FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended:
September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the Transition
Period from to
Commission file number: 0-15159
RENTRAK CORPORATION
(Exact name of registrant as specified in its charter)
OREGON 93-0780536
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification no.)
7700 NE Ambassador Place, Portland, Oregon 97220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area
code: (503)284-7581
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (x)
No ( )
As of October 24, 1997, the Registrant had 11,116,428 shares
of Common Stock outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September
30, 1997 and March 31, 1997
Consolidated Statements of Income for the
three month periods ended September 30, 1997
and September 30, 1996
Consolidated Statements of Income for the six
month periods ended September 30, 1997 and
September 30, 1996
Consolidated Statements of Cash Flows for the
six month periods ended September 30, 1997 and
September 30, 1996
Notes to Consolidated Financial Statements
<TABLE>
RENTRAK CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
UNAUDITED
September 30, March 31,
1997 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,599,915 $ 10,167,169
Accounts receivable, net of allowance for doubtful
accounts of $215,389 and $409,313 16,434,079 16,434,566
Advances to program suppliers 2,664,687 492,844
Inventory 2,231,564 1,902,618
Deferred tax asset 708,956 1,365,064
Other current assets 4,491,424 2,901,964
Total current assets 34,130,625 33,264,225
PROPERTY AND EQUIPMENT, net 1,889,923 2,006,556
INTANGIBLES, net 331,214 171,509
OTHER INVESTMENTS, net 343,436 778,950
DEFERRED TAX ASSET 3,875,408 3,637,563
OTHER ASSETS 4,443,891 3,189,192
TOTAL ASSETS $ 45,014,497 $ 43,047,995
The accompanying notes are an integral
part of these consolidated balance sheets.
</TABLE>
<TABLE>
RENTRAK CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
UNAUDITED
September 30, March 31,
1997 1997
<S> <C> <C>
CURRENT LIABILITIES:
Line of credit $ 5,000,000 $ 5,000,000
Accounts payable 21,383,503 17,160,492
Accrued liabilities 1,084,275 613,669
Accrued compensation 804,144 1,695,814
Deferred revenue 1,477,473 2,672,849
Net current liabilities of discontinued operations 4,585,373 4,633,114
Total current liabilities 34,334,768 31,775,938
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock $.001 par value;
Authorized: 10,000,000 shares
Common stock, $.001 par value;
Authorized: 30,000,000 shares
Issued and outstanding: 11,054,568 shares
at September 30, 1997 and 11,847,441 at
March 31, 1997 11,055 11,847
Capital in excess of par value 44,711,299 47,931,165
Net unrealized gain (loss) on investment securities (5,154) 184,932
Accumulated deficit (32,937,709) (35,452,729)
Less - Deferred charge - warrants (1,099,762) (1,403,158)
10,679,729 11,272,057
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,014,497 $ 43,047,995
The accompanying notes are an integral
part of these consolidated balance sheets.
</TABLE>
<TABLE>
RENTRAK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(UNAUDITED)
Three Months Ended September 30,
1997 1996
<S> <C> <C>
REVENUES:
PPT $ 27,158,459 $ 29,962,381
Other 1,690,052 5,442,310
28,848,511 35,404,691
OPERATING COSTS AND EXPENSES:
Cost of sales 23,802,293 25,446,970
Selling and administrative 3,156,183 3,683,032
26,958,476 29,130,002
INCOME FROM OPERATIONS 1,890,035 6,274,689
OTHER INCOME (EXPENSE):
Interest income 128,325 112,054
Interest expense (62,035)
Other 110,000
128,325 160,019
INCOME BEFORE INCOME TAX PROVISION 2,018,360 6,434,708
INCOME TAX PROVISION 814,472 2,458,775
NET INCOME $ 1,203,888 $ 3,975,933
FULLY DILUTED EARNINGS PER COMMON
SHARE AND COMMON EQUIVALENT SHARE $ 0.10 $ 0.26
SHARES USED IN PER SHARE CALCULATION 14,106,887 16,323,636
The accompanying notes are an integral
part of these statements.
</TABLE>
<TABLE>
RENTRAK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(UNAUDITED)
Six Months Ended September 30,
1997 1996
<S> <C> <C>
REVENUES:
PPT $56,169,975 $ 52,611,077
Other 3,293,087 6,556,724
59,463,062 59,167,801
OPERATING COSTS AND EXPENSES:
Cost of sales 48,840,933 44,901,304
Selling and administrative 6,575,920 7,305,860
55,416,853 52,207,164
INCOME FROM OPERATIONS 4,046,209 6,960,637
OTHER INCOME (EXPENSE):
Interest income 251,176 285,675
Interest expense (5,000) (181,950)
Other 318,875
246,176 422,600
INCOME BEFORE INCOME TAX PROVISION 4,292,385 7,383,237
INCOME TAX PROVISION 1,777,363 2,831,008
NET INCOME $ 2,515,022 $ 4,552,229
FULLY DILUTED EARNINGS PER COMMON
SHARE AND COMMON EQUIVALENT SHARE $ 0.19 $ 0.31
SHARES USED IN PER SHARE CALCULATION 14,931,978 16,300,423
The accompanying notes are an integral
part of these statements.
</TABLE>
<TABLE>
RENTRAK CORPORATION
STATEMENT OF CASH FLOWS
<CAPTION>
(Unaudited)
Six Months Ended September 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,515,022 $ 4,552,229
Adjustments to reconcile income to
net cash provided (used) in operations
Gain on investment / asset sales (318,875)
Depreciation 373,382 506,755
Amortization of intangibles 45,849 82,462
Amortization of warrants 303,396 189,107
Provision for doubtful accounts (309,733) (88,633)
Retailer financing program reserves (300,000) (344,911)
Studio advance reserves (17,852) (112,612)
Deferred income taxes 534,768 161,331
Change in specific accounts:
Accounts receivable (389,780) (406,401)
Advance to program suppliers (2,153,991) 184,336
Inventory (328,946) 244,712
Other current assets (589,460) 3,338,798
Accounts payable 4,223,011 (6,012,410)
Accrued liabilities & compensation (421,064) 1,237,883
Deferred revenue (1,195,376) (567,989)
Net current liabilities of discontinued operation (47,741)
Net cash provided by operations 2,241,485 2,645,782
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (256,749) (76,120)
(Investments) reduction in retailer
financing program (750,000) 1,334,911
Proceeds from sale of investment / assets 544,864
(Purchase) reduction of other assets & intangibles (581,332) 435,696
Net cash provided (used) by investing activitie (1,588,081) 2,239,351
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under line of credit, net (2,700,000)
Repurchase of common stock (2,998,877)
Repurchase of Warrants (250,000)
Issuance of common stock 28,219 1,439
Net cash used by financing activities (3,220,658) (2,698,561)
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (2,567,254) 2,186,572
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THIS PERIOD 10,167,169 2,683,128
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,599,915 $ 4,869,700
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for -
Interest $ 5,000 $ 197,642
Income taxes, net of refunds 1,337,366 (314,228)
NON-CASH TRANSACTIONS
Increase (decrease) in net unrealized gain on
investment securities (190,086) (521,734)
Reduction of Warrants 496,913
Retailer Loan Program Investment through -
conversion of accounts receivable 1,196,856
The accompanying notes are an integral
part of these consolidated statements.
</TABLE>
RENTRAK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial
Statements of RENTRAK CORPORATION (the "Company"), have been
prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The results of
operations for the three month and six month periods ended
September 30, 1997 are not necessarily indicative of the
results to be expected for the entire fiscal year ended March
31, 1998. The Condensed Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial
Statements and footnotes thereto included in the Company's
1997 Annual Report to Shareholders.
The Condensed Consolidated Financial Statements reflect, in
the opinion of management, all material adjustments (which
include only normal and recurring adjustments) necessary to
present fairly the Company's financial position and results
of operations.
The Condensed Consolidated Financial Statements include the
accounts of the Company, its majority owned subsidiaries, and
those subsidiaries in which the Company has a controlling
interest after elimination of all intercompany accounts and
transactions. Investments in affiliated companies owned 20
to 50 percent are accounted for by the equity method.
NOTE B: Net Income Per Share
For the three and six month periods ended September 30, 1997
and September 30, 1996, net income per share is computed
using the "modified" treasury stock method. Under this
method, the number of shares is based on the weighted average
number of shares outstanding and the assumed exercise of
common stock equivalent options and warrants regardless of
whether the market price of the common stock exceeded the
exercise price of the options and warrants. In addition,
contingent warrants were assumed to have been exercised. The
number of treasury shares assumed to be purchased with the
proceeds from the exercise of stock options and warrants is
limited to 20 percent of the outstanding shares at period
end. Proceeds from exercise of the options and warrants in
excess of those used to purchase treasury shares were assumed
to have been invested in government securities with the
resultant net interest income, adjusted for appropriate tax
effects, added to net income for purposes of calculating
earnings per share.
NOTE C: Major Suppliers
For the quarter ended September 30, 1997, the Company had one
program supplier whose product generated 50 percent, a
second that generated 21 percent, and a third that generated
an additional 11 percent of Rentrak revenues. For the six
month period ended September 30, 1997, the Company had one
program supplier whose product generated 52 percent, a second
that generated 19 percent, and a third that generated an
additional 13 percent of Rentrak revenue. No other program
supplier provided product which generated more than 10
percent of revenue for the three or six month periods ended
September 30, 1997.
For the quarter ended September 30, 1996, the Company had one
program supplier whose product generated 31 percent, a second
that generated 25 percent, and a third that generated an
additional 18 percent of Rentrak revenues. For the six month
period ended September 30, 1996, the Company had one program
supplier whose product generated 35 percent, a second that
generated 26 percent and a third that generated an additional
16 percent of Rentrak revenues. No other program supplier
provided product which generated more than 10 percent of
revenue for the three or six month periods ended September
30, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
Information included in Management's Discussion and Analysis
of Financial Conditions and Results of Operations regarding
revenue growth, gross profit margin and liquidity constitute
forward-looking statements that involve a number of risks and
uncertainties. Forward looking statements can be identified
by the uses of forward-looking words such as "may", "will",
"expects", "intends", "anticipates", "estimates", or
"continues" or the negative thereof or variations thereon or
comparable terminology. The following factors are among the
factors that could cause actual results to differ materially
from the forward-looking statements: business conditions and
growth in the video industry and general economics, both
domestic and international; competitive factors, including
increased competition, new technology, and the continued
availability of Cassettes from Program Suppliers. Such
factors are discussed in more detail in the Company's 1997
Annual Report to Shareholders.
Results of Operations
Total revenue includes the following: application fees
generated when retailers are approved for participation in
the Pay Per Transaction ("PPT") system; order processing fees
generated when prerecorded videocassettes ("Cassettes") are
ordered by and distributed to retailers; transaction fees
generated when retailers rent Cassettes to consumers; sell-
through fees generated when retailers sell Cassettes to
consumers; buy out fees when retailers purchase Cassettes at
the end of the lease term; royalty payments from Rentrak
Japan; and sales of Cassettes.
For the quarter ended September 30, 1997, total revenue
decreased $6.6 million, or 18.5 percent to $28.8 million from
$35.4 million in the quarter ended September 30, 1996. For
the six month period ended September 30, 1997, total revenue
increased $.3 million, or .5 percent, to $59.5 million from
$59.2 million in the six month period ended September 30,
1996. During the quarter ended September 30, 1996, the
Company received, and recognized in other revenue, $4.4
million in one-time royalty payments from Rentrak Japan.
Excluding this one-time royalty payment in 1996, revenues for
the quarter ended September 30, 1997 decreased $2.2 million
from the same quarter of the previous year and revenues for
the six month period ended September 30, 1997 increased $4.7
million from the same period in the prior year. In addition
to the decrease in royalty revenue, the decrease in total
revenue for the quarter ended September 30, 1997 and the
decreases described in the following paragraph were primarily
due to the decrease in the number and quality of titles
released to the PPT System. During the six month period
ended September 30, 1997, the increase in revenues was
primarily due to the growth in (i) the number of retailers
approved to lease Cassettes under the PPT System from the
Company (the "Participating Retailers"); (ii) the quality of
titles released to the PPT System; and (iii) the total number
of Cassettes leased under the PPT System.
Cost of sales for the quarter ended September 30, 1997
decreased to $23.8 million from $25.4 million the prior year,
a decrease of $1.6 million, or 6.5 percent. Cost of sales
for the six month period ended September 30, 1997 rose to
$48.8 million from $44.9 million the prior year, an increase
of $3.9 million or 9 percent.
The gross profit margin decreased to 17.5 percent in the
quarter ended September 30, 1997 from 18 percent the previous
year, excluding the one-time royalty payment of $4.4 million.
The gross profit margin was 18 percent in both the six month
periods ended September 30, 1997 and September 30, 1996,
excluding the one-time royalty payment of $4.4 million.
Inclusion of the one-time royalty payment of $4.4 million
resulted in a gross profit margin of 28 percent and 24
percent in the three and six month periods ended September
30, 1996, respectively.
Selling and administrative expenses were $3.2 million for the
quarter ended September 30, 1997 compared to $3.7 million in
the quarter ended September 30, 1996, a decrease of $.5
million, or 14 percent. Selling and administrative expenses
were $6.6 million in the six month period ended September 30,
1997 compared to $7.3 million in the six month period ended
September 30, 1996, a decrease of $0.7 million or 10 percent.
These decreases were primarily due to the recovery of amounts
which were loaned under the retailer loan program and which
had been previously reserved. As a percentage of total
revenue, selling and administrative expenses increased from
10 percent for the quarter ended September 30, 1996 to 11
percent for the quarter ended September 30, 1997. This
increase is attributable to the one time royalty payment
included in other revenue which had no impact on selling and
administrative expenses. As a percentage of total revenue,
selling and administrative expenses decreased from 12 percent
for the six month period ended September 30, 1996 to 11
percent for the six month period ended September 30, 1997.
