrak's independent auditors, including all audit,
audit-related, tax, and other legally-permitted services. Under the policy, a
detailed description of each proposed service is submitted to the Audit
Committee, together with a statement by the independent auditors and Rentrak's
chief financial officer or controller that such services are consistent with
applicable rules on auditor independence. The policy permits the Audit Committee
to pre-approve lists of audit, audit-related, tax, and other legally-permitted
services after reviewing detailed back-up documentation regarding the specific
services to be provided. The term of any pre-approval is 12 months, unless the
Audit Committee specifically provides for a shorter period. Additional
pre-approval is required for services not included in the pre-approved lists and
for services exceeding pre-approved fee levels. The policy allows the Audit
Committee to delegate its pre-approval authority to one or more of its members
provided that a full report of any pre-approval decision is provided to the
Audit Committee at its next scheduled meeting. All audit and permissible
non-audit services provided by Grant Thornton LLP during fiscal 2005 were
pre-approved by the Audit Committee.
FINANCIAL INFORMATION
A copy of Rentrak's 2005 Annual Report on Form 10-K, including audited
financial statements, is being sent to shareholders with this proxy statement.
-26-
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,
Mark L. Thoenes
Senior Vice President, Chief Financial Officer and
Secretary
Portland, Oregon
July 21, 2005
-27-
APPENDIX A
RENTRAK CORPORATION
2005 STOCK INCENTIVE PLAN
1. ESTABLISHMENT AND PURPOSE
1.1 Establishment. Rentrak Corporation, an Oregon corporation, hereby
establishes the Rentrak Corporation 2005 Stock Incentive Plan (the "Plan"),
effective as of August 25, 2005 (the "Effective Date"), subject to shareholder
approval as provided in Section 16.
1.2 Purpose. The purpose of the Plan is to promote and advance the
interests of Corporation and its shareholders by enabling Corporation to
attract, retain, and reward key employees, directors, and outside consultants of
Corporation and its subsidiaries. It is also intended to strengthen the
mutuality of interests between such employees, directors, and consultants and
Corporation's shareholders. The Plan is designed to serve these purposes by
offering stock options and other equity-based incentive awards in order to
provide participants a proprietary interest in pursuing the long-term growth,
profitability, and financial success of Corporation.
1.3 Prior Plans. The Plan will be separate from the Rentrak Corporation
1997 Equity Participation Plan and the Rentrak Corporation 1997 Non-Officer
Employee Stock Option Plan (the "Prior Plans"). The adoption of the Plan will
neither affect nor be affected by the continued existence of the Prior Plans
except that:
(a) After the Plan is approved by Corporation's shareholders, no
further Awards will be granted under the Prior Plans; and
(b) The number of Shares which may be made subject to Awards under
the Plan will be adjusted from time to time pursuant to Section 4.2 to reflect
cancellation, termination, or expiration of stock options previously granted
under the Prior Plans.
1.4 Reservation of Right to Amend to Comply with AJCA. The Board and the
Committee reserve the right to amend the Plan, either retroactively or
prospectively, in whatever respect is required to achieve and maintain
compliance with the requirements of the American Jobs Creation Act of 2004, Code
Section 409A, IRS Notice 2005-1, and other regulations and guidance issued by
the Department of the Treasury with respect to such requirements (collectively,
the "AJCA").
2. DEFINITIONS
2.1 Defined Terms. For purposes of the Plan, the following terms have the
meanings set forth below:
"Award" means an award or grant made to a Participant of Options,
Stock Appreciation Rights, Restricted Awards, Performance Awards, or Other
Stock-Based Awards pursuant to the Plan.
"Award Agreement" means an agreement as described in Section 6.4 of
the Plan.
"Board" means the Board of Directors of Corporation.
"Change in Control" has the meaning given by the Committee in each
Award Agreement, or, if the term is not otherwise defined in an Award
Agreement, the first occurrence of any of the following:
(a) Any person (including any individual, corporation, limited liability
company, partnership, trust, group, association, or other "person," as such term
is used in Section 13(d)(3) or 14(d) of the Exchange Act) other than a trustee
or other fiduciary holding securities under an employee benefit plan of
Corporation, is or becomes a beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
Corporation representing 25 percent or more of the combined voting power of
Corporation's then outstanding securities;
-1-
(b) A majority of the directors elected at any annual or special meeting
of shareholders are not individuals nominated by Corporation's then incumbent
Board; or
(c) The shareholders of Corporation approve (i) a merger or consolidation
of Corporation with any other corporation, other than a merger or consolidation
which would result in the Voting Securities (defined as all issued and
outstanding securities ordinarily having the right to vote at elections of
Corporation's directors) of Corporation outstanding immediately prior to such
transaction continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 75 percent of
the combined voting power of the Voting Securities of Corporation or of such
surviving entity outstanding immediately after such merger or consolidation,
(ii) a plan of complete liquidation of Corporation, or (iii) an agreement for
the sale or disposition by Corporation of all or substantially all of its
assets.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute, together with rules,
regulations, and interpretations promulgated under the Code. Where the
context so requires, any reference to a particular Code section will be
construed to refer to the successor provision to such Code section.
"Committee" means the committee appointed by the Board to administer
the Plan as provided in Section 3 of the Plan.
"Common Stock" means the $.001 par value Common Stock of
Corporation.
"Consultant" means any consultant or adviser to Corporation or a
Subsidiary selected by the Committee who is not an employee of Corporation
or a Subsidiary and who provides services to Corporation or a Subsidiary
other than services of a capital-raising nature.
"Continuing Restriction" means a Restriction contained in Sections
6.5(g), 6.5(i), 15.3, 15.4, and 15.6 of the Plan and any other Restriction
expressly designated by the Committee in an Award Agreement as a
Continuing Restriction.
"Corporation" means Rentrak Corporation, an Oregon corporation, or
any successor corporation.
"Disability" means the condition of being permanently "disabled"
within the meaning of Section 22(e)(3) of the Code, namely being unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months. However, the Committee may change the
foregoing definition of "Disability" or may adopt a different definition
for purposes of specific Awards.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute. Where the
context so requires, any reference to a particular section of the Exchange
Act, or to any rule promulgated under the Exchange Act, will be construed
to refer to successor provisions to such section or rule.