Other income (expense) was $0.1 million for the quarter ended
September 30, 1997 and $0.2 million for the quarter ended
September 30, 1996. Other income was $0.2 million in the six
month period ended September 30, 1997 and $0.4 million in the
six month period ended September 30, 1996, a decrease of $0.2
million. Other income in the six month period ended
September 30, 1996 includes a gain of $0.3 million on the
sale of corporate securities which includes the sale of 60
shares of Rentrak Japan stock for $100,000.
For the quarter ended September 30, 1997, the Company
recorded a pre-tax profit of $2.0 million, or 7 percent of
total revenue, compared to a pre-tax profit of $6.4 million,
or 18 percent of total revenue in the quarter ended September
30, 1996. Excluding the one-time royalty payment from
Rentrak Japan, the Company had a pre-tax profit of $1.9
million or 6 percent of total revenue for the quarter ended
September 30, 1996. For the six month period ended September
30, 1997, the Company recorded a pre-tax profit of $4.3
million or 7 percent of total revenue, compared to a pre-tax
profit of $7.4 million or 12 percent of total revenue for the
six month period ended September 30, 1996. Excluding the one-
time royalty payment from Rentrak Japan, the Company had a
pre-tax profit of $2.9 million or 5 percent of total revenue
for the six month period ended September 30, 1996. This
increase, excluding the one-time royalty payment, is
primarily due to a decrease in selling and administrative
expenses and an increase in total revenue which resulted in
increased gross margin dollars.
Included in the amounts above are the results from Other
Subsidiaries which are comprised of other video retail and
other operations. For the quarter ended September 30, 1997,
Other Subsidiaries recorded pre-tax income of $0.2 million
compared to $0.1 million for the quarter ended September 30,
1996. For the six month period ended September 30, 1997,
Other Subsidiaries recorded pre-tax income of $0.4 million
compared to $0.1 million for the six month period ended
September 30, 1996.
Consolidated Balance Sheet
At September 30, 1997, total assets were $45.0 million, an
increase of $2.0 million from the $43.0 million at March 31,
1997. At September 30, 1997, cash decreased $2.6 million to
$7.6 million from $10.2 million at March 31, 1997. The
decrease is primarily due to the increase in other assets
such as advances to program suppliers and other long term
assets and the repurchase of the Company's stock as described
below.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had cash and other liquid
investments of $7.6 million, compared to $10.2 million at
March 31, 1997. At September 30, 1997, the Company's current
ratio (current assets/current liabilities) decreased to .99
from 1.05 at March 31, 1997.
The Company has an agreement for a line of credit with a
financial institution in an amount not to exceed the
lesser of $10 million or the sum of (a) 80 percent of
the net amount of eligible accounts receivable as
defined in the agreement. The line of credit expires on
December 18, 1997. Interest is payable monthly at the
bank's prime rate plus .5 percent (9.0 percent at
September 30, 1997). The lender has an option to
purchase 10,000 unregistered shares of common stock of
the Company at $7 per share, which exceeded market value
at the date of grant. The line is secured by
substantially all of the Company's assets. The terms of
the agreement require, among other things, a minimum
amount of tangible net worth, minimum current ratio and
minimum total liabilities to tangible net worth. The
agreement also restricts the amount of net losses, loans
and indebtedness and limits the payment of dividends on
the Company's stock. The Company is in compliance with
these covenants or has obtained waivers of noncompliance
as of September 30, 1997. At March 31, 1997, the
Company had $5.0 million outstanding borrowings which
were paid under this agreement in April, 1997. As of
September 30, 1997, the Company had $5.0 million
outstanding borrowings under this agreement which were
repaid in October, 1997.
The Company has established a retailer financing program
whereby the Company will provide, on a selective basis,
financing to video retailers which the Company believes have
the potential for substantial growth in the industry. In
connection with these financings, the Company typically makes
a loan to and/or an equity investment in the retailer. In
some cases, a warrant to purchase stock may be obtained. As
part of such financing, the retailer typically agrees to
cause all of its current and future retail locations to
participate in the PPT system for a designated period of
time. Under these agreements, retailers are typically
required to obtain some or all of their requirements of
Cassettes offered under the PPT system or obtain a minimum
amount of Cassettes based on a percentage of the retailer's
revenues. Notwithstanding the long term nature of such
agreements, both the Company and the retailer may, in some
cases, retain the right to terminate such agreement upon 30-
90 days prior written notice. These financings are highly
speculative in nature and involve a high degree of risk, and
no assurance of a satisfactory return on investment can be
given. The amounts the Company could ultimately receive
could differ materially in the near term from the amounts
assumed in establishing reserves.
The Board of Directors has authorized up to $18 million to be
used in connection with the Company's retailer financing
program. As of September 30, 1997, the Company had invested
or loaned approximately $13.2 million in various retailers,
including BlowOut Entertainment, Inc. (BlowOut) as described
below . The investments individually range from $0.2 million
to $6.1 million. Interest rates on the various loans range
from the prime rate plus 1 percent to the prime rate plus 2
percent. As the financings are made, and periodically
throughout the terms of the agreements, the Company assesses
the likelihood of recoverability of the amounts invested or
loaned based on the financial position of each retailer.
This assessment includes reviewing available financial
statements and cash flow projections of the retailer and
discussions with retailers' management. As of September 30,
1997, a total of approximately $8.5 million had been reserved
by the Company in connection with the retailer loan program.
As noted in the Company's 1997 Annual Report to Shareholders,
the Company distributed to its Shareholders shares of common
stock of BlowOut. The operations of BlowOut were reflected
as discontinued operations in the March 31, 1996 consolidated
financial statements. Net current liabilities of
discontinued operations include management's best estimates
of the anticipated losses from discontinued operations
through the final resolution of all contingencies related to
the disposition of BlowOut. The estimates are based on an
analysis of the costs which may be incurred to dispose of the
entity. The amounts the Company will ultimately incur could
differ materially in the near term from the amounts assumed
in arriving at the loss on disposal of the discontinued
operations.
BlowOut is essentially a start-up company requiring
additional financing if it is to continue its expansion
and to support operations of recently opened stores.
The Company is the principal creditor to BlowOut. The
Company has agreed to guarantee up to $7 million of
indebtedness of BlowOut (Guarantee). The Guarantee
expires for future borrowings on the earlier of (i)
December 31, 1997 or (ii) such time as the total
indebtedness of BlowOut subject to the Rentrak Guarantee
is equal to $7 million. There can be no assurance that
the Company will not have to pay out under these
guarantees or provide other accommodations. During the
term of the Rentrak Guarantee, and/or so long as any
guarantee is thereunder outstanding, BlowOut has agreed
to pay the Company a weekly fee at a rate equal to .02
percent per week of then-currently outstanding
indebtedness subject to the Rentrak Guarantee. BlowOut
has executed a $3 million note in favor of the Company
which accrues interest at 9% per annum and is due in
April 1999. At March 31, 1997, the total outstanding
balance of the debt under such note, including accrued
interest, was $3.5 million.
BlowOut has a credit facility (the Credit Facility) in
an aggregate principal amount of $2 million for a five-
year term. Amounts outstanding under the Credit
Facility bear interest at a fixed rate per annum equal
to 13.98 percent. Pursuant to the terms of the
Guarantee, the Company agreed to guarantee any amounts
outstanding under the Credit Facility until the lender
is satisfied, in its sole discretion, that BlowOut's
financial condition is sufficient to justify the release
of the Company's guarantee. As of September 30, 1997,
BlowOut had borrowed approximately $1.5 million under
the Credit Facility.
BlowOut also has a revolving line of credit (Line of
Credit) in a maximum principal amount at one time
outstanding of $5 million. Under the Line of Credit,
BlowOut may only draw up to 80% of the Orderly
Liquidation Value (as defined in the Line of Credit) of
eligible new and used Cassette inventory. Advances
under the Line of Credit bear interest at a floating
rate per annum equal to the Bank of America Reference
Rate plus 2.75 percent (11.25 percent as of September
30, 1997). The term of the Line of Credit is three
years. The Company has agreed, under certain
circumstances in the event of default under the Line of
Credit, to repurchase BlowOut's Cassette inventory at
specified amounts. As of September 30, 1997, BlowOut
had borrowed approximately $3.0 million under the Line
of Credit.
The Company's exposure related to adverse financial and
operational developments at BlowOut is limited to its
receivables from BlowOut [See Note 4 of the Notes to the
Consolidated Financial Statements included in the
Company's 1997 Annual Report to Shareholders] and the
obligations under the Guarantee [See Note 9 of the Notes
to the Consolidated Financial Statements included in the
Company's 1997 Annual Report to Shareholders].
On November 26, 1996, the Board authorized the re-
purchase of up to two million shares of Common Stock in
open market and negotiated purchases. During the
quarter ended September 30, 1997, the Company acquired
556,006 shares for an aggregate amount of approximately
$2,236,000. During the six months ended September 30,
1997, the company acquired 813,600 shares for an
aggregate amount of approximately $2,968,000. These
purchases were funded through cash flows from
operations.
The Company's sources of liquidity include its cash
balance, cash generated from operations and its
available credit facility. These sources are expected
to be sufficient to fund the Company's operations for
the year ending March 31, 1998.
PART II
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of matters to a Vote of Security Holders
On August 11, 1997, the Company conducted its Annual
Meeting of Shareholders. The matters voted on were as
follows:
1. Voting for Directors was as follows:
Nominees For: Percentage* Withheld Percentage
Herbert Fischer 8,220,113 95.12% 421,537 4.87%
James Jimirro 8,217,963 95.09% 423,687 4.90%
Bill LeVine 8,202,313 94.91% 439,337 5.08%
* Percentage of votes cast at the meeting or by Proxy.
2. Proposal to Approve the 1997 Equity Participation
Plan of Rentrak Corporation:
For: Against: Abstain:
7,667,302 881,565 92,783
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.1 - Employment Agreement of Marty Graham
dated May 17, 1997.
Exhibit 10.2 - Employment Agreement of Michael
Lightbourne dated July 10, 1997.
Exhibit 10.3 - Employment Agreement of Christopher
Roberts dated October 27, 1997.
Exhibit 10.4 - The 1997 Equity Participation Plan of
Rentrak Corporation. (1)
Exhibit 10.5 - The Amendment to the 1997 Non-Officer
Employee Stock Option Plan of Rentrak Corporation. (2)
Exhibit 10.6 - Rentrak Corporation Non-Qualified Stock
Option Agreement.
Exhibit 11 - Statement of Computation of per share
earnings.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
(1) Incorporated by referenced to the Company's Proxy
Statement dated June 25, 1997 for the Company's 1997 Annual
Meeting of Shareholders.
(2) Filed as Exhibit 4.1 to Form S-8 filed on October 29, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Dated this 31st day of October, 1997
RENTRAK CORPORATION:
s/s Carolyn A .Pihl
Carolyn A. Pihl
Chief Accounting Officer
Signing on behalf of the registrant
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (hereinafter
referred to as the "Agreement") is made and entered into as of
this 17th day of May, 1997 by and between RENTRAK CORPORATION, an
Oregon corporation (hereinafter referred to as "Employer"), and
MARTY GRAHAM (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer currently employs Employee in the capacity
of Vice President, Product Development and Employee is one of the
key executives of the Employer and desires to be so employed;
WHEREAS, Employer and Employee have entered into an
Employment Agreement effective June 1, 1995, as amended,
(collectively the "Employment Agreement") and Employer and
Employee desire to enter into a new Employment Agreement upon the
terms and subject to the conditions of this Agreement;
WHEREAS, the terms of this Agreement shall supersede in its
entirety the terms of the Employment Agreement;
WHEREAS, Employer considers it essential to the best
interests of its shareholders to foster the continuous employment
of Employee;
WHEREAS, the Board of Directors of Employer (the "Board")
recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change of Control (as defined
below) may exist and that such possibility, and the uncertainty
and questions which it may raise among management, may result in
the departure or distraction of management personnel to the
detriment of Employer and its shareholders;
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of Employer's management,
including Employee, to their assigned duties without distraction
in the face of potentially disturbing circumstances arising from
the possibility of Change of Control; and
WHEREAS, the Board has determined that it is in the best
interests of Employer and its shareholders to clarify certain
provisions of the Employment Agreement in order to more
effectively carry out the purposes of Employment Agreement and
avoid potential disputes in connection with the enforcement of
the Employment Agreement following a Change of Control.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and agreements herein contained, the recitals set forth
hereinabove which by this reference are incorporated herein, and
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1. EMPLOYMENT
1.01. Duties and Place of Employment.
(a) Employee shall be responsible for, and perform
duties associated with his position as Vice President, Product
Development, including title management so as to minimize risk
and maximize profits, and other duties as may be directed by the
Employer, from time to time. Employee shall: (i) devote his full
business time during normal business hours to the business and
affairs of Employer; (ii) use his best efforts to promote the
interests of Employer; and (iii) perform faithfully and
efficiently his responsibilities. Employee shall perform his
duties at the Employer's principal executive offices which are
currently located at One Airport Center, 7700 N.E. Ambassador
Place,, Portland, Oregon 97220, or such other locations as may be
directed by Employer from time to time. Subject to the terms of
this Agreement, Employee shall comply promptly and faithfully
with all of Employer's policies, instructions, directions,
requests, rules and regulations.
(b) After a Change of Control (as defined below),
during the Term of this Agreement, Employee shall continue to
serve Employer in the same capacity and have the same authority,
responsibilities and status as he had as of the date immediately
prior to the Change of Control. After a Change of Control,
during the Term of this Agreement, Employee's services shall be
performed at the location where Employee was employed as of the
date immediately prior to the Change of Control, or at such other
location as may be mutually agreed between Employer and Employee.
(c) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred upon the first
fulfillment of the conditions set forth in any one of the
following four paragraphs:
(1) any "person" (as such term is defined in
Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding
securities under an employee benefit plan of Employer,
is or becomes a beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of Employer,
representing twenty-five percent (25%) or more of the
combined voting power of Employer's then outstanding
securities; or
(2) a majority of the directors elected at any
annual or special meeting of stockholders are not
individuals nominated by Employer's then incumbent
Board; or
(3) the shareholders of Employer approve a merger
or consolidation of Employer with any other
corporation, other than a merger or consolidation which
would result in the voting securities of Employer
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least seventy-five percent (75%) of the
combined voting power of the voting securities of
Employer or such surviving entity outstanding
immediately after such merger or consolidation, or the
shareholders of Employer approve a plan of complete
liquidation of Employer or an agreement for the sale or
disposition by Employer of all or substantially all of
its assets.
2. TERM AND TERMINATION
2.01. Stated Term.
Employment commenced on April 15, 1997 and will end on April
15, 2002 (the "End Date") or until Employee's employment under
this Agreement is terminated pursuant to this Section 2 ("Term").
2.02. At Will Termination.
Notwithstanding anything herein to the contrary, Employee's
employment may be terminated by Employer at any time without
cause upon thirty (30) days written notice to Employee.
2.03. For Cause Termination.
Employee's employment may be terminated by Employer for
"cause" without notice. Termination for "cause" is defined for
purposes of this subsection as termination for: (i) material
failure of Employee to substantially perform the reasonable and
attainable instructions of Employer as to his duties hereunder;
or (ii) an act or acts of misconduct by Employee which is
determined by the Employer to be materially injurious to Employer
monetarily or otherwise; or (iii) material violation by Employee
of any provision of this Agreement. For purposes of this
subsection, termination for "cause" shall not include any act or
failure to act on Employee's part if done or omitted to be done
by him in demonstrable good faith and with the reasonable belief
that his act or omission was in the best interest of the Employer
or pursuant to an express policy of Employer at the time of such
act or omission.
2.04. Disability or Death.
Employee's employment shall be terminable immediately upon
Employee's death or disability. "Disability" is defined for
purposes of this subsection as absence from Employee's full time
duties with Employer as a result of Employee's incapacity due to
physical or mental illness for ninety (90) days calculated on a
cumulative basis during any one (1) year period during the Term
of this Agreement. Nothing in this Section 2.04 is intended to
violate any Oregon State law regarding parental or family leave
policies or any other applicable law.
2.05. Termination by Employee for Good Reason.
Employee's employment may be terminated by Employee at any
time for "Good Reason" as that term is defined below. Employee's
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any act or failure to act constituting
Good Reason hereunder. "Good Reason" shall mean (i) a material
breach by Employer of the terms of this Agreement; provided that
Employee shall have no right to terminate this Agreement pursuant
to this clause (i) unless Employer has had at least 15 days to
cure such failure, or (ii) the occurrence (without Employee's
express written consent), within two (2) years after any Change
of Control of any one of the following acts by Employer, or
failures by Employer to act:
(a) the assignment to Employee of any duties
inconsistent with Employee's status as an executive officer of
Employer or a substantial adverse alteration in the nature or
status of Employee's title, position, duties, functions, working
conditions or responsibilities from those in effect immediately
prior to the Change of Control other than any such alteration
primarily attributable to the fact that Employer may no longer be
a public company;
(b) a reduction by Employer in Employee's annual Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(c) the relocation of Employer's principal executive
offices to a location more than thirty-five miles from the
location of such offices immediately prior to the Change of
Control or Employer's requiring Employee to be based anywhere
other than Employer's principal executive offices except for
required travel on Employer's business to an extent substantially
consistent with Employee's business travel obligations
immediately prior to the Change of Control;
(d) the failure by Employer, without Employee's
consent, to pay to Employee any portion of Employee's current
compensation;
(e) the failure by Employer to continue in effect any
compensation plan in which Employee participates immediately
prior to the Change of Control which is material to Employee's
total compensation unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by Employer to continue
Employee's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the terms and
conditions of such benefits, including, without limitation, the
level of Employee's participation relative to other participants,
as such relative level existed at the time of the Change of
Control;
(f) the failure by Employer to continue to provide
Employee with benefits substantially similar to those enjoyed by
Employee under any of Employer's pension, life insurance,
medical, health and accident, or disability plans in which
Employee was participating immediately prior to the Change of
Control, the taking of any action by Employer which would
directly or indirectly materially reduce any of such benefits or
deprive Employee of any material fringe benefit enjoyed by
Employee immediately prior to the Change of Control, or the
failure by Employer to provide Employee with the number of paid
vacation days to which Employee is entitled on the basis of years
of service with Employer in accordance with Employer's normal
vacation policy in effect immediately prior to the Change of
Control; or
(g) the failure of Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 7.04.
2.06. Other Termination by Employee.
Employee's employment may be terminated by Employee at any
time without Good Reason upon thirty (30) days written notice to
Employer.
3. COMPENSATION
3.01. Base Salary.
Commencing April 15, 1997, Employee shall be paid an annual
base salary in the amount of One Hundred Thirty Thousand Dollars
($130,000) ("Base Salary"). The Base Salary shall be paid to
Employee in equal semi-monthly installments in arrears on the
seventh (7th) and twenty-second (22nd) day of each month,
commencing as of the first semi-monthly pay period following the
effective date of this Agreement. Should the seventh (7th) or
the twenty-second (22nd) day of any month not be a business day,
Employee's semi-monthly installment of the Base Salary otherwise
due on such date shall be paid to Employee on the business day
closest to the date such semimonthly installment is due (i.e., if
the seventh (7th) day of the month falls on a Saturday, the semi-
monthly installment shall be paid on the preceding business day
or if the seventh (7th) day of the month falls on a Sunday, the
semi-monthly installment shall be paid on the next following
business day). Employee's Base Salary shall be increased during
the Term of this Agreement by Ten Thousand Dollars ($10,000) per
annum, said increase to be effective as of April 15 of each year
during the Term of this Agreement.
3.02. Bonus Compensation.
Employee shall be entitled to participate in whatever bonus
plan is adopted by Employer, including any cash bonus pools
established from time to time by Employer, for Corporate
Officers. Additionally, Employee shall be entitled to a
performance bonus in the amounts set forth below upon achievement
of the specified objectives:
(a) For the establishment of PPT operations, defined
as shipment of the first cassette, in a non-Asian foreign
territory, Fifteen Thousand Dollars ($15,000);
(b) For obtaining a fulfillment agreement no less than
one (1) year in duration with any retailer with One Hundred (100)
or more stores for all product of either Warner, Paramount, Sony,
Fox, Universal or Disney, Fifteen Thousand Dollars ($15,000); and
(c) For obtaining a fulfillment agreement no less than
one (1) year in duration with any retailer with One Hundred (100)
or more stores for all product of either Orion, LIVE, MGM,
Polygram, NewLine or Trimark, Seven Thousand Five Hundred Dollars
($7,500).
3.03. Benefits.
(a) Vacation and Holiday Pay. As of the effective
date of this Agreement, Employee will be entitled to: (i) accrue
vacation time at the rate of one hundred sixty (160) hours of
paid vacation during each year of employment; and (ii) will be
eligible to receive pay for Employer-paid holidays.
(b) Insurance. Employee shall be entitled to medical,
life, worker's compensation, social security and state
unemployment insurance benefits as provided under Employer's then
current terms, policies and procedures. Employee shall also be
entitled to officers' disability insurance benefits. For five
years following a Change of Control, Employer shall use its best
efforts to continue to provide directors' and officers' liability
insurance covering Employee (with respect to events occurring
prior to termination of Employment) on terms no less favorable
(in terms of coverage and amounts) than those of such insurance
in effect immediately prior to the Change of Control. Following
a Change of Control, Employer will indemnify and hold harmless
Employee (and advance expenses) to the full extent provided in
the Articles of Incorporation and Bylaws of Employer as in effect
immediately prior to the Change of Control.
(c) Tuition Reimbursement. Employee shall be entitled
to reimbursement for all tuition, enrollment fees, and books
pursuant to Employer's education assistance program. Employee
shall comply with all Employer's terms, policies and procedures
regarding its education assistance program.
(d) Business Expenses. During the Term of this
Agreement, Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by Employee in
the performance of his duties pursuant to this Agreement in
accordance with the policies and procedures of Employer now or
hereinafter in effect.
(e) Miscellaneous Benefits. In addition to any other
compensation or benefits to be received by Employee pursuant to
the terms of this Agreement, Employee shall be entitled to
participate in any employee or officer(s) benefits which Employer
may from time to time provide its employees or officer(s)
generally.
3.04. Stock Options.
Upon the commencement of the Term of this Agreement, all
options previously granted to Employee shall fully vest. Also
upon commencement of the Term of this Agreement, Employer shall
grant Employee Twenty-Five Thousand (25,000) shares of Employer's
stock at the market rate as set forth in Employer's Stock Option
Plan on the date of execution of this Agreement. Said options
shall vest at a rate of Twenty percent (20%) per year (i.e.,
5,000 options shall vest at the end of each full year of
Employee's employment during the five-year Term of this
Agreement). Said options shall remain exercisable for a period
of Ten (10) years from the issue date.
In addition to the aforementioned options, Employee shall be
granted additional options for Five Thousand (5,000) shares per
grant during each year that this Agreement remains in effect,
commencing on the anniversary date of execution of this Agreement
in 1998. Said options shall be at a price to be set by the Board
of Directors of Employer and shall be the same price at which
options are offered to all other employees during the year in
which the options are granted. Said options shall vest at a rate
of Twenty percent (20%) per year (i.e., 1,000 options shall vest
at the end of each full year of Employee's employment) and shall
remain exercisable for a period of Ten (10) years from the issue
date.
3.05. Loan.
Employer has advanced to Employee Thirty-Five Thousand
Dollars ($35,000) (the "Loan"). The Loan is to be repaid in
full, with interest at the rate of Eight-and-a-half percent
(8.5%); provided however, that if Employee is still employed by
Employer on the anniversary date of the execution of this
Agreement in 2002, the Loan shall be forgiven. All interest will
accrue to the fifth anniversary of this Agreement. In the event
of termination of Employee's employment by Employer for reason
other than cause, or by Employee for good reason, or by
Employee's death or disability, the Loan shall be forgiven. If
Employee resigns other than for good reason or his employment is
terminated for cause by Employer, then the loan shall be repaid
on the last date of Employee's employment.
4. PAYMENTS UPON TERMINATION OF EMPLOYMENT
4.01. Termination for Cause.
In the event of the termination of Employee's employment by
Employer for cause pursuant to Section 2.03 within ten days of
termination Employer shall pay to Employee only the Base Salary
accrued pursuant to Section 3.01 through and including the date
of termination. No other compensation shall be due or payable
under this Agreement in the event of a termination for Cause.
4.02. Termination for Death or Disability.
(a) Termination for Death. In the event of the termination
of Employee's employment pursuant to Section 2.04 due to his
death, within ten days of termination Employer shall pay to
Employee's estate or legal representative, as the case may be, in
a lump sum, the Base Salary accrued pursuant to Section 3.01
through and including the date of termination plus a lump sum
severance of Ninety (90) days Base Salary at the rate in effect
on the date of Employee's death. Employer shall also convey to
Employee's estate or legal representative all options granted to
Employee during his employment, regardless of whether or not said
options vested prior to Employee's death. Said options shall
remain exercisable for a period of One (1) year from the date of
death. No other compensation shall be due or payable under this
Agreement in the event of a termination due to the Employee's
death.
(b) Termination for Disability. In the event of the
termination of Employee's employment pursuant to Section 2.04 due
to his disability, within ten days of termination Employer shall
pay to Employee or his legal representative, as the case may be,
in a lump sum, the Base Salary accrued pursuant to Section 3.01
through and including the date of termination. During the period
of Employee's disability, but prior to Employee's termination of
Employment, Employee shall be entitled to receive all
compensation as set forth in this Agreement. No other
compensation shall be due or payable under this Agreement in the
event of a termination due to the Employee's disability.
4.03. Termination by Employer Without Cause After Change
of Control or by Employee for Good Reason.
In the event of the termination of Employee's employment by
Employer pursuant to Section 2.02 within two years after a Change
of Control or by Employee pursuant to Section 2.05, within ten
days of termination Employer shall pay to Employee, in a lump
sum, the lesser of (i) all Base Salary which Employer is
obligated to pay to Employee pursuant to Section 3.01 through the
End Date or (ii) one year of Base Salary which Employer is
obligated to pay to Employee pursuant to Section 3.01 during the
current fiscal year.
4.04. Other Termination by Employer.
In the event of termination of Employee's employment by
Employer pursuant to Section 2.02 prior to a Change of Control or
more than two years after a Change of Control, Employer shall pay
Employee the Base Salary accrued pursuant to Section 3.01 as of
the date of termination plus severance payments in an amount
equal to six months' Base Salary at the rate at which Employer is
obligated to pay to Employee pursuant to Section 3.01 during the
current fiscal year, payable in installments as if still
employed; provided, however, that during the period that Employer
is making severance payments pursuant to this Section 4.04,
Employer shall have the right to request Employee to provide
reasonable evidence that he is using his best efforts to obtain
other employment of comparable status in the Portland
metropolitan area, and in the event that Employee fails to
provide such reasonable evidence, then Employer shall not be
obligated to pay any severance payments; and provided further
that if Employee is successful in obtaining such employment, the
amount of severance payments that would have been payable after
the time that Employee obtains such employment shall be reduced
by the amount of any remuneration received from such employment.