"Fair Market Value" means, on any given day, the fair market value
per share of the Common Stock determined as follows:
(a) If the Common Stock is traded on an established securities
exchange, the closing sale price of Common Stock as reported for such day
by the principal exchange on which Common Stock is traded (as determined
by the Committee) or, if Common Stock was not traded on such day, on the
next preceding day on which Common Stock was traded;
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(b) If trading activity in Common Stock is reported on The Nasdaq
Stock Market, the closing sale price of Common Stock as reported for such
day by Nasdaq or, if Common Stock trades were not reported on such day, on
the next preceding day on which Common Stock trades were reported by
Nasdaq;
(c) If trading activity in Common Stock is reported on the OTC
Bulletin Board, the average of the closing representative bid and asked
prices for such day as reported on the OTC Bulletin Board or, if there are
no such quotes for Common Stock for such day, on the next preceding day
for which bid and asked price quotes for Common Stock were reported on the
OTC Bulletin Board; or
(d) If there is no market for Common Stock or if trading activities
for Common Stock are not reported in one of the manners described above,
the fair market value will be as determined by the Committee.
"Incentive Stock Option" or "ISO" means any Option granted pursuant
to the Plan that is intended to be and is specifically designated in its
Award Agreement as an "incentive stock option" within the meaning of
Section 422 of the Code.
"Non-Employee Board Director" means a member of the Board who is not
an employee of Corporation or any Subsidiary.
"Non-Employee Subsidiary Director" means a member of the board of
directors of a Subsidiary who is neither an employee of Corporation or a
Subsidiary nor a member of the Board.
"Nonqualified Option" or "NQO" means any Option granted pursuant to
the Plan that is not an Incentive Stock Option.
"Option" means an ISO or an NQO.
"Option Committee" manes a committee of one or more members of the
Board (who need not be members of the Committee) to whom the Committee may
delegate authority to grant Awards to Participants who are not Reporting
Persons.
"Other Stock-Based Award" means an Award as defined in Section 11.1
of the Plan.
"Participant" means an employee of Corporation or a Subsidiary, a
Consultant, a Non-Employee Board Director, or a Non-Employee Subsidiary
Director who is granted an Award under the Plan.
"Performance Award" means an Award granted pursuant to the
provisions of Section 10 of the Plan, the Vesting of which is contingent
on attainment of Performance Goals.
"Performance Cycle" means a designated performance period pursuant
to the provisions of Section 10.3 of the Plan.
"Performance Goal" means a designated performance objective pursuant
to the provisions of Section 10.4 of the Plan.
"Plan" means this Rentrak Corporation 2005 Stock Incentive Plan, as
set forth in this document and as it may be amended from time to time.
"Reporting Person" means a Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
"Restricted Award" means a Restricted Share or a Restricted Stock
Unit granted pursuant to Section 9 of the Plan.
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"Restricted Share" means an Award described in Section 9.1(a) of the
Plan.
"Restricted Stock Unit" means an Award of units representing Shares
described in Section 9.1(b) of the Plan.
"Restriction" means a provision in the Plan or in an Award Agreement
which limits the exercisability or transferability, or which governs the
forfeiture, of an Award or the Shares, cash, or other property payable
pursuant to an Award.
"Restriction Period" means a designated period pursuant to the
provisions of Section 9.3 of the Plan.
"Retirement" has the meaning given by the Committee in each Award
Agreement, or, if the term is not otherwise defined in an Award Agreement,
has the following meaning:
(a) For Participants who are employees, retirement from active employment
with Corporation and its Subsidiaries on or after age 65, or such earlier
retirement date as approved by the Committee for purposes of the Plan;
(b) For Participants who are Non-Employee Board Directors or Non-Employee
Subsidiary Directors, retirement from the applicable board of directors after
attaining the age and service period specified in the Corporate Governance
Guidelines adopted by the Board; or
(c) For Participants who are Consultants, termination of service as a
Consultant after attaining a retirement age specified by the Committee for
purposes of an Award to such Consultant.
"Settlement Period" means, with respect to any Restricted Stock Unit
Award or Performance Award, the period following the expiration of the
Restriction Period or the Performance Cycle, respectively, for such Award
specified by the Committee in the Award Agreement for such Award so that
the Restricted Stock Unit Award or Performance Award will either (a) not
be treated as a deferred compensation arrangement for income tax purposes
under the AJCA, or (b) if treated as a deferred compensation arrangement
for such purposes, will meet all requirements under the AJCA.
"Share" means a share of Common Stock.
"Stock Appreciation Right" or "SAR" means an Award to benefit from
the appreciation of Common Stock granted pursuant to the provisions of
Section 8 of the Plan.
"Subsidiary" means (i) a "subsidiary corporation" of Corporation,
within the meaning of Section 424(f) of the Code, namely any corporation
in which Corporation directly or indirectly controls 50 percent or more of
the total combined voting power of all classes of stock having voting
power, and (ii) any partnership, limited liability company, or other
business entity of which Corporation owns or controls 50 percent or more
of the voting interests and which has been designated by the Committee as
a subsidiary; provided, however, that with respect to ISOs, only employees
of subsidiary corporations as described in clause (i) may receive such
Awards.
"Vest," "Vesting," or "Vested" means:
(a) In the case of an Award that requires exercise, to be or to become
immediately and fully exercisable and free of all Restrictions (other than
Continuing Restrictions);
(b) In the case of an Award that is subject to forfeiture, to be or to
become nonforfeitable, freely transferable, and free of all Restrictions (other
than Continuing Restrictions);
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(c) In the case of an Award that is required to be earned by attaining
specified Performance Goals, to be or to become earned and nonforfeitable,
freely transferable, and free of all Restrictions (other than Continuing
Restrictions); or
(d) In the case of any other Award as to which payment is not dependent
solely upon the exercise of a right, election, or option, to be or to become
immediately payable and free of all Restrictions (except Continuing
Restrictions).
2.2 Gender and Number. Except where otherwise indicated by the context,
any masculine or feminine terminology used in the Plan also includes the
opposite gender; and the definition of any term in Section 2.1 in the singular
also includes the plural, and vice versa.
3. ADMINISTRATION
3.1 General. The Plan will be administered by a Committee composed as
described in Section 3.2.