For the purposes of this Agreement, "remuneration" shall be
defined to include cash payments, the face value of any
promissory notes issued to Employee regardless of the terms of
payment or whether payments are ever received, stock or stock
options valued as of the day granted, or any other compensation
given in any form whatsoever.
4.05. Other Termination by Employee.
In the event of the termination of Employee's employment by
Employee pursuant to Section 2.06, within ten days of termination
Employer shall pay to Employee only the amount of Base Salary
accrued pursuant to Section 3.01 through and including the date
of termination. No other compensation shall be due or payable
under this Agreement in the event of a such a termination.
4.06. Insurance Benefits.
Employee is entitled to elect to continue the insurance
described in Section 3.04B during a period of two (2) years
following an event of termination described in Section 2.05 and a
period of six (6) months following an event of termination
described in Section 2.02. If Employee elects to continue such
coverage, Employer shall reimburse Employee for the premiums paid
by Employee for such insurance as such premiums are paid until
such time as the continued insurance terminates or Employee
obtains replacement full-time employment and is covered by such
new employer's group medical health and life insurance plan with
benefits substantially similar to those provided by Employer's
insurance plan and without any pre-existing conditions,
exclusions, limitations or restrictions, whichever occurs first.
Such reimbursement shall be reduced for an amount equivalent to
the amounts charged Employee for health coverage immediately
prior to the occurrence of the Change of Control.
4.07. Other Compensation.
Except as set forth in this Section 4, no other compensation
shall be due or payable to Employee upon termination of his
employment.
4.08. Right to Decline Payments.
Employee, in his sole and absolute discretion, shall have
the right to decline all or a portion of any payments under this
Agreement.
5. PERSONAL NATURE
This Agreement is personal, and is being entered into based
upon the singular skill, qualifications and experience of
Employee. Employee shall not assign this Agreement or any rights
hereunder without the express written consent of Employer which
may be withheld with or without reason. Employee hereby grants
to Employer the right to use Employee's name, likeness and/or
biography in connection with the services performed by Employee
hereunder and in connection with the advertising or exploitation
of any project with respect to which Employee performs services
hereunder.
6. NOTICES
Any and all notices or other communications required or
permitted by this Agreement or by law shall be deemed duly served
and given when personally delivered to the party to whom such
notice or communication is directed or, in lieu of such personal
service, when deposited in the United States mail, certified,
return receipt requested, first class postage prepaid, addressed
as follows:
EMPLOYER: Rentrak Corporation
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
Attn: Ron Berger
EMPLOYEE: Marty Graham
1914 N.E. 213th Avenue
Troutdale, Oregon 97060
Each party may change its address for purposes of this
Section by giving written notice of such change in the manner
provided for in this Section.
7. MISCELLANEOUS PROVISIONS.
7.01. Attorneys' Fees; Disputes Concerning Termination.
(a) Subject to Section 7.01(b), in the event that it
should be become necessary for any party to bring an action,
including arbitration, either at law or in equity, to enforce or
interpret the terms of this Agreement, each party shall pay its
own attorneys' fees including those incurred in resolving the
dispute prior to initiation of any litigation and at trial and on
any appeal.
(b) If within fifteen (15) days after any notice of
termination for Good Reason is given by Employee pursuant to
Section 2.05, Employer notifies Employee that a dispute exists
concerning the termination, the date of termination of this
Agreement shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties or
by a final determination; provided further that the date of
termination shall be extended by a notice of dispute from
Employer only if such notice is given in good faith and Employer
pursues the resolution of such dispute with reasonable diligence.
Following a Change of Control, Employer shall provide all
witnesses and evidence reasonably required by Employee to present
Employee's case. If a purported termination by Employer within
two years after a Change of Control or by Employee for Good
Reason occurs and such termination is disputed, Employer shall
pay to Employee all reasonable expenses and legal fees incurred
by Employee as a result of a termination in seeking to obtain or
enforce any right or benefit provided by this Agreement (whether
or not Employee is successful in obtaining or enforcing such
right or benefit).
(c) If a purported termination by Employer within two
years after a Change of Control or by Employee for Good Reason
occurs and such termination is disputed, Employer shall do either
of the following.
(1) So long as Employee continues to provide
services, Employer shall continue to pay Employee the
full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited
to, salary and estimated bonus) and continue Employee
as a participant in all compensation, benefit and
insurance plans in which Employee was a participant
when the notice giving rise to the dispute was given,
until the dispute is finally resolved; provided that
Employee's right to continue to provide such services
is solely within the discretion of Employer, and
nothing herein shall prohibit Employer from terminating
such services.
(2) If Employee is no longer providing services,
Employer shall pay Employee fifty percent (50%) of the
amount specified in Sections 4.03 and Employer will
provide Employee with the other benefits provided in
Section 4.06, if, but only if, Employee agrees in
writing that if the dispute is resolved against
Employee, Employee will promptly refund to Employer all
payments specified in Section 4.03 that Employee
receives under this paragraph (c) plus interest at the
rate provided in Section 1274(d) of the Internal
Revenue Code of 1986, as amended (the "Code"),
compounded quarterly. If the dispute is resolved in
Employee's favor, promptly after resolution of the
dispute Employer will pay Employee the sum which was
withheld during the period of the dispute plus interest
at the rate provided in Section 1274(d) of the Code,
compounded quarterly.
Amounts paid under this paragraph (c) shall offset against and
reduce other amounts due under this Agreement. If the dispute is
resolved by a determination that Employee did not have Good
Reason, this Agreement, in accordance with its terms, will
continue to apply to the circumstances of Employee's employment
by Employer and any termination thereof.
7.02. Applicable Law and Venue.
This Agreement is executed and intended to be performed in
the State of Oregon and the laws of such State shall govern its
interpretation and effect. If suit is instituted by any party
hereto or by any other party for any cause or matter arising from
or in connection with the respective rights or obligations of the
parties hereunder, the sole jurisdiction and venue for such
action shall be the Circuit Court of the State of Oregon in and
for the County of Multnomah.
7.03. Integration.
Employee has executed an Employee Confidentiality and
Noncompetition Agreement (a copy of which is attached hereto as
Exhibit A) which remains in effect and is incorporated into the
terms and conditions of employment under this Agreement. Except
as set forth in the preceding sentence, this Agreement
constitutes the entire agreement of the parties with respect to
the subject matter of this Agreement and supersedes all prior
agreements, negotiations, or understandings, whether oral or
written, between the parties with respect thereto.
7.04. Heirs and Assigns.
Subject to any restriction on assignment contained herein,
this Agreement shall be binding upon and shall inure to the
benefit of the respective party's heirs, successors and assigns.
Employer will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of Employer, by
agreement in form and substance satisfactory to Employee, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Employer would be required to
perform it if no such succession had taken place. This Agreement
shall not be terminated by Employer's voluntary or involuntary
dissolution or by any merger or consolidation in which Employer
is not the surviving or resulting corporation, or on any transfer
of all or substantially all of the assets of Employer. In the
event of any such merger, consolidation, or transfer of assets,
the provisions of this Agreement shall be binding on and inure
the benefit of the surviving business entity or the business
entity to which such assets shall be transferred.
7.05. Severability.
Any provision in this Agreement which is, by competent
judicial authority, declared illegal, invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such illegality, invalidity or unenforceability
without invalidating the remaining provisions hereof or affecting
the legality, validity or enforceability or such provision in any
other jurisdiction. The parties hereto agree to negotiate in
good faith to replace any illegal, invalid or unenforceable
provision that, to the extent possible, will preserve the
economic bargain of this Agreement, or otherwise to amend this
Agreement.
7.06. Counterparts.
This Agreement may be executed in counterparts, each of
which shall be deemed an original, and the counterparts shall
together constitute one and the same agreement, notwithstanding
that all of the parties are not signatory to the original or the
same counterpart.
7.07. Captions.
The headings and captions herein are inserted solely for the
purpose of convenience of reference and are not intended to
govern, limit, or aid in the construction of any term or
provision hereof.
7.08. Execution.
Each of the parties hereto shall execute, acknowledge and
deliver any instrument necessary to carry out the provisions of
this Agreement.
7.09. Construction.
This Agreement has been prepared by legal counsel for
Employer. Employee has been advised and by his execution hereof
acknowledges, that he has the right to and should have this
Agreement reviewed by his own separate legal counsel. This
Agreement has been negotiated at arms' length with the benefit of
or opportunity to seek legal counsel and, accordingly, shall not
be construed against any of the parties.
7.10. No Disparagement or Breach of Confidentiality and
Noncompetition Agreement.
In the event that Employee's employment terminates under this
Agreement in any manner whatsoever, Employee agrees that, except
under compulsion of legal process, he will make no oral or
written comments about Employer or its business for a period of
one year following termination of his employment. In the event
that Employee breaches this provision of this Agreement, or
violates the terms of the Employee Confidentiality and
Noncompetition Agreement executed by him, then all severance
obligations which Employer may then have under this Agreement
shallimmediately cease and Employee shall be owed nothing under this
Agreement other than wages and benefits earned through the date
of the termination of his employment.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
EMPLOYER:
RENTRAK CORPORATION,
an Oregon corporation
By: s/s Ron Berger
Ron Berger, President
I acknowledge that I have read and agree to the foregoing
Agreement, including, without limitation, the provision allowing
termination of my employment "at will" by Employer in Section
2.02.
s/s Marty Graham
Marty Graham
|SF_DOCS\64219.1|
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into as of this 10th day of
July, 1997 by and between RENTRAK CORPORATION, an Oregon
corporation (hereinafter referred to as "Employer"), and MICHAEL
R. LIGHTBOURNE (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer wishes to engage Employee as Executive
Vice President of Employer; and
WHEREAS, Employee is willing to accept employment with
Employer on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
covenants and agreements herein contained, the recitals set forth
hereinabove which by this reference are incorporated herein, and
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
SECTION 1. EMPLOYMENT
1.01 Position and Title. Employer shall employ and engage
the services of Employee, in the position of Executive Vice
President for the Term of this Agreement as defined in Section 2,
pursuant to the terms and conditions set forth in this Agreement.
1.02 Duties and Place of Employment. Employee shall manage
customer service and supervise communications with retail
customers of Employer except for the Retailer Financing Program,
unless requested to do so, function as a resource for the Sales
Department as requested, and perform all other duties as may be
directed by the Chief Executive Officer, President or Chief
Operating Officer of Employer, including, without limitation,
travel as reasonably requested. Employee shall: (i) devote his
full business time during normal business hours to the business
and affairs of Employer; (ii) use his best efforts to promote the
interests of Employer; and (iii) perform faithfully and
efficiently his responsibilities. Employee shall perform his
duties at the Employer's principal executive offices which are
currently located at Portland, Oregon. Subject to the terms of
this Agreement, Employee shall comply promptly and faithfully
with all of Employer's policies, instructions, directions,
requests, rules and regulations.
SECTION 2. TERM and TERMINATION
2.01 Stated Term. Employment shall commence on July 10,
1997 and shall end on July 9, 2002 (the "End Date") or until
Employee's employment under this Agreement is terminated pursuant
to this Section 2 ("Term").
2.02 At Will Termination. Notwithstanding anything herein
to the contrary, Employee's employment may be terminated at any
time with or without reason, by Employer upon thirty (30) days
written notice to Employee, or by Employee upon thirty (30) days
written notice to Employer.
2.03 For Cause Termination. Employee's employment may be
terminated by Employer for "cause" without notice. Termination
for "cause" is defined for purposes of this subsection as
termination for: (i) the final conviction of Employee for a
felony involving willful conduct materially injurious, harmful or
detrimental to Employer; or (ii) the final adjudication of
Employee in a civil proceeding for acts of omissions to act
involving willful conduct materially injurious, harmful or
detrimental to Employer. For the purposes of this subsection,
"final conviction" and "final adjudication" shall be and mean a
conviction or an adjudication, as the case may be, that is no
longer appealable due to the passage of time or otherwise, and
with respect to which a final judgment has been entered on the
judgment roles of the court in which the action was commenced.
Further, for the purposes of this subsection, no act or omission
to act on Employee's part shall be considered "willful" unless
done, or omitted to be done, by Employee in bad faith and without
reasonable belief that employee's act or omission was in the best
interest of Employer.
2.04 Disability or Death. Employee's employment shall be
terminable immediately upon Employee's death or disability.
"Disability" is defined for purposes of this subsection as
absence from Employee's full time duties with Employer as a
result of Employee's incapacity due to physical or mental
illness, such as will entitle Employee to disability benefits
pursuant to the terms of the disability insurance policy referred
to in Section 3.04E below. Nothing in this Section 2.04 is
intended to violate any federal or Oregon State law regarding
parental or family leave policies or any other applicable law.
2.05 Termination by Employee for Good Reason. Employee's
employment may be terminated by Employee at any time for "Good
Reason" as that term is defined below. Employee's continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good
Reason hereunder. "Good Reason" shall mean a material breach by
Employer of the terms of this Agreement; provided that Employee
shall have no right to terminate this Agreement pursuant to this
clause unless Employer has had at least 15 days to cure such
failure.
SECTION 3. COMPENSATION
3.01 Base Salary. Commencing July 10, 1997, Employee shall
be paid an annual base salary in the amount of One Hundred
Seventy Thousand dollars ($170,000) ("Base Salary"). The Base
Salary shall be paid to Employee in equal semi-monthly
installments in arrears on the seventh (7th) and twenty-second
(22nd) day of each month, commencing as of the first semi-monthly
pay period following the effective date of this Agreement.