3.2 Composition of the Committee. The Committee will be appointed by the
Board and will consist of not less than a sufficient number of Non-Employee
Board Directors so as to qualify the Committee to administer the Plan as
contemplated by Section 162(m)(4)(C) of the Code, Rule 16b-3 under the Exchange
Act and Rule 4350(c)(3) of the Nasdaq Marketplace Rules. The Board may from time
to time remove members from, or add members to, the Committee. Vacancies on the
Committee, however caused, will be filled by the Board. In the event that the
Committee ceases to satisfy the requirements of Section 162(m)(4)(C), Rule
16b-3, or Rule 4350(c)(3), the Board will reconstitute the Committee as
necessary to satisfy such requirements.
3.3 Authority of the Committee. The Committee has full power and authority
(subject to such orders or resolutions as may be issued or adopted from time to
time by the Board) to administer the Plan in its sole discretion, including the
authority to:
(a) Construe and interpret the Plan and any Award Agreement;
(b) Promulgate, amend, and rescind rules and procedures relating to
the implementation of the Plan;
(c) Select the employees, Non-Employee Board Directors, Non-Employee
Subsidiary Directors, and Consultants who will be granted Awards;
(d) Determine the number and types of Awards to be granted to each
such Participant;
(e) Determine the number of Shares, or Share equivalents, to be
subject to each Award;
(f) Determine the option price, purchase price, base price, or
similar feature for any Award; and
(g) Determine all the terms and conditions of all Award Agreements,
consistent with the requirements of the Plan.
Decisions of the Committee, or any delegate as permitted by the Plan, will
be final, conclusive, and binding on all Participants.
3.4 Action by the Committee. A majority of the members of the Committee
will constitute a quorum for the transaction of business. Action approved by a
majority of the members present at any meeting at which a
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quorum is present, or action in writing by all of the members of the Committee,
will be the valid acts of the Committee.
3.5 Delegation. Notwithstanding any other provision of this Section 3, the
Committee may delegate to the Option Committee the authority, Subject to such
conditions or limitations as the Committee may designate, to determine the
recipients, types, amounts, and terms of Awards granted to Participants who are
not Reporting Persons.
3.6 Liability of Committee Members. No member of the Committee or the
Option Committee will be liable for any action or determination made in good
faith with respect to the Plan, any Award, or any Participant.
3.7 Costs of Plan. The costs and expenses of administering the Plan will
be borne by Corporation.
4. DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 Duration of the Plan. The Plan is effective August 25, 2005, subject
to approval by Corporation's shareholders as provided in Section 16. The Plan
will remain in effect until Awards have been granted covering all the available
Shares or the Plan is otherwise terminated by the Board. Termination of the Plan
will not affect outstanding Awards.
4.2 Shares Subject to the Plan. The shares which may be made subject to
Awards under the Plan are Shares of Common Stock, which may be either authorized
and unissued Shares or reacquired Shares. No fractional Shares may be issued
under the Plan. Subject to adjustment pursuant to Section 13, the maximum number
of Shares for which Awards may be granted under the Plan is 1,000,000. If an
Award under the Plan (or any option previously granted under the Prior Plans) is
canceled or expires for any reason prior to having been fully Vested or
exercised by a Participant or is settled in cash in lieu of Shares or is
exchanged for other Awards, all Shares covered by such Awards will be added back
into the number of Shares available for future Awards under the Plan.
5. ELIGIBILITY
Officers and other key employees of Corporation and its Subsidiaries
(including employees who may also be directors of Corporation or a Subsidiary),
Consultants, Non-Employee Board Directors, and Non-Employee Subsidiary Directors
who, in the Committee's judgment, are or will be contributors to the long-term
success of Corporation are eligible to receive Awards under the Plan.
6. AWARDS
6.1 Types of Awards. The types of Awards that may be granted under the
Plan are:
(a) Options governed by Section 7 of the Plan;
(b) Stock Appreciation Rights governed by Section 8 of the Plan;
(c) Restricted Awards governed by Section 9 of the Plan;
(d) Performance Awards governed by Section 10 of the Plan; and
(e) Other Stock-Based Awards or combination awards governed by
Section 11 of the Plan.
In the discretion of the Committee, any Award may be granted alone, in addition
to, or in tandem with other Awards under the Plan.
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6.2 General. Subject to the limitations of the Plan, the Committee may
cause Corporation to grant Awards to such Participants, at such times, of such
types, in such amounts, for such periods, with such option prices, purchase
prices, or base prices, and subject to such terms, conditions, limitations, and
restrictions as the Committee, in its discretion, deems appropriate. Awards may
be granted as additional compensation to a Participant or in lieu of other
compensation to such Participant. A Participant may receive more than one Award
and more than one type of Award under the Plan.
6.3 Nonuniform Determinations. The Committee's determinations under the
Plan or under one or more Award Agreements, including, without limitation, (a)
the selection of Participants to receive Awards, (b) the type, form, amount, and
timing of Awards, (c) the terms of specific Award Agreements, and (d) elections
and determinations made by the Committee with respect to exercise or payments of
Awards, need not be uniform and may be made by the Committee selectively among
Participants and Awards, whether or not Participants are similarly situated.
6.4 Award Agreements. Each Award will be evidenced by a written Award
Agreement between Corporation and the Participant. Award Agreements may, subject
to the provisions of the Plan, contain any provision approved by the Committee.
6.5 Provisions Governing All Awards. All Awards are subject to the
following provisions:
(a) Alternative Awards. If any Awards are designated in their Award
Agreements as alternative to each other, the exercise of all or part of one
Award will automatically cause an immediate equal (or pro rata) corresponding
termination of the other alternative Award or Awards.
(b) Rights as Shareholders. No Participant will have any rights of a
shareholder with respect to Shares subject to an Award until such Shares are
issued in the name of the Participant.
(c) Employment Rights. Neither the adoption of the Plan nor the
granting of any Award confers on any person the right to continued employment
with Corporation or any Subsidiary or the right to remain as a director of or a
Consultant to Corporation or any Subsidiary, as the case may be, nor does it
interfere in any way with the right of Corporation or a Subsidiary to terminate
such person's employment or to remove such person as a Consultant or as a
director at any time for any reason, or for no reason, with or without cause.
(d) Restriction on Transfer. Unless otherwise expressly provided in
an individual Award Agreement, no Award (other than Restricted Shares after they
Vest) will be transferable other than by will or the laws of descent and
distribution and each Award will be exercisable (if exercise is required),
during the lifetime of the Participant, only by the Participant or, in the event
the Participant becomes legally incompetent, by the Participant's guardian or
legal representative. Notwithstanding the foregoing, the Committee, in its
discretion, may provide in any Award Agreement that the Award:
o May be freely transferred;
o May be freely transferred to a class of transferees specified in the Award
Agreement; or
o May be transferred, but only subject to any terms and conditions specified
in the Award Agreement (including, without limitation, a condition that an
Award may only be transferred without payment of consideration).
Furthermore, notwithstanding the foregoing, any Award may be surrendered
to Corporation pursuant to Section 6.5(h) in connection with the payment
of the purchase or option price of another Award or the payment of the
Participant's federal, state, or local tax withholding obligation with
respect to the exercise or payment of another Award.
(e) Termination of Employment. The terms and conditions under which
an Award may be exercised, if at all, after a Participant's termination of
employment or service as a Non-Employee Board
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Director, Non-Employee Subsidiary Director, or Consultant will be determined by
the Committee and specified in the applicable Award Agreement.
(f) Change in Control. The Committee, in its discretion, may provide
in any Award Agreement that:
(i) In the event of a Change in Control of Corporation, all or
a specified portion of the Award (to the extent then outstanding) will become
immediately Vested to the full extent not previously Vested. Any such
acceleration of Award Vesting must comply with applicable regulatory
requirements and any Participant will be entitled to decline the accelerated
Vesting of all or any portion of his or her Award, if he or she determines that
such acceleration may result in adverse tax consequences to him or her; and
(ii) In the event the Board approves a proposal for: (i)
merger, exchange or consolidation in which Corporation is not the resulting or
surviving corporation (or in which Corporation is the resulting or surviving
corporation but becomes a subsidiary of another corporation); (ii) transfer of
all or substantially all the assets of Corporation; (iii) sale of 25 percent or
more of the combined voting power of Corporation's Voting Securities; or (iv)
the dissolution or liquidation of Corporation (each, a "Transaction"), the
Committee will notify Participants in writing of the proposed Transaction (the
"Proposed Transaction Notice") at least 30 days prior to the effective date of
the proposed Transaction. The Committee may, in its sole discretion, and to the
extent possible under the structure of the Transaction, select one of the
following alternatives for treating outstanding Awards under the Plan:
(a) The Committee may provide that outstanding Awards
will be converted into or replaced by Awards of a similar type relating to
the securities of the surviving or acquiring corporation in the
Transaction. The amount and type of securities subject to and the exercise
price (if applicable) of the replacement or converted Awards will be
determined by the Committee based on the exchange ratio, if any, used in
determining shares of the surviving corporation to be issued to holders of
Shares of Corporation. If there is no exchange ratio in the Transaction,
the Committee will, in making its determination, take into account the
relative values of the companies involved in the Transaction and such
other factors as the Committee deems relevant. Such replacement or
converted Awards will continue to Vest over the period (and at the same
rate) as the Awards which the replacement or converted Awards replaced,
unless determined otherwise by the Committee;
(b) The Committee may provide a 30-day period prior to
the consummation of the Transaction during which all outstanding Awards
will tentatively become fully Vested, and upon consummation of such
Transaction, all outstanding and unexercised Awards will immediately
terminate. If the Committee elects to provide such 30-day period for the
exercise of Awards, the Proposed Transaction Notice must so state.
Participants, by written notice to Corporation, may exercise their Awards
and, in so exercising the Awards, may condition such exercise upon, and
provide that such exercise will become effective immediately prior to, the
consummation of the Transaction, in which event Participants need not make
payment for any Common Stock to be purchased upon exercise of an Award
until five days after written notice by Corporation to the Participants
that the Transaction has been consummated (the "Transaction Notice"). If
the Transaction is consummated, each Award, to the extent not previously
exercised prior to the consummation of the Transaction, will terminate and
cease being exercisable as of the effective date of such consummation. If
the Transaction is abandoned, (1) all outstanding Awards not exercised
will continue to be Vested and exercisable, to the extent such Awards were
Vested and exercisable prior to the date of the Proposed Transaction
Notice, and (2) to the extent that any Awards not exercised prior to such
abandonment have become Vested and exercisable solely by operation of this
Section 6.5(f)(ii), such Vesting and exercisability will be deemed
annulled, and the Vesting and exercisability provisions otherwise in
effect will be reinstituted, as of the date of such abandonment; or
(c) The Committee may provide that outstanding Awards
that are not fully Vested will become fully Vested subject to
Corporation's right to pay each Participant a cash
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amount (determined by the Committee and based on the amount, if any, being
received by Corporation's shareholders in the Transaction) in exchange for
cancellation of the applicable Award.
Unless the Committee specifically provides otherwise in the change in
control provision for a specific Award Agreement, Awards will become Vested as
of a Change in Control date only if, or to the extent, such acceleration in the
Vesting of the Awards does not result in an "excess parachute payment" within
the meaning of Section 280G(b) of the Code. The Committee, in its discretion,
may include change in control provisions in some Award Agreements and not in
others, may include different change in control provisions in different Award
Agreements, and may include change in control provisions for some Awards or some
Participants and not for others.
(g) Conditioning or Accelerating Benefits. The
Committee, in its discretion, may include in any Award Agreement a
provision conditioning or accelerating the Vesting of an Award or the
receipt of benefits pursuant to an Award, either automatically or in the
discretion of the Committee, upon the occurrence of specified events,
including without limitation, a Change in Control of Corporation (subject
to the foregoing paragraph (f)), a sale of all or substantially all of the
property and assets of Corporation, or an event of the type described in
Section 13 of this Plan.