Should the seventh (7th) or the twenty-second (22nd) day of any
month not be a business day, Employee's semi-monthly installment
of the Base Salary otherwise due on such date shall be paid to
Employee on the business day closest to the date such semimonthly
installment is due (i.e., if the seventh (7th) day of the month
falls on a Saturday, the semi-monthly installment shall be paid
on the preceding business day or if the seventh (7th) day of the
month falls on a Sunday, the semi-monthly installment shall be
paid on the next following business day). Employee's Base Salary
shall be increased annually by the greater of five percent (5%)
or the change in the national Consumer
Price Index, the CPI-U, for the calendar year just ended, rather
than the CPI-U for the previous calendar year.
3.02 Bonus Compensation. Employee shall receive a sign-on
bonus upon execution of this Agreement in the amount of Seventy-
Five Thousand Dollars ($75,000). Employee shall receive an
additional bonus of Seventy-Five Thousand ($75,000) (the "Ending
Bonus") on July 9, 2002 if he is still employed by Employer on
that date. After the 30th month of Employee's employment
pursuant to this Agreement, the Ending Bonus shall vest at the
rate of 1/30 ($2,500) per month. Nothing herein shall preclude
the Employer from authorizing the payment of additional
compensation to Employee over and above the Base Salary at any
time payable to him under this Agreement, whether as a bonus or
otherwise. The payment of such additional compensation shall not
operate as an amendment obligating Employer to make any similar
payment or to pay additional compensation at any future time or
for any future period, or be deemed to affect Employee's Base
Salary in any manner. Employee will participate in whatever
bonus plan is adopted by Employer including any cash bonus pools
established from time to time by Employer for Corporate
Executives.
3.03 Stock options. Upon the commencement of the Term of
this Agreement, Employer shall grant Employee an option to
purchase One Hundred Fifty Thousand (150,000) shares of
Employer's stock at the market rate as set forth in Employer's
Stock Option Plan on the date of execution of this Agreement.
Said options shall vest at a rate of Twenty percent (20%) per
year (i.e., 30,000 options shall vest at the end of each full
year of Employee's employment during the five-year Term of this
Agreement). Said options shall remain exercisable until July 9,
2007.
In addition to the aforementioned options, Employee
shall be granted additional options for 10,000 shares per grant
during each year that this Agreement remains in effect. The
first 10,000 options shall be granted on the earliest date that
such option shares are available at the lesser of the price then
available or the price as of June 15, 1997. All subsequent
grants of options pursuant to this paragraph shall be at a price
to be set by the Board of Directors of Employer and shall be the
same price at which options are offered to most other employees
during the year in which the options are granted. Said options
shall vest at a rate of Twenty percent (20%) per year (i.e.,
2,000 options shall vest at the end of each full year of
Employee's employment) and shall remain exercisable for a period
of ten (10) years from the issue date.
Should Employee's employment be terminated by Employer
other than for cause prior to the expiration of this Agreement,
all options granted through the date of termination will vest
immediately and all annual options granted for each year of
employment shall vest upon the day of such grant as if the
termination had not occurred. Should Employee be terminated for
cause, he shall be entitled only to those options which vested
through the date of termination.
3.04 Benefits.
3.04A Vacation and Holiday Pay. As of the
effective date of this Agreement, Employee will be
entitled to: (i) accrue vacation time at the rate of
four (4) weeks of paid vacation during each year of
employment; and (ii) will be eligible to receive pay
for Employer-paid holidays. In addition to vacation
set forth above, Employee shall have forty-five (45)
days (equivalent to nine weeks) of paid vacation on the
date that his employment pursuant to this Agreement
commences. Said forty-five (45) days of vacation may
be booked into a vacation bank or, at Employer's
option, paid to Employee in cash at Employee's Base
Salary rate within 30 days of execution of this
Agreement.
3.04B Insurance. Employee shall be entitled
to life, medical, worker's compensation, social
security and state unemployment insurance benefits as
provided under Employer's then current terms, policies
and procedures. Employer shall reimburse Employee for
the cost of continued health coverage under COBRA for
the first 90 days of Employee's employment. Employer
shall provide directors' and officers' liability
insurance covering Employee and will indemnify and hold
harmless Employee (and advance expenses) to the full
extent provided in the Articles of Incorporation and
Bylaws of Employer. If the directors' and officers'
liability insurance coverage levels are reduced during
the Term of this Agreement by Employer, then Employee
may seek additional coverage and Employer shall pay up
to Fifteen Thousand Dollars ($15,000) per year to
reimburse Employee for such additional coverage.
3.04C Tuition Reimbursement. Employee shall
be entitled to reimbursement for all tuition,
enrollment fees, and books pursuant to Employer's
education assistance program. Employee shall comply
with all Employer's terms, policies and procedures
regarding its education assistance program.
3.04D Business Expenses. During the Term of
this Agreement, Employee shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by Employee in the performance of his duties
pursuant to this Agreement in accordance with the
policies and procedures of Employer now or hereinafter
in effect.
3.04E Disability Insurance. Employer shall
purchase a disability insurance policy from Northwest
Mutual Life Insurance Company, naming Employee as the
beneficiary, and providing maximum benefits available
to Employee in the event
of Employee's partial or total disability.
Employer shall not terminate the disability policy or
allow its benefits to lapse for any reason during the
Term of this Agreement. Employer shall pay all
premiums due under the disability policy referred to
above until the End Date.
3.04F Miscellaneous Benefits. In addition to any
other compensation or benefits to be received by
Employee pursuant to the terms of this Agreement,
Employee shall be entitled to receive all employee
benefits which Employer now provides or may from time
to time provide other executives (excluding the
President/CEO) at comparable or lower level positions,
except that Employee shall not be entitled to stock
option grants issued to other executives in comparable
or lower level positions unless grants in excess of
10,000 options are issued to such executives. In the
latter case, the Employee shall be entitled to an
additional grant of options in the incremental amount
in excess of 10,000. For example, if executives in
comparable or lower level positions are given options
for 15,000 shares of stock in any year during the Term
of this Agreement, then Employee would be entitled to
an additional grant of 5,000 options. Employer shall
also contribute to Employee's 401K Plan consistent with
Employer's contributions to the 401K Plans of employees
of comparable level.
SECTION 4. PAYMENTS UPON TERMINATION OF EMPLOYMENT
4.01 Termination for Cause. In the event of the termination
of Employee's employment by Employer for cause pursuant to
Section 2.02 within ten days of termination Employer shall pay to
Employee only the Base Salary, vacation and bonuses accrued and
vested stock options pursuant to Section 3 through and including
the date of termination. No other compensation shall be due or
payable under this Agreement in the event of a termination for
Cause.
4.02 Termination for Death or Disability. In the event of
the termination of Employee's employment pursuant to Section 2.03
due to his death or disability, within ten days of termination
Employer shall pay to Employee or Employee's estate or legal
representative, in a lump sum, the total value of all
compensation which would otherwise have been paid to Employee
pursuant to Section 3, including Base Salary, bonuses, stock
options and fringe benefits, less any amounts paid to Employee
under the terms of the disability policy purchased by Employer
pursuant to Section 3.04E and any life insurance policy purchased
by Employer for the benefits of Employee's dependents. Employer
shall convey to Employee or Employee's estate or legal
representative all options granted to Employee during his
employment, regardless of whether or not said options vested
prior to Employee's death. Said options shall vest immediately
and remain exercisable for a period of One (1) year from the date
of death. During the period of Employee's disability, but prior
to Employee's termination of Employment, Employee shall be
entitled to receive all compensation as set forth in this
Agreement. No other compensation shall be due or payable under
this Agreement in the event of a termination due to the
Employee's death.
4.03 Other Termination by Employer. In the event of
termination of Employee's employment by Employer for any reason
other than a termination for cause or termination for death or
disability pursuant to Sections 2.03 and 2.04, or in the event of
a termination by Employee for good reason pursuant to Section
2.05, Employer shall pay to Employee the Base Salary accrued
pursuant to Section 3.01 as of the date of termination plus
severance payments in an amount equal to Employee's Base Salary
and bonsues, payable in installments as if still employed,
through the end of this Agreement (the "Severance Period"),
provided, however, that Employer's obligation shall be reduced by
the amount of Remuneration received by Employee from all other
employment during the Severance Period. Employee shall continue
to receive stock options, to vest in issued options and to
receive other fringe benefits through the end of this Agreement.
For the purposes of this Agreement, "Remuneration" shall be
defined to include cash payments, the face value of any
promissory notes issued to Employee, regardless of the terms of
payment or whether payment is ever received, stock or stock
options valued as of the day granted, or any other compensation
given in any form whatsoever.
4.04 Other Termination by Employee. In the event of the
termination of Employee's employment by Employee other than for
good reason pursuant to Section 2.05, within ten days of
termination Employer shall pay to Employee only the amount of
Base Salary accrued pursuant to Section 3.01 through and
including the date of termination. No other compensation shall
be due or payable under this Agreement in the event of a such a
termination.
4.05 Severance/Renewal. Employer and Employee will
negotiate a new five-year agreement in good faith prior to July
10, 2001. Alternatively, Employer may notify Employee prior to
such date that Employer does not intend to extend Employee's
employment. In the event of non-renewal or termination of this
Agreement for any reason other than for cause as defined in 2.03,
Employee shall receive one year's salary continuance at the Base
rate following expiration of this Agreement in addition to any
compensation payable under 4.03.
4.06 Except as set forth in this Section 4, no other
compensation shall be due or payable to Employee upon termination
of his employment.
4.07 Right to Decline Payments. Employee, in his sole and
absolute discretion, shall have the right to decline all or a
portion of any payments under this Agreement.
SECTION 5. PERSONAL NATURE
This Agreement is personal, and is being entered into based
upon the singular skill, qualifications and experience of
Employee. Employee shall not assign this Agreement or any rights
hereunder without the express written consent of Employer which
may be withheld with or without reason. Employee hereby grants
to Employer the right to use Employee's name, likeness and/or
biography in connection with the services performed by Employee
hereunder and in connection with the advertising or exploitation of
any project with respect to which Employee performs services hereunder.
SECTION 6. NOTICES
Any and all notices or other communications required or
permitted by this Agreement or by law shall be deemed duly
served and given when personally delivered to the party to whom
such notice or communication is directed or, in lieu of such
personal service, when deposited in the United States mail,
certified, return receipt requested, first class postage
prepaid, addressed as follows:
EMPLOYER: Rentrak Corporation
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
Attn: Ron Berger
EMPLOYEE: Michael R. Lightbourne
P.O. Box 510
Gresham, Oregon 97030
Each party may change its address for purposes of this
Section by giving written notice of such change in the manner
provided for in this Section.
SECTION 7. MISCELLANEOUS PROVISIONS.
7.01 Attorneys' Fees; Disputes Concerning Termination.
Should it become necessary for any party to bring an action,
including arbitration, either at law or in equity, to enforce or
interpret the terms of this Agreement, each party shall pay its
own attorneys' fees including those incurred in resolving the
dispute prior to initiation of any litigation and at trial and on
any appeal.
7.02 Applicable Law and Venue. This Agreement is executed
and intended to be performed in the State of Oregon and the laws
of such State shall govern its interpretation and effect. If
suit is instituted by any party hereto or by any other party for
any cause or matter arising from or in connection with the
respective rights or obligations of the parties hereunder, the
sole jurisdiction and venue for such action shall be the Circuit
Court of the State of Oregon in and for the County of Multnomah.
7.03 Integration. Employee has executed an Incentive Stock
Option Agreement (a copy of which is attached hereto as Exhibit
A), and an Employee Confidentiality and Noncompetition Agreement
(a copy of which is attached hereto as Exhibit B) which remain in
effect and are incorporated into the terms and conditions of
employment under this Agreement. Except as set forth in the
preceding sentence, this Agreement constitutes the entire
agreement of the parties with respect to the subject matter of
this Agreement and supersedes all prior
agreements, negotiations, or understandings, whether oral or
written, between the parties with respect thereto.
7.04 Heirs and Assigns. Subject to any restriction on
assignment contained herein, this Agreement shall be binding upon
and shall inure to the benefit of the respective party's heirs,
successors and assigns. Employer will require any successor
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all the business and/or
assets of Employer, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent
that Employer would be required to perform it if no such
succession had taken place. This Agreement shall not be
terminated by Employer's voluntary or involuntary dissolution or
by any merger or consolidation in which Employer is not the
surviving or resulting corporation, or on any transfer of all or
substantially all of the assets of Employer. In the event of any
such merger, consolidation, or transfer of assets, the provisions
of this Agreement shall be binding on and inure the benefit of
the surviving business entity or the business entity to which
such assets shall be transferred.
7.05 Severability. Any provision in this Agreement which
is, by competent judicial authority, declared illegal, invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such illegality, invalidity or
unenforceability without invalidating the remaining provisions
hereof or affecting the legality, validity or enforceability or
such provision in any other jurisdiction. The parties hereto
agree to negotiate in good faith to replace any illegal, invalid
or unenforceable provision that, to the extent possible, will
preserve the economic bargain of this Agreement, or otherwise to
amend this Agreement.
7.06 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and the
counterparts shall together constitute one and the same
agreement, notwithstanding that all of the parties are not
signatory to the original or the same counterpart.
7.07 Captions. The headings and captions herein are
inserted solely for the purpose of convenience of reference and
are not intended to govern, limit, or aid in the construction of
any term or provision hereof.
7.08 Execution. Each of the parties hereto shall execute,
acknowledge and deliver any instrument necessary to carry out the
provisions of this Agreement.