(h) Payment of Purchase Price and Withholding. The
Committee, in its discretion, may include in any Award Agreement a
provision permitting the Participant to pay the purchase or option price,
if any, for the Shares or other property issuable pursuant to the Award,
or the Participant's federal, state, or local tax withholding obligations
with respect to such issuance, in whole or in part by any one or more of
the following methods; provided, however, that the availability of any one
or more methods of payment may be suspended from time to time if the
Committee determines that the use of such payment method would result in
adverse financial accounting treatment for Corporation:
(i) By delivering previously owned Shares
(including fully vested Restricted Shares);
(ii) By surrendering other outstanding Vested
Awards under the Plan denominated in Shares or in Share equivalent units;
(iii) By reducing the number of Shares or other
property otherwise Vested and issuable pursuant to the Award;
(iv) Unless specifically prohibited by any
applicable statute or rule, including, without limitation, the provisions
of the Sarbanes-Oxley Act of 2002, by delivering to Corporation a
promissory note payable on such terms and over such period as the
Committee may determine;
(v) By delivery (in a form approved by the
Committee) of an irrevocable direction to a securities broker acceptable
to the Committee (subject to the provisions of the Sarbanes-Oxley Act of
2002 and any other applicable statute or rule):
(a) To sell Shares subject to the Award and
to deliver all or a part of the sales proceeds to Corporation in
payment of all or a part of the option or purchase price and taxes
or withholding taxes attributable to the issuance; or
(b) To pledge Shares subject to the Award to
the broker as security for a loan and to deliver all or a part of
the loan proceeds to Corporation in payment of all or a part of the
option or purchase price and taxes or withholding taxes attributable
to the issuance; or
(vi) In any combination of the foregoing or in any
other form approved by the Committee.
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Shares withheld or surrendered as described above will be valued based on their
Fair Market Value on the date of the transaction. Any Shares withheld or
surrendered with respect to a Reporting Person will be subject to such
additional conditions and limitations as the Committee may impose to comply with
the requirements of the Exchange Act.
(i) Reporting Persons. With respect to all Awards
granted to Reporting Persons, the following limitations will apply only if
or to the extent required by Rule 16b-3 under the Exchange Act, unless the
Award Agreement provides otherwise:
(i) Awards requiring exercise will not be
exercisable until at least six months after the date the Award was
granted, except in the case of the death or Disability of the Participant;
and
(ii) Shares issued pursuant to any other Award may
not be sold by the Participant for at least six months after acquisition,
except in the case of the death or Disability of the Participant.
Award Agreements for Awards to Reporting Persons must also comply with any
future restrictions imposed by such Rule 16b-3.
(j) Service Periods. At the time of granting an Award,
the Committee may specify, by resolution or in the Award Agreement, the
period or periods of service performed or to be performed by the
Participant in connection with the grant of the Award.
7. OPTIONS
7.1 Types of Options. Options granted under the Plan may be in the form of
Incentive Stock Options or Nonqualified Options. The grant of each Option and
the Award Agreement governing each Option will identify the Option as an ISO or
an NQO. In the event the Code is amended to provide for tax-favored forms of
stock options other than or in addition to Incentive Stock Options, the
Committee may grant Options under the Plan meeting the requirements of such
forms of options.
7.2 General. All Options will be subject to the terms and conditions set
forth in Section 6 and this Section 7 and Award Agreements governing Options may
contain such additional terms and conditions, not inconsistent with the express
provisions of the Plan, as the Committee deems desirable.
7.3 Option Price. Each Award Agreement for Options will state the option
exercise price per Share of Common Stock purchasable under the Option, which may
not be less than 100 percent of the Fair Market Value of a Share on the date of
grant for all Options. Except for adjustments in Option price pursuant to
Section 13.2, at no time may the option exercise price of any Option granted
under the Plan be repriced after the date the Option was granted.
7.4 Option Term. The Award Agreement for each Option will specify the term
of each Option, which may be unlimited or may have a specified period during
which the Option may be exercised, as determined by the Committee.
7.5 Time of Exercise. The Award Agreement for each Option will specify, as
determined by the Committee:
(a) The time or times when the Option becomes exercisable and
whether the Option becomes exercisable in full or in graduated amounts based on:
(i) continuation of employment over a period specified in the Award Agreement,
(ii) satisfaction of performance goals or criteria specified in the Award
Agreement, or (iii) a combination of continuation of employment and satisfaction
of performance goals or criteria;
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(b) Such other terms, conditions, and restrictions as to when the
Option may be exercised as determined by the Committee; and
(c) The extent, if any, to which the Option will remain exercisable
after the Participant ceases to be an employee, Consultant, or director of
Corporation or a Subsidiary.
An Award Agreement for an Option may, in the discretion of the Committee,
provide whether, and to what extent, the time when an Option becomes exercisable
may be accelerated or otherwise modified (i) in the event of the death,
Disability, or Retirement of the Participant, or (ii) upon the occurrence of a
Change in Control. The Committee may, at any time in its discretion, accelerate
the time when all or any portion of an outstanding Option becomes exercisable.
7.6 Special Rules for Incentive Stock Options. In the case of an Option
designated as an Incentive Stock Option, the terms of the Option and the Award
Agreement will conform with the statutory and regulatory requirements specified
pursuant to Section 422 of the Code, as in effect on the date such ISO is
granted. ISOs may be granted only to employees of Corporation or a Subsidiary.
ISOs may not be granted under the Plan after ten years following the date
specified in Section 4.1, unless the ten-year limitation of Section 422(b)(2) of
the Code is removed or extended.
7.7 Restricted Shares. In the discretion of the Committee, the Shares
issuable upon exercise of an Option may be Restricted Shares if so provided in
the Award Agreement for the Option.
7.8 Reload Options. The Committee, in its discretion, may provide in an
Award Agreement for an Option that, in the event all or a portion of the Option
is exercised by the Participant using previously acquired Shares, the
Participant will automatically be granted (subject to the available pool of
Shares subject to grants of Awards as specified in Section 4.2 of the Plan) a
replacement Option (with an option price equal to the Fair Market Value of a
Share on the date of such exercise) for a number of Shares equal to (or equal to
a portion of) the number of shares surrendered upon exercise of the Option. Such
reload Option features may be subject to such terms and conditions as the
Committee determines, including, without limitation, a condition that the
Participant retain the Shares issued upon exercise of the Option for a specified
period of time.
7.9 Limitation on Number of Shares Subject to Options. In no event may
Options for more than 200,000 Shares be granted to any individual under the Plan
during any fiscal year.
8. STOCK APPRECIATION RIGHTS
8.1 General. Stock Appreciation Rights are subject to the terms and
conditions set forth in Section 6 and this Section 8 and Award Agreements
governing Stock Appreciation Rights may contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the
Committee deems desirable.