7.09 Construction. This Agreement has been prepared by
legal counsel for Employer. Employee has been advised of and by
his execution hereof acknowledges, that he has exercised the
right to have this Agreement reviewed by his own separate legal
counsel. This Agreement has been negotiated at arms' length and
Employee has had the benefit of legal counsel and, accordingly,
this Agreement shall not be construed against either of the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
EMPLOYER:
RENTRAK CORPORATION,
an Oregon corporation
By: s/s Ron Berger
Ron Berger, President
I acknowledge that I have read and agree to the foregoing
Agreement.
EMPLOYEE s/s Michael R. Lightbourne
Michael R. Lightbourne
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into as of this 27th day of
October, 1997 by and between RENTRAK CORPORATION, an Oregon
corporation (hereinafter referred to as "Employer"), and
CHRISTOPHER E. ROBERTS (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer currently employs Employee in the capacity
of Vice President, Sales and Employee is one of the key
executives of the Employer and desires to be so employed;
WHEREAS, Employer and Employee desire to enter into an
Employment Agreement memorializing the terms and conditions of
the employment relationship;
WHEREAS, Employer considers it essential to the best
interests of its shareholders to foster the continuous employment
of Employee;
WHEREAS, the Board of Directors of Employer (the "Board")
recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change of Control (as defined
below) may exist and that such possibility, and the uncertainty
and questions which it may raise among management, may result in
the departure or distraction of management personnel to the
detriment of Employer and its shareholders;
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of Employer's management,
including Employee, to their assigned duties without distraction
in the face of potentially disturbing circumstances arising from
the possibility of Change of Control; and
WHEREAS, the Board has determined that it is in the best
interests of Employer and its shareholders to clarify certain
provisions of the Employment Agreement in order to more
effectively carry out the purposes of Employment Agreement and
avoid potential disputes in connection with the enforcement of
the Employment Agreement following a Change of Control.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and agreements herein contained, the recitals set forth
hereinabove which by this reference are incorporated herein, and
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1. EMPLOYMENT
1.01. Duties and Place of Employment.
(a) Employee shall be responsible for, and perform
duties associated with his position as Vice President, Sales, and
other duties as may be directed by the Employer, from time to
time. Employee shall: (i) devote his full business time during
normal business hours to the business and affairs of Employer;
(ii) use his best efforts to promote the interests of Employer;
and (iii) perform faithfully and efficiently his
responsibilities. Employee shall perform his duties at the
Employer's principal executive offices which are currently
located at One Airport Center, 7700 N.E. Ambassador Place,,
Portland, Oregon 97220, or such other locations as may be
directed by Employer from time to time. Subject to the terms of
this Agreement, Employee shall comply promptly and faithfully
with all of Employer's policies, instructions, directions,
requests, rules and regulations.
(b) After a Change of Control (as defined below),
during the Term of this Agreement, Employee shall continue to
serve Employer in the same capacity and have the same authority,
responsibilities and status as he had as of the date immediately
prior to the Change of Control. After a Change of Control,
during the Term of this Agreement, Employee's services shall be
performed at the location where Employee was employed as of the
date immediately prior to the Change of Control, or at such other
location as may be mutually agreed between Employer and Employee.
(c) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred upon the first
fulfillment of the conditions set forth in any one of the
following four paragraphs:
(1) any "person" (as such term is defined in
Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding
securities under an employee benefit plan of Employer,
is or becomes a beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of Employer,
representing twenty-five percent (25%) or more of the
combined voting power of Employer's then outstanding
securities; or
(2) a majority of the directors elected at any
annual or special meeting of stockholders are not
individuals nominated by Employer's then incumbent
Board; or
(3) the shareholders of Employer approve a merger
or consolidation of Employer with any other
corporation, other than a merger or consolidation which
would result in the voting securities of Employer
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least seventy-five percent (75%) of the
combined voting power of the voting securities of
Employer or such surviving entity outstanding
immediately after such merger or consolidation, or the
shareholders of Employer approve a plan of complete
liquidation of Employer or an agreement for the sale or
disposition by Employer of all or substantially all of
its assets.
2. TERM AND TERMINATION
2.01. Stated Term.
Employment commenced on November 1, 1997 and will end on
November, 2002 (the "End Date") or until Employee's employment
under this Agreement is terminated pursuant to this Section 2
("Term").
2.02. At Will Termination.
Notwithstanding anything herein to the contrary, Employee's
employment may be terminated by Employer at any time without
cause upon thirty (30) days written notice to Employee.
2.03. For Cause Termination.
Employee's employment may be terminated by Employer for
"cause" without notice. Termination for "cause" is defined for
purposes of this subsection as termination for: (i) material
failure of Employee to substantially perform the reasonable and
attainable instructions of Employer as to his duties hereunder;
or (ii) an act or acts of misconduct by Employee which is
determined by the Employer to be materially injurious to Employer
monetarily or otherwise; or (iii) material violation by Employee
of any provision of this Agreement. For purposes of this
subsection, termination for "cause" shall not include any act or
failure to act on Employee's part if done or omitted to be done
by him in demonstrable good faith and with the reasonable belief
that his act or omission was in the best interest of the Employer
or pursuant to an express policy of Employer at the time of such
act or omission.
2.04. Disability or Death.
Employee's employment shall be terminable immediately upon
Employee's death or disability. "Disability" is defined for
purposes of this subsection as absence from Employee's full time
duties with Employer as a result of Employee's incapacity due to
physical or mental illness for ninety (90) days calculated on a
cumulative basis during any one (1) year period during the Term
of this Agreement. Nothing in this Section 2.04 is intended to
violate any Oregon State law regarding parental or family leave
policies or any other applicable law.
2.05. Termination by Employee for Good Reason.
Employee's employment may be terminated by Employee at any
time for "Good Reason" as that term is defined below. Employee's
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any act or failure to act constituting
Good Reason hereunder. "Good Reason" shall mean (i) a material
breach by Employer of the terms of this Agreement; provided that
Employee shall have no right to terminate this Agreement pursuant
to this clause (i) unless Employer has had at least 15 days to
cure such failure, or (ii) the occurrence (without Employee's
express written consent), within two (2) years after any Change
of Control of any one of the following acts by Employer, or
failures by Employer to act:
(a) the assignment to Employee of any duties
inconsistent with Employee's status as an executive officer of
Employer or a substantial adverse alteration in the nature or
status of Employee's title, position, duties, functions, working
conditions or responsibilities from those in effect immediately
prior to the Change of Control other than any such alteration
primarily attributable to the fact that Employer may no longer be
a public company;
(b) a reduction by Employer in Employee's annual Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(c) the relocation of Employer's principal executive
offices to a location more than thirty-five miles from the
location of such offices immediately prior to the Change of
Control or Employer's requiring Employee to be based anywhere
other than Employer's principal executive offices except for
required travel on Employer's business to an extent substantially
consistent with Employee's business travel obligations
immediately prior to the Change of Control;
(d) the failure by Employer, without Employee's
consent, to pay to Employee any portion of Employee's current
compensation;
(e) the failure by Employer to continue in effect any
compensation plan in which Employee participates immediately
prior to the Change of Control which is material to Employee's
total compensation unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by Employer to continue
Employee's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the terms and
conditions of such benefits, including, without limitation, the
level of Employee's participation relative to other participants,
as such relative level existed at the time of the Change of
Control;
(f) the failure by Employer to continue to provide
Employee with benefits substantially similar to those enjoyed by
Employee under any of Employer's pension, life insurance,
medical, health and accident, or disability plans in which
Employee was participating immediately prior to the Change of
Control, the taking of any action by Employer which would
directly or indirectly materially reduce any of such benefits or
deprive Employee of any material fringe benefit enjoyed by
Employee immediately prior to the Change of Control, or the
failure by Employer to provide Employee with the number of paid
vacation days to which Employee is entitled on the basis of years
of service with Employer in accordance with Employer's normal
vacation policy in effect immediately prior to the Change of
Control; or
(g) the failure of Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 7.04.
2.06. Other Termination by Employee. Employee's
employment may be terminated by Employee at any time without Good
Reason upon thirty (30) days written notice to Employer.
3. COMPENSATION
3.01. Base Salary.
Commencing November 1, 1997, Employee shall be paid an
annual base salary in the amount of One Hundred Thirty Thousand
Dollars ($130,000) ("Base Salary"). The Base Salary shall be paid
to Employee in equal semi-monthly installments in arrears on the
seventh (7th) and twenty-second (22nd) day of each month,
commencing as of the first semi-monthly pay period following the
effective date of this Agreement. Should the seventh (7th) or
the twenty-second (22nd) day of any month not be a business day,
Employee's semi-monthly installment of the Base Salary otherwise
due on such date shall be paid to Employee on the business day
closest to the date such semimonthly installment is due (i.e., if
the seventh (7th) day of the month falls on a Saturday, the semi-
monthly installment shall be paid on the preceding business day
or if the seventh (7th) day of the month falls on a Sunday, the
semi-monthly installment shall be paid on the next following
business day). Employee's Base Salary shall be increased during
the Term of this Agreement by Five Thousand Dollars ($5,000) per
annum, said increase to be effective as of April 15 of each year
during the Term of this Agreement.
3.02. Bonus Compensation.
Employee shall be entitled to participate in whatever bonus
plan is adopted by Employer, including any cash bonus pools
established from time to time by Employer, for Corporate
Officers. Additionally, Employee shall be entitled to a
performance bonus in the amounts set forth below upon achievement
of the specified objectives:
(a) For achieving the fiscal year sales goals for
applications received - $10,000; and
(b) For obtaining the participation in PPT (defined as
execution of agreement for substantially all of a retailer's
stores and the chain ordering - or stating its intent to order -
Product equal to not less than 8% of its gross rental revenues,
from Rentrak) of the retailers below:
West Coast Video (600) $20,000
Rogers (180) $15,000
Tower Records (105) $5,000
Pic A Flick ( 41) $5,000
Family Video ( 92) $7,000
V. Warehouse (IA) ( 26) $3,000
Videoland (OR) ( 45) $5,000
VideoRun ( 70) $7,000
Video Station ( 25) $3,000
Kroger/Perkins
Dillon/Hutch (700) $5,000 (Per KMA)
Giant Eagle (118) $10,000
Pathmark (144) $10,000
Smiths FoodKing (152) $10,000
Dierbergs ( 20) $3,000
HannaFord Bros. (114) $10,000
Wegmans ( 53) $5,000
Hy'vee Food Stores (135) $10,000
Schnucks ( 82) $7,000
3.03. Benefits
(a) Vacation and Holiday Pay. As of the effective
date of this Agreement, Employee will be entitled to: (i) accrue
vacation time at the rate of one hundred sixty (160) hours of
paid vacation during each year of employment; and (ii) will be
eligible to receive pay for Employer-paid holidays.
(b) Insurance. Employee shall be entitled to medical,
life, worker's compensation, social security and state
unemployment insurance benefits as provided under Employer's then
current terms, policies and procedures. Employee shall also be
entitled to officers' disability insurance benefits. For five
years following a Change of Control, Employer shall use its best
efforts to continue to provide directors' and officers' liability
insurance covering Employee (with respect to events occurring
prior to termination of Employment) on terms no less favorable
(in terms of coverage and amounts) than those of such insurance
in effect immediately prior to the Change of Control. Following
a Change of Control, Employer will indemnify and hold harmless
Employee (and advance expenses) to the full extent provided in
the Articles of Incorporation and Bylaws of Employer as in effect
immediately prior to the Change of Control.
(c) Tuition Reimbursement. Employee shall be entitled
to reimbursement for all tuition, enrollment fees, and books
pursuant to Employer's education assistance program. Employee
shall comply with all Employer's terms, policies and procedures
regarding its education assistance program.
(d) Business Expenses. During the Term of this
Agreement, Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by Employee in
the performance of his duties pursuant to this Agreement in
accordance with the policies and procedures of Employer now or
hereinafter in effect.
(e) Miscellaneous Benefits. In addition to any other
compensation or benefits to be received by Employee pursuant to
the terms of this Agreement, Employee shall be entitled to
participate in any employee or officer(s) benefits which Employer
may from time to time provide its employees or officer(s)
generally.
3.03. Stock Options.
Upon commencement of the Term of this Agreement, Employer
shall grant Employee Twenty-Five Thousand (25,000) shares of
Employer's stock at the market rate as set forth in Employer's
Stock Option Plan on the date of execution of this Agreement.
Said options shall vest at a rate of Twenty percent (20%) per
year (i.e., 5,000 options shall vest at the end of each full year
of Employee's employment during the five-year Term of this
Agreement). Said options shall remain exercisable for a period
of Ten (10) years from the issue date.
In addition to the aforementioned options, Employee shall be
granted additional options for Five Thousand (5,000) shares per
grant during each year that this Agreement remains in effect,
commencing on the earlier of the date all employee options are
issued by Rentrak in 1998 or the anniversary date of execution of
this Agreement in 1998, or the higher of options that would have
been granted regardless of this Agreement. Said options shall be
at a price to be set by the Board of Directors of Employer and
shall be the same price at which options are offered to all other
employees during the year in which the options are granted. Said
options shall vest at a rate of Twenty percent (20%) per year
(i.e., 1,000 options shall vest at the end of each full year of
Employee's employment) and shall remain exercisable for a period
of Ten (10) years from the issue date.
4. PAYMENTS UPON TERMINATION OF EMPLOYMENT
4.01. Termination for Cause.
In the event of the termination of Employee's employment by
Employer for cause pursuant to Section 2.03 within ten days of
termination Employer shall pay to Employee only the Base Salary
accrued pursuant to Section 3.01 through and including the date
of termination. No other compensation shall be due or payable
under this Agreement in the event of a termination for Cause.
4.02. Termination for Death or Disability.
(a) Termination for Death. In the event of the termination
of Employee's employment pursuant to Section 2.04 due to his
death, within ten days of termination Employer shall pay to
Employee's estate or legal representative, as the case may be, in
a lump sum, the Base Salary accrued pursuant to Section 3.01
through and including the date of termination plus a lump sum
severance of Ninety (90) days Base Salary at the rate in effect
on the date of Employee's death. Employer shall also convey to
Employee's estate or legal representative all options granted to
Employee during his employment, regardless of whether or not said
options vested prior to Employee's death. Said options shall
remain exercisable for a period of One (1) year from the date of
death. No other compensation shall be due or payable under this
Agreement in the event of a termination due to the Employee's
death.
(b) Termination for Disability. In the event of the
termination of Employee's employment pursuant to Section 2.04 due
to his disability, within ten days of termination Employer shall
pay to Employee or his legal representative, as the case may be,
in a lump sum, the Base Salary accrued pursuant to Section 3.01
through and including the date of termination. During the period
of Employee's disability, but prior to Employee's termination of
Employment, Employee shall be entitled to receive all
compensation as set forth in this Agreement. No other
compensation shall be due or payable under this Agreement in the
event of a termination due to the Employee's disability.
4.03. Termination by Employer Without Cause After Change
of Control or by Employee for Good Reason.
In the event of the termination of Employee's employment by
Employer pursuant to Section 2.02 within two years after a Change
of Control or by Employee pursuant to Section 2.05, within ten
days of termination Employer shall pay to Employee, in a lump
sum, the lesser of (i) all Base Salary which Employer is
obligated to pay to Employee pursuant to Section 3.01 through the
End Date or (ii) one year of Base Salary which Employer is
obligated to pay to Employee pursuant to Section 3.01 during the
current fiscal year.
4.04. Other Termination by Employer.
In the event of termination of Employee's employment by
Employer pursuant to Section 2.02 prior to a Change of Control or
more than two years after a Change of Control, Employer shall pay
Employee the Base Salary accrued pursuant to Section 3.01 as of
the date of termination plus severance payments in an amount
equal to six months' Base Salary at the rate at which Employer is
obligated to pay to Employee pursuant to Section 3.01 during the
current fiscal year, payable in installments as if still
employed; provided, however, that during the period that Employer
is making severance payments pursuant to this Section 4.04,
Employer shall have the right to request Employee to provide
reasonable evidence that he is using his best efforts to obtain
other employment of comparable status in the Portland
metropolitan area, and in the event that Employee fails to
provide such reasonable evidence, then Employer shall not be
obligated to pay any severance payments; and provided further
that if Employee is successful in obtaining such employment, the
amount of severance payments that would have been payable after
the time that Employee obtains such employment shall be reduced
by the amount of any remuneration received from such employment.
For the purposes of this Agreement, "remuneration" shall be
defined to include cash payments, the face value of any
promissory notes issued to Employee regardless of the terms of
payment or whether payments are ever received, stock or stock
options valued as of the day granted, or any other compensation
given in any form whatsoever.
4.05. Other Termination by Employee.
In the event of the termination of Employee's employment by
Employee pursuant to Section 2.06, within ten days of termination
Employer shall pay to Employee only the amount of Base Salary
accrued pursuant to Section 3.01 through and including the date
of termination. No other compensation shall be due or payable
under this Agreement in the event of a such a termination.
4.06. Insurance Benefits.
Employee is entitled to elect to continue the insurance
described in Section 3.03B during a period of two (2) years
following an event of termination described in Section 2.05 and a
period of six (6) months following an event of termination
described in Section 2.02. If Employee elects to continue such
coverage, Employer shall reimburse Employee for the premiums paid
by Employee for such insurance as such premiums are paid until
such time as the continued insurance terminates or Employee
obtains replacement full-time employment and is covered by such
new employer's group medical health and life insurance plan with
benefits substantially similar to those provided by Employer's
insurance plan and without any pre-existing conditions,
exclusions, limitations or restrictions, whichever occurs first.
Such reimbursement shall be reduced for an amount equivalent to
the amounts charged Employee for health coverage immediately
prior to the occurrence of the Change of Control.
4.07. Other Compensation.
Except as set forth in this Section 4, no other compensation
shall be due or payable to Employee upon termination of his
employment.
4.08. Right to Decline Payments.
Employee, in his sole and absolute discretion, shall have
the right to decline all or a portion of any payments under this
Agreement.
5. PERSONAL NATURE
This Agreement is personal, and is being entered into based
upon the singular skill, qualifications and experience of
Employee. Employee shall not assign this Agreement or any rights
hereunder without the express written consent of Employer which
may be withheld with or without reason. Employee hereby grants
to Employer the right to use Employee's name, likeness and/or
biography in connection with the services performed by Employee
hereunder and in connection with the advertising or exploitation
of any project with respect to which Employee performs services
hereunder.
6. NOTICES
Any and all notices or other communications required or
permitted by this Agreement or by law shall be deemed duly served
and given when personally delivered to the party to whom such
notice or communication is directed or, in lieu of such personal
service, when deposited in the United States mail, certified,
return receipt requested, first class postage prepaid, addressed
as follows:
EMPLOYER: Rentrak Corporation
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
Attn: Ron Berger
EMPLOYEE: Christopher E. Roberts
1915 SW Myers Pl.
Gresham, Oregon 97080
Each party may change its address for purposes of this
Section by giving written notice of such change in the manner
provided for in this Section.
7. MISCELLANEOUS PROVISIONS.
7.01. Attorneys' Fees; Disputes Concerning Termination.
(a) Subject to Section 7.01(b), in the event that it
should be become necessary for any party to bring an action,
including arbitration, either at law or in equity, to enforce or
interpret the terms of this Agreement, each party shall pay its
own attorneys' fees including those incurred in resolving the
dispute prior to initiation of any litigation and at trial and on
any appeal.
(b) If within fifteen (15) days after any notice of
termination for Good Reason is given by Employee pursuant to
Section 2.05, Employer notifies Employee that a dispute exists
concerning the termination, the date of termination of this
Agreement shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties or
by a final determination; provided further that the date of
termination shall be extended by a notice of dispute from
Employer only if such notice is given in good faith and Employer
pursues the resolution of such dispute with reasonable diligence.
Following a Change of Control, Employer shall provide all
witnesses and evidence reasonably required by Employee to present
Employee's case. If a purported termination by Employer within
two years after a Change of Control or by Employee for Good
Reason occurs and such termination is disputed, Employer shall
pay to Employee all reasonable expenses and legal fees incurred
by Employee as a result of a termination in seeking to obtain or
enforce any right or benefit provided by this Agreement (whether
or not Employee is successful in obtaining or enforcing such
right or benefit).
(c) If a purported termination by Employer within two
years after a Change of Control or by Employee for Good Reason
occurs and such termination is disputed, Employer shall do either
of the following.
(1) So long as Employee continues to provide
services, Employer shall continue to pay Employee the
full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited
to, salary and estimated bonus) and continue Employee
as a participant in all compensation, benefit and
insurance plans in which Employee was a participant
when the notice giving rise to the dispute was given,
until the dispute is finally resolved; provided that
Employee's right to continue to provide such services
is solely within the discretion of Employer, and
nothing herein shall prohibit Employer from terminating
such services.
(2) If Employee is no longer providing services,
Employer shall pay Employee fifty percent (50%) of the
amount specified in Sections 4.03 and Employer will
provide Employee with the other benefits provided in
Section 4.06, if, but only if, Employee agrees in
writing that if the dispute is resolved against
Employee, Employee will promptly refund to Employer all
payments specified in Section 4.03 that Employee
receives under this paragraph (c) plus interest at the
rate provided in Section 1274(d) of the Internal
Revenue Code of 1986, as amended (the "Code"),
compounded quarterly. If the dispute is resolved in
Employee's favor, promptly after resolution of the
dispute Employer will pay Employee the sum which was
withheld during the period of the dispute plus interest
at the rate provided in Section 1274(d) of the Code,
compounded quarterly.
Amounts paid under this paragraph (c) shall offset against and
reduce other amounts due under this Agreement. If the dispute is
resolved by a determination that Employee did not have Good
Reason, this Agreement, in accordance with its terms, will
continue to apply to the circumstances of Employee's employment
by Employer and any termination thereof.
7.02. Applicable Law and Venue.
This Agreement is executed and intended to be performed in
the State of Oregon and the laws of such State shall govern its
interpretation and effect. If suit is instituted by any party
hereto or by any other party for any cause or matter arising from
or in connection with the respective rights or obligations of the
parties hereunder, the sole jurisdiction and venue for such
action shall be the Circuit Court of the State of Oregon in and
for the County of Multnomah.
7.03. Integration.
Employee has executed an Employee Confidentiality and
Noncompetition Agreement (a copy of which is attached hereto as
Exhibit A) which remains in effect and is incorporated into the
terms and conditions of employment under this Agreement. Except
as set forth in the preceding sentence, this Agreement
constitutes the entire agreement of the parties with respect to
the subject matter of this Agreement and supersedes all prior
agreements, negotiations, or understandings, whether oral or
written, between the parties with respect thereto.
7.04. Heirs and Assigns.
Subject to any restriction on assignment contained herein,
this Agreement shall be binding upon and shall inure to the
benefit of the respective party's heirs, successors and assigns.
Employer will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of Employer, by
agreement in form and substance satisfactory to Employee, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Employer would be required to
perform it if no such succession had taken place. This Agreement
shall not be terminated by Employer's voluntary or involuntary
dissolution or by any merger or consolidation in which Employer
is not the surviving or resulting corporation, or on any transfer
of all or substantially all of the assets of Employer. In the
event of any such merger, consolidation, or transfer of assets,
the provisions of this Agreement shall be binding on and inure
the benefit of the surviving business entity or the business
entity to which such assets shall be transferred.
7.05. Severability.
Any provision in this Agreement which is, by competent
judicial authority, declared illegal, invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such illegality, invalidity or unenforceability
without invalidating the remaining provisions hereof or affecting
the legality, validity or enforceability or such provision in any
other jurisdiction. The parties hereto agree to negotiate in
good faith to replace any illegal, invalid or unenforceable
provision that, to the extent possible, will preserve the
economic bargain of this Agreement, or otherwise to amend this
Agreement.
7.06. Counterparts.
This Agreement may be executed in counterparts, each of
which shall be deemed an original, and the counterparts shall
together constitute one and the same agreement, notwithstanding
that all of the parties are not signatory to the original or the
same counterpart.
7.07. Captions.
The headings and captions herein are inserted solely for the
purpose of convenience of reference and are not intended to
govern, limit, or aid in the construction of any term or
provision hereof.
7.08. Execution.
Each of the parties hereto shall execute, acknowledge and
deliver any instrument necessary to carry out the provisions of
this Agreement.
7.09. Construction.
This Agreement has been prepared by legal counsel for
Employer. Employee has been advised and by his execution hereof
acknowledges, that he has the right to and should have this
Agreement reviewed by his own separate legal counsel. This
Agreement has been negotiated at arms' length with the benefit of
or opportunity to seek legal counsel and, accordingly, shall not
be construed against any of the parties.
7.10. No Disparagement or Breach of Confidentiality and
Noncompetition Agreement.
In the event that Employee's employment terminates under this
Agreement in any manner whatsoever, Employee agrees that, except
under compulsion of legal process, he will make no oral or
written comments about Employer or its business for a period of
one year following termination of his employment. In the event
that Employee breaches this provision of this Agreement, or
violates the terms of the Employee Confidentiality and
Noncompetition Agreement executed by him, then all severance
obligations which Employer may then have under this Agreement
shall immediately cease and Employee shall be owed nothing under
this Agreement other than wages and benefits earned through the
date of the termination of his employment.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
EMPLOYER:
RENTRAK CORPORATION,
an Oregon corporation
By: s/s Ron Berger
Ron Berger, President
I acknowledge that I have read and agree to the foregoing
Agreement, including, without limitation, the provision allowing
termination of my employment "at will" by Employer in Section
2.02.
s/s Christopher E. Roberts
Christopher E. Roberts
RENTRAK CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated ____________, is made by
and between Rentrak Corporation, an Oregon corporation
(hereinafter referred to as "Company"), and
____________________________, an employee of the Company or
a Subsidiary of the Company (hereinafter referred to as
"Optionee"):
WHEREAS, the Company wishes to afford the Optionee
the opportunity to purchase shares of its $0.001 par value
Common Stock; and
WHEREAS, the Company wishes to carry out the 1997
Equity Participation Plan of Rentrak Corporation
(hereinafter referred to as "Plan") (the terms of which are
hereby incorporated by reference and made a part of this
Agreement); and
WHEREAS, the Committee, appointed to administer
the Plan, has delegated to certain officers of the Company
the authority to implement grants of Options under the Plan;
and
WHEREAS, such officers have determined that it
would be to the advantage and best interest of the Company
and its shareholders to grant the non-qualified Option
provided for herein to the Optionee as an inducement to
enter into or remain in the service of the Company or its
Subsidiaries and as an incentive for increased efforts
during such service;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE
GRANT OF OPTION
Section 1.1. - Grant of Option
In consideration of the Optionee's agreement to
remain in the employ of the Company or its subsidiairies and
for other good and valuable consideration, on the date
hereof the Company irrevocably grants to the Optionee the
option to purchase any part or all of an aggregate of
____________ shares of its $0.001 par value Common Stock
upon the terms and conditions set forth in this Agreement.
Section 1.2. - Purchase Price
The purchase price of the shares of stock covered
by the Option shall be $__________ per share, without
commission or other charge.
Section 1.3. - Consideration to Company
In consideration of the granting of this Option by
the Company, the Optionee agrees to render faithful and
efficient services to the Company or a Subsidiary, with such
duties and responsibilities as the Company shall from time
to time prescribe. Nothing in this Agreement or in the Plan
shall confer upon the Optionee any right to continue in the
employ of the Company or any Subsidiary, or as a director of
the Company, or shall interfere with or restrict in any way
the rights of the Company and its Subsidiaries, which are
hereby expressly reserved, to discharge the Optionee at any
time for any reason whatsoever, with or without cause.