8.2 Nature of Stock Appreciation Right. A Stock Appreciation Right is an
Award entitling a Participant to receive an amount equal to the excess (or, if
the Committee determines at the time of grant, a portion of the excess) of the
Fair Market Value of a Share of Common Stock on the date of exercise of the SAR
over the base price, as described below, on the date of grant of the SAR,
multiplied by the number of Shares with respect to which the SAR is being
exercised. The base price will be designated by the Committee in the Award
Agreement for the SAR and may be the Fair Market Value of a Share on the grant
date of the SAR or such other higher price as the Committee determines. The base
price may not be less than the Fair Market Value of a Share on the grant date of
the SAR.
8.3 Exercise. A Stock Appreciation Right may be exercised by a Participant
in accordance with procedures established by the Committee. The Committee may
also provide that a SAR will be automatically exercised on one or more specified
dates or upon the satisfaction of one or more specified conditions. In the case
of SARs granted to Reporting Persons, exercise of the SARs will be limited by
the Committee to the extent required to comply with the applicable requirements
of Rule 16b-3 under the Exchange Act.
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8.4 Form of Payment. Payment upon exercise of a Stock Appreciation Right
must be made in Shares, provided that the Committee may provide in an Award
Agreement that a Stock Appreciation Right may be settled using cash or
installments (a "Cash Settled SAR") if the Committee determines that under the
terms of such Award Agreement the Cash Settled SAR will comply with the
requirements of the AJCA.
8.5 Limitation on Number of Stock Appreciation Rights. In no event may
more than 200,000 Stock Appreciation Rights be granted to any individual under
the Plan during any fiscal year.
9. RESTRICTED AWARDS
9.1 Types of Restricted Awards. Restricted Awards granted under the Plan
may be in the form of either Restricted Shares or Restricted Stock Units.
(a) Restricted Shares. A Restricted Share is an Award of Shares
transferred to a Participant subject to such terms and conditions as the
Committee deems appropriate, including, without limitation, restrictions on the
sale, assignment, transfer, or other disposition of such Restricted Shares and
may include a requirement that the Participant forfeit such Restricted Shares
back to Corporation upon termination of Participant's employment (or service as
a Non-Employee Board Director, Non-Employee Subsidiary Director, or Consultant)
for specified reasons within a specified period of time or upon other
conditions, as set forth in the Award Agreement for such Restricted Shares. Each
Participant receiving a Restricted Share will be issued a stock certificate in
respect of such Shares, registered in the name of such Participant, and will
execute a stock power in blank with respect to the Shares evidenced by such
certificate. The certificate evidencing such Restricted Shares and the stock
power will be held in custody by Corporation until the Restrictions have lapsed.
(b) Restricted Stock Units. A Restricted Stock Unit is an Award of
units (with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, and may include a requirement that the Participant forfeit such
Restricted Stock Units upon termination of Participant's employment (or service
as a Non-Employee Board Director, Non-Employee Subsidiary Director, or
Consultant) for specified reasons within a specified period of time or upon
other conditions, as set forth in the Award Agreement for such Restricted Stock
Units. Under the AJCA, Restricted Stock Unit Awards may be treated, for income
tax purposes, as deferred compensation arrangements. In each Award Agreement for
each Restricted Stock Unit Award, the Committee will (a) specify the Settlement
Period and (b) set the other terms and conditions of the Award Agreement so that
the Restricted Stock Unit Award will comply with all applicable requirements of
the AJCA.
9.2 General. Restricted Awards are subject to the terms and conditions of
Section 6 and this Section 9 and Award Agreements governing Restricted Awards
may contain such additional terms and conditions, not inconsistent with the
express provisions of the Plan, as the Committee deems desirable.
9.3 Restriction Period. Award Agreements for Restricted Awards will
provide that Restricted Awards, and the Shares subject to Restricted Awards, may
not be transferred, and may provide that, in order for a Participant to Vest in
such Restricted Awards, the Participant must remain in the employment (or remain
as a Non-Employee Board Director, Non-Employee Subsidiary Director, or
Consultant) of Corporation or its Subsidiaries, subject to relief for reasons
specified in the Award Agreement, for a period commencing on the grant date of
the Award and ending on such later date or dates as the Committee may designate
at the time of the Award (the "Restriction Period"). During the Restriction
Period, a Participant may not sell, assign, transfer, pledge, encumber, or
otherwise dispose of Shares received under or governed by a Restricted Award
grant. The Committee, in its sole discretion, may provide for the lapse of
restrictions in installments during the Restriction Period. Upon expiration of
the applicable Restriction Period (or lapse of Restrictions during the
Restriction Period where the Restrictions lapse in installments) the Participant
will be entitled to settlement of the Restricted Award or portion thereof, as
the case may be. Although Restricted Awards will usually Vest based on continued
employment (or service as a Non-Employee Board Director, Non-Employee Subsidiary
Director, or Consultant) and Performance Awards under Section 10 will usually
Vest based on attainment of Performance Goals, the Committee, in its discretion,
may condition Vesting of Restricted Awards on attainment of Performance Goals as
well as continued employment (or
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service as a Non-Employee Board Director, Non-Employee Subsidiary Director, or
Consultant). In such case, the Restriction Period for such a Restricted Award
will include the period prior to satisfaction of the Performance Goals.
9.4 Forfeiture. If a Participant ceases to be an employee (or Consultant,
Non-Employee Board Director, or Non-Employee Subsidiary Director) of Corporation
or a Subsidiary during the Restriction Period for any reason other than reasons
which may be specified in an Award Agreement (such as death, Disability, or
Retirement) the Award Agreement may require that all non-Vested Restricted
Awards previously granted to the Participant be forfeited and returned to
Corporation.
9.5 Settlement of Restricted Awards.
(a) Restricted Shares. Upon Vesting of a Restricted Share Award, the
legend on such Shares will be removed, the Participant's stock power will be
returned and the Shares will no longer be Restricted Shares.
(b) Restricted Stock Units. Within the Settlement Period after
Vesting of a Restricted Stock Unit Award, a Participant will be entitled to
receive payment for Restricted Stock Units in an amount equal to the aggregate
Fair Market Value of the Shares covered by such Restricted Stock Units at the
expiration of the applicable Restriction Period. Payment in settlement of a
Restricted Stock Unit will be made during the Settlement Period following the
conclusion of the applicable Restriction Period in cash, in installments, or in
Shares equal to the number of Restricted Stock Units or in any other manner or
combination of such methods as the Committee, in its sole discretion,
determines.