Section 1.4. - Adjustments in Option
The Committee shall make adjustments with respect
to the Option in accordance with the provisions of Section
9.3 of the Plan.
ARTICLE II.
PERIOD OF EXERCISABILITY
Section 2.1. - Commencement of Exercisability
(a) Subject to Section 4.5, the Option shall
become exercisable in [four (4) cumulative installments as
follows:
The first installment shall consist of
twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on the first
anniversary of the date the Option is granted.
The second installment shall consist of
twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on the second
anniversary of the date the Option is granted.
The third installment shall consist of
twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on the third
anniversary of the date the Option is granted.
The fourth installment shall consist of
twenty-five percent (25%) of the shares covered by the
Option and shall become exercisable on the fourth
anniversary of the date the Option is granted.
(b) No portion of the Option which is
unexercisable at Termination of Employment shall thereafter
become exercisable.
Section 2.2. - Duration of Exercisability
The installments provided for in Section 2.1 are
cumulative. Each such installment which becomes exercisable
pursuant to Section 2.1 shall remain exercisable until it
becomes unexercisable under Section 2.1.
Section 2.3. - Expiration of Option
The Option may not be exercised to any extent by
anyone after the first to occur of the following events:
(a) The expiration of ten (10) years from the
date the Option was granted; or
(b) The expiration of one (1) month from the date
of the Optionee's Termination of Employment unless such
Termination of Employment results from his death, his
retirement, his disability or his being discharged not for
good cause; or
(c) The expiration of one (1) month from the date
of the Optionee's Termination of Employment by reason of his
retirement or his being discharged not for good cause,
unless the Optionee dies within said one-month period; or
(d) The expiration of one (1) year from the date
of the Optionee's Termination of Employment by reason of his
disability; or
(e) The expiration of one (1) year from the date
of the Optionee's death.
(f) The effective date of either the merger or
consolidation of the Company with or into another
corporation, or the acquisition by another corporation or
person of all or substantially all of the Company's assets
or eighty percent (80%) or more of the Company's then
outstanding voting stock, or the liquidation or dissolution
of the Company, unless the Committee waives this provision
in connection with such transaction. As soon as practicable
prior to the effective date of such merger, consolidation,
acquisition, liquidation or dissolution, the Committee shall
give the Optionee notice of such event if the Option has
then neither been fully exercised nor become unexercisable
under this Section 2.3.
Section 2.4. - Adjustments to and/or Cancellation of
the Option
If there is a material alteration in the capital
structure of the Company on account of a reorganization,
merger, recapitalization, exchange of shares, stock split,
reverse stock split, stock dividend, or otherwise, the
Committee shall make such adjustments to the Plan and to the
Options then outstanding under the Plan as the Committee
determines to be appropriate and equitable under the
circumstances. Such adjustments may include, without
limitation, (a) a change in the number or kind of shares
of stock of the Company covered by the Options and/or (b)
a change in the Option Price payable per share; provided,
however, that the aggregate Option Price applicable to the
unexercised portion of existing Options shall not be
altered, it being intended that any adjustments made with
respect to these Options shall apply only to the price per
share and the number of shares subject thereto. For
purposes of this paragraph, neither (i) the issuance of
additional shares of stock of the Company in exchange for
adequate consideration (including services), nor (ii) the
conversion of outstanding preferred shares of the Company
into Common Stock, shall be deemed a material alteration of
the capital structure of the Company. In the event the
Committee shall determine that the nature of a material
alteration in the capital structure of the Company is such
that it is not practical or feasible to make appropriate
adjustments to the Plan or to this Option, such event shall
be deemed a Termination Event subject to the following
paragraph.
In the event of (a) the dissolution or
liquidation of the Company, (b) a reorganization , merger,
or consolidation of the Company with one or more
corporations as a result of which the Company will not be a
surviving corporation, (c) the sale of all or substantially
all of the assets of the Company, (d) a sale or other
transfer of more than eighty percent (80%) of the then
outstanding shares of Common Stock of the Company, or (e)
a material change in the capital structure of the Company
that is subject to this Section in accordance with the last
sentence of the previous paragraph (any of such events is
herein referred to as a "Terminating Event"), the Committee
shall determine whether a provision will be made in
connection with the Terminating Event for an appropriate
assumption of this Option for stock or for substitution of
appropriate new options covering stock of a successor
corporation employing the Optionee under this Plan and
Agreement or stock of an affiliate of such successor
employer corporation . If the Committee determines that
such an appropriate assumption or substitution will be made,
the Committee shall give notice of the determination to the
Optionee and the provisions of such assumption or
substitution, and any adjustments made (i) to the number
and kind of shares subject to the Option outstanding under
the Plan (or to options issued in substitution therefor),
(ii) to the Option price and/or (iii) to the terms and
conditions of this Option, shall be binding upon the
Optionee. If the Committee determines that no assumption or
substitution will be made, the Committee shall give notice
of this determination to the Optionee, whereupon the
Optionee shall have the right for a period of thirty (30)
days following the notice to exercise in full or in part any
unexercised or unexpired Option then held by him or her,
without regarding to any contingent vesting provision to
which the Option may otherwise been subject pursuant to
Paragraph 2.1a above. Upon the expiration of this thirty
(30) day period, this option shall expire to the extent not
earlier exercised, and the Plan shall terminate.
ARTICLE III.
GRANT OF OPTION
Section 3.1. - Partial Exercise
Any exercisable portion of the Option or the
entire Option, if then wholly exercisable, may be exercised
in whole or in part at any time prior to the time when the
Option or portion thereof becomes unexercisable under
Section 2.3; provided, however, that each partial exercise
shall be for not less than ten (10) shares (or the minimum
installment set forth in Section 2.1, if a smaller number of
shares) and shall be for whole shares only.
Section 3.2. - Manner of Exercise
The Option, or any exercisable portion thereof,
may be exercised solely by delivery to the Secretary or his
office of all of the following prior to the time when the
Option or such portion becomes unexercisable under Section
2.3:
(a) A written notice complying with the
applicable rules established by the Committee stating that
the Option, or a portion thereof, is exercised. The notice
shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion; and
(b) Full payment to the Company for the shares with
respect to which such Option or portion exercised in accordance
with Section 5.2d of the Plan.
(i) With the consent of the Committee, (A) shares of
the Company's Common Stock owned by the Optionee, duly endorsed for transfer
to the Company, with a Fair Market Value on the date of delivery
equal to the aggregate exercise price of the Option or exercised portion
thereof, or (B) shares of the Company's Common Stock issuabe to the Optionee
upon exercise of the Option, with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or exercised
thereof; or
(ii) With the consent of the Committee, a
notice that the Optionee has placed a market sell order
with a broker with respect to shares of the Company's
Common Stock then issuable upon exercise of the Option,
and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to
the Company in satisfaction of the Option exercise
price.
(c) A bona fide written representation and
agreement, in a form satisfactory to the Committee, signed
by the Optionee or other person then entitled to exercise
such Option or portion, as the Committee in its discretion
shall determine is necessary or appropriate to effect
compliance with the Securities Act and any other federal or
state securities laws or regulations. Without limiting the
generality of the foregoing, the Committee may require an
opinion of counsel acceptable to it to the effect that any
subsequent transfer of shares acquired on an Option exercise
does not violate the Securities Act, and may issue
stop-transfer orders covering such shares. Share
certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the
provisions of this subsection (c) and the agreements herein.
The written representation and agreement referred to in the
first sentence of this subsection (c) shall, however, not be
required if the shares to be issued pursuant to such
exercise have been registered under the Securities Act, and
such registration is then effective in respect of such
shares; and
(d) Full payment to the Company (or other
employer corporation) of all amounts which, under federal,
state or local tax law, it is required to withhold upon
exercise of the Option; with the consent of the Committee,
(i) shares of the Company's Common Stock owned by the
Optionee, duly endorsed for transfer, with a Fair Market
Value equal to the sums required to be withheld, or (ii)
shares of the Company's Common Stock issuable to the
Optionee upon exercise of the Option with a Fair Market
Value equal to the sums required to be withheld, may be used
to make all or part of such payment; and
(e) In the event the Option or portion shall be
exercised pursuant to Section 4.1 by any person or persons
other than the Optionee, appropriate proof of the right of
such person or persons to exercise the Option.
Section 3.3. - Rights as Shareholder
The holder of the Option shall not be, nor have
any of the rights or privileges of, a shareholder of the
Company in respect of any shares purchasable upon the
exercise of any part of the Option unless and until
certificates representing such shares shall have been issued
by the Company to such holder.
ARTICLE IV.
OTHER PROVISIONS
Section 4.1. - Option Not Transferable
Neither the Option nor any interest or right
therein or part thereof shall be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of
descent and distribution, unless and until such Option has
been exercised, or the shares underlying such Option have
been issued, and all restrictions applicable to such shares
have lapsed. Neither the Option nor any interest or right
therein or part thereof shall be liable for the debts,
contracts or engagements of the Optionee or his successors
in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or
any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect,
except to the extent that such disposition is permitted by
the preceding sentence.
Section 4.2. - Shares to Be Reserved
The Company shall at all times during the term of
the Option reserve and keep available such number of shares
of stock as will be sufficient to satisfy the requirements
of this Agreement.
Section 4.3. - Notices
Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company
in care of its Secretary, and any notice to be given to the
Optionee shall be addressed to him at the address given
beneath his signature hereto. By a notice given pursuant to
this Section 4.3, either party may hereafter designate a
different address for notices to be given to him. Any
notice which is required to be given to the Optionee shall,
if the Optionee is then deceased, be given to the Optionee's
personal representative if such representative has
previously informed the Company of his status and address by
written notice under this Section 4.3. Any notice shall be
deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
Section 4.4. - Titles
Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or
construction of this Agreement.
Section 4.5. - Construction
This Agreement shall be administered, interpreted
and enforced under the internal laws of the State of Oregon
without regard to conflicts of laws thereof.
Section 4.6. - Conformity to Securities Laws
The Optionee acknowledges that the Plan is intended to
conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including without limitation
Rule 16b-3. Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is
granted and may be exercised, only in such a manner as to
conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement
shall be deemed amended to the extent necessary to conform
to such laws, rules and regulations.
IN WITNESS WHEREOF, this Agreement has been
executed and delivered by the parties hereto.
RENTRAK CORPORATION
By ___________________________
President
Optionee's Taxpayer
Identification Number:
Optionee:
____________________________
<TABLE>
Rentrak Corporation
Computation of Net Income Per Share
For The Periods Ended September 30, 1996 and 1997
<CAPTION>
For the Quarter Ended For the Six Months Ended
September 30, 1997 September 30, 1997
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Calculation of Outstanding Shares
Weighted average number of shares of
common stock outstanding 11,369,295 11,369,295 11,533,504 11,533,504
Dilutive effect of exercise of stock options 4,698,506 4,948,506 4,643,284 5,664,886
Less: purchase of treasury shares, up to
20% of shares outstanding at period end (2,210,914) (2,210,914) (2,266,412) (2,266,412)
Weighted average number of shares of common
stock and common stock equivalents 13,856,887 14,106,887 13,910,376 14,931,978
Calculation of Net Income Per Share
Net Income $1,203,888 $1,203,888 $2,515,022 $2,515,022
Plus: interest income from investments
assumed purchased with proceeds from
exercise of stock options and warrants in
excess of proceeds used to purchase
treasury stock. 131,879 140,052 269,347 361,965
Net Income for purposes of computing
earnings per share. $1,335,767 $1,343,940 $2,784,369 $2,876,987
Net Income per Share $0.10 $0.10 $0.20 $0.19
</TABLE>
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Months Ended
September 30, 1996 September 30, 1996
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Calculation of Outstanding Shares
Weighted average number of shares of
common stock outstanding 12,141,210 12,141,210 12,139,762 12,139,762
Dilutive effect of exercise of stock options 4,936,924 6,610,674 4,914,899 6,588,649
Less: purchase of treasury shares, up to
20% of shares outstanding at period end (2,428,248) (2,428,248) (2,427,988) (2,427,988)
Weighted average number of shares of common
stock and common stock equivalents 14,649,886 16,323,636 14,626,673 16,300,423
Calculation of Net Income Per Share
Net Income $3,975,933 $3,975,933 $4,552,229 $4,552,229
Plus: interest income from investments
assumed purchased with proceeds from
exercise of stock options and warrants in
excess of proceeds used to purchase
treasury stock. 164,474 253,725 343,379 521,881
Net Income for purposes of computing
earnings per share. $4,140,407 $4,229,658 $4,895,608 $5,074,110
Net Income per Share $0.28 $0.26 $0.33 $0.31
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 7,599,915
<SECURITIES> 0
<RECEIVABLES> 16,649,468
<ALLOWANCES> 215,389
<INVENTORY> 2,231,564
<CURRENT-ASSETS> 34,130,625
<PP&E> 6,988,493
<DEPRECIATION> 5,098,570
<TOTAL-ASSETS> 45,014,497
<CURRENT-LIABILITIES> 34,334,768
<BONDS> 0
0
0
<COMMON> 11,055
<OTHER-SE> 10,668,674
<TOTAL-LIABILITY-AND-EQUITY> 45,014,497
<SALES> 59,463,062
<TOTAL-REVENUES> 59,463,062
<CGS> 48,840,933
<TOTAL-COSTS> 55,416,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,000
<INCOME-PRETAX> 4,292,385
<INCOME-TAX> 1,777,363
<INCOME-CONTINUING> 2,515,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,515,022
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.19
</TABLE>