9.6 Rights as a Shareholder. A Participant has, with respect to
unforfeited Shares received under a grant of Restricted Shares, all the rights
of a shareholder of Corporation, including the right to vote the shares, and the
right to receive any cash dividends. Stock dividends issued with respect to
Restricted Shares will be treated as additional Shares covered by the grant of
Restricted Shares and will be subject to the same Restrictions. A Participant
will have no rights as a shareholder with respect to a Restricted Stock Unit
Award until Shares are issued to the Participant in settlement of the Award.
9.7 Limitation in Number of Restricted Awards. The aggregate number of
shares subject to Restricted Share Awards and Restricted Stock Unit Awards that
may be granted under the Plan may not exceed 500,000 Shares.
10. PERFORMANCE AWARDS
10.1 General. Performance Awards are subject to the terms and conditions
set forth in Section 6 and this Section 10 and Award Agreements governing
Performance Awards may contain such other terms and conditions not inconsistent
with the express provisions of the Plan, as the Committee deems desirable.
10.2 Nature of Performance Awards. A Performance Award is an Award of
units (with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, the requirement that the Participant
forfeit all or a portion of such Performance Award in the event specified
performance criteria are not met within a designated period of time. Under the
AJCA, Performance Awards may be treated, for income tax purposes, as deferred
compensation arrangements. In the Award Agreement for each Performance Award,
the Committee will (a) specify the Settlement Period, and (b) set the other
terms and conditions of the Award Agreement so that the Performance Award will
comply with all applicable requirements of the AJCA.
10.3 Performance Cycles. For each Performance Award, the Committee will
designate a performance period (the "Performance Cycle") with a duration to be
determined by the Committee in its discretion within which specified Performance
Goals are to be attained. There may be several Performance Cycles in existence
at any one time and the duration of Performance Cycles may differ from each
other.
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10.4 Performance Goals. The Committee will establish Performance Goals for
each Performance Cycle on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. Performance Goals may
be based on (i) performance criteria for Corporation, a Subsidiary, or an
operating group, (ii) a Participant's individual performance, or (iii) a
combination of both. Performance Goals may include objective and subjective
criteria. During any Performance Cycle, the Committee may adjust the Performance
Goals for such Performance Cycle as it deems equitable in recognition of unusual
or nonrecurring events affecting Corporation, changes in applicable tax laws or
accounting principles, or such other factors as the Committee may determine.
10.5 Performance Goals for Executive Officers. The Performance Goals for
Performance Awards granted to executive officers of Corporation may relate to
corporate performance, business unit performance, or a combination of both.
(a) Corporate Performance Goals will be based on financial
performance goals related to the performance of Corporation as a whole and may
include one or more measures related to earnings, profitability, efficiency, or
return to shareholders such as earnings per share, operating profit, stock
price, or costs of production.
(b) Business unit Performance Goals will be based on a combination
of financial goals and strategic goals related to the performance of an
identified business unit for which a Participant has responsibility. Strategic
goals for a business unit may include one or a combination of objective factors
relating to success in implementing strategic plans or initiatives, introducing
products, constructing facilities, or other identifiable objectives. Financial
goals for a business unit may include the degree to which the business unit
achieves one or more objective measures related to its revenues, earnings,
profitability, efficiency, operating profit, or costs of production.
(c) Any corporate or business unit Performance Goals may be
expressed as absolute amounts or as ratios or percentages. Success may be
measured against various standards, including budget targets, improvement over
prior periods, and performance relative to other companies, business units, or
industry groups.
10.6 Determination of Awards. As soon as practicable after the end of a
Performance Cycle, the Committee will determine the extent to which Performance
Awards have been earned on the basis of performance in relation to the
established Performance Goals.
10.7 Timing and Form of Payment. Settlement of earned Performance Awards
will be made to the Participant within the Settlement Period after the
expiration of the Performance Cycle and the Committee's determination under
Section 10.6, in the form of cash, installments, Shares, or any combination of
the foregoing or in any other form as the Committee determines.
11. OTHER STOCK-BASED AND COMBINATION AWARDS
11.1 Other Stock-Based Awards. The Committee may grant other Awards under
the Plan pursuant to which Shares are or may in the future be acquired, or
Awards denominated in or measured by Share equivalent units, including Awards
valued using measures other than the market value of Shares. Other Stock-Based
Awards are not restricted to any specific form or structure and may include,
without limitation, Share purchase warrants, other rights to acquire Shares, and
securities convertible into or redeemable for Shares. Other Stock-Based Awards
may be granted either alone, in addition to, or in tandem with, any other type
of Award granted under the Plan.
11.2 Combination Awards. The Committee may also grant Awards under the
Plan in tandem or combination with other Awards or in exchange of Awards, or in
tandem or combination with, or as alternatives to, grants or rights under any
other employee plan of Corporation, including the plan of any acquired entity.
No action authorized by this section will reduce the amount of any existing
benefits or change the terms and conditions thereof without the Participant's
consent.
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12. DIVIDEND EQUIVALENTS
Any Award may, to the extent provided in its Award Agreement, at the
discretion of the Committee, earn dividend equivalents. In respect of any such
Award that is outstanding on a dividend record date for Common Stock, the
Participant may be credited with an amount equal to the amount of cash or stock
dividends that would have been paid on the Shares covered by such Award, had
such covered Shares been issued and outstanding on such dividend record date.
The Committee will establish such rules and procedures governing the crediting
of dividend equivalents, including the timing, form of payment, and payment
contingencies of such dividend equivalents, as it deems appropriate or
necessary.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
13.1 Plan Does Not Restrict Corporation. The existence of the Plan and the
Awards granted under the Plan will not affect or restrict in any way the right
or power of the Board or the shareholders of Corporation to make or authorize
any adjustment, recapitalization, reorganization, or other change in
Corporation's capital structure or its business, any merger or consolidation of
the Corporation, any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting Corporation's capital stock or the rights thereof,
the dissolution or liquidation of Corporation or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding.
13.2 Adjustments by the Committee. In the event of any change in
capitalization affecting the Common Stock of Corporation, such as a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, or any other
change affecting the Common Stock, such proportionate adjustments, if any, as
the Committee, in its sole discretion, may deem appropriate to reflect such
change, will be made with respect to the aggregate number of Shares for which
Awards in respect thereof may be granted under the Plan, the maximum number of
Shares which may be sold or awarded to any Participant, the number of Shares
covered by each outstanding Award, and the base price or purchase price per
Share in respect of outstanding Awards. The Committee may also make such
adjustments in the number of Shares covered by, and price or other value of, any
outstanding Awards in the event of a spin-off or other distribution (other than
normal cash dividends), of Corporation assets to shareholders.
14. AMENDMENT AND TERMINATION
The Board may amend, suspend, or terminate the Plan or any portion of the
Plan at any time, provided that no amendment may be made without shareholder
approval if such approval is required by applicable law or the requirements of
an applicable stock exchange or registered securities association.
15. MISCELLANEOUS
15.1 Tax Withholding. Corporation has the right to deduct from any
settlement of any Award under the Plan, including the delivery or Vesting of
Shares or Awards, any federal, state, or local taxes of any kind required by law
to be withheld with respect to such payments or to take such other action as may
be necessary in the opinion of Corporation to satisfy all obligations for the
payment of such taxes. The recipient of any payment or distribution under the
Plan has the obligation to make arrangements satisfactory to Corporation for the
satisfaction of any such tax withholding obligations. Corporation will not be
required to make any such payment or distribution under the Plan until such
obligations are satisfied.
15.2 Unfunded Plan. The Plan will be unfunded and Corporation will not be
required to segregate any assets that may at any time be represented by Awards
under the Plan. Any liability of Corporation to any person with respect to any
Award under the Plan will be based solely upon any contractual obligations that
may be effected pursuant to the Plan. No such obligation of Corporation will be
deemed to be secured by any pledge of, or other encumbrance on, any property of
Corporation.
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15.3 Annulment of Awards. Any Award Agreement may provide, in the
discretion of the Committee, that the grant of an Award payable in cash is
revocable until cash is paid in settlement of the Award or that grant of an
Award payable in Shares is revocable until the Participant becomes entitled to
the certificate in settlement of the Award. In the event the employment (or
service as a Non-Employee Board Director, Non-Employee Subsidiary Director, or
Consultant) of a Participant is terminated for cause (as defined below), any
Award that is revocable will be annulled as of the date of such termination for
cause. For the purpose of this Section 15.3, the term "for cause" has the
meaning set forth in the Participant's employment agreement, if any, or
otherwise means any discharge (or removal) for material or flagrant violation of
the policies and procedures of Corporation or for other performance or conduct
which is materially detrimental to the best interests of Corporation, as
determined by the Committee.
15.4 Engaging in Competition With Corporation. Any Award Agreement may
provide, in the discretion of the Committee, that, if a Participant terminates
employment (or service as a Non-Employee Board Director, Non-Employee Subsidiary
Director, or Consultant) with Corporation or a Subsidiary for any reason
whatsoever, and within a period of time (as specified in the Award Agreement)
after the date of such termination accepts employment with any competitor of (or
otherwise engages in competition with) Corporation, the Committee, in its sole
discretion, may require such Participant to return to Corporation the economic
value of any Award that is realized or obtained (measured at the date of
exercise, Vesting, or payment) by such Participant at any time during the period
beginning on the date that is six months prior to the date of such Participant's
termination of employment (or service as a Non-Employee Board Director,
Non-Employee Subsidiary Director, or Consultant) with Corporation.
15.5 Other Corporation Benefit and Compensation Programs. Payments and
other benefits received by a Participant under an Award made pursuant to the
Plan are not to be deemed a part of a Participant's regular, recurring
compensation for purposes of the termination indemnity or severance pay law of
any state or country and will not be included in, or have any effect on, the
determination of benefits under any other employee benefit plan or similar
arrangement provided by Corporation or a Subsidiary unless expressly so provided
by such other plan or arrangements, or except where the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of cash compensation. Awards under the Plan may
be made in combination with or in tandem with, or as alternatives to, grants,
awards, or payments under any other Corporation or Subsidiary plans,
arrangements, or programs. The Plan notwithstanding, Corporation or any
Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain, and reward
employees and directors for their service with Corporation and its Subsidiaries.
15.6 Securities Law Restrictions. No Shares may be issued under the Plan
unless counsel for Corporation is satisfied that such issuance will be in
compliance with applicable federal and state securities laws. Certificates for
Shares delivered under the Plan may be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange or registered securities association upon which the Common
Stock is then listed or quoted, and any applicable federal or state securities
laws. The Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
15.7 Governing Law. Except with respect to references to the Code or
federal securities laws, the Plan and all actions taken thereunder will be
governed by and construed in accordance with the laws of the state of Oregon.
16. SHAREHOLDER APPROVAL
The adoption of the Plan and the grant of Awards under the Plan are
expressly subject to the approval of the Plan by a majority of the total votes
cast at a meeting of Corporation's shareholders duly held in accordance with the
requirements of the Oregon Business Corporation Act and Corporation's Bylaws.
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RENTRAK CORPORATION
2005 ANNUAL MEETING OF SHAREHOLDERS
This proxy is solicited on behalf of the board of directors of Rentrak
Corporation ("Rentrak").
The undersigned hereby appoints each of Paul A. Rosenbaum and Mark L.
Thoenes as proxies, with full power of substitution, and hereby authorizes them
to represent and to vote as designated below, all the shares of Rentrak common
stock held of record by the undersigned on June 24, 2005, at the annual meeting
of the shareholders to be held at Rentrak's executive offices, One Airport
Center, 7700 N.E. Ambassador Place, Portland, Oregon 97220, on August 25, 2005,
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 below.
Nominees: Judith G. Allen, Cecil D. |_| FOR election |_| WITHHOLD
Andrus, George H. Kuper, Paul A.Rosenbaum, of all director vote from all
Ralph R. Shaw, Stanford C. Stoddard nominees (except nominees
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: Approval of 2005 Stock Incentive Plan
The board of directors unanimously recommends a vote FOR Proposal 2.
Approval of 2005 Stock Incentive Plan |_| FOR |_| AGAINST |_| ABSTAIN
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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: _____________________, 2005
Signature______________________ Signature if held jointly______________________
Please mark, sign, date and return the proxy using the enclosed envelope.