SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ' 240.14a-11(c) or ' 240.14a-12
Rentrak Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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RENTRAK CORPORATION
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
To Our Shareholders:
Our 1998 Annual Meeting of Shareholders will be held at
the Company's executive offices, One Airport Center,
7700 N.E. Ambassador Place, Portland, Oregon, 97220, on
August 24, 1998, at 8:00 a.m., Pacific Daylight Time.
The purpose of the meeting is to do the following:
1. Elect two (2) Class I Directors to serve for a
term of three (3) years each; and one (1) Class II
Director to serve for a term of one (1) year.
2. Approve an amendment to the 1997 Equity
Participation Plan of Rentrak Corporation to
increase the aggregate number of shares of common
stock that may be issued thereunder from 550,000
shares to 1,100,000 shares and to increase the
number of shares subject to options and other
awards that may be granted under the plan to any
individual in any fiscal year from 250,000 shares
to 400,000 shares.
3. Hear and consider reports from certain officers of
the Company; and
4. Transact such other business as may properly come
before the meeting or any adjournments
thereof.
The formal notice of the meeting and the proxy
statement containing information pertaining to the
meeting follow this letter. The Company's 1998 Annual
Report is also enclosed.
Please be sure to sign, date and return the enclosed
proxy card whether or not you plan to attend the
meeting so that your shares will be voted at the
meeting. If you attend the meeting, and the Board of
Directors joins me in hoping that you will, there will
be an opportunity to revoke your proxy and to vote in
person if you prefer.
Sincerely yours,
/S/ Ron Berger
RON BERGER
Chairman of the Board
July 1, 1998
RENTRAK CORPORATION
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
NOTICE OF ANNUAL MEETING OF SHAREHOLDER
To Be Held August 24, 1998
The Annual Meeting of Shareholders of Rentrak
Corporation (the "Company") will be held on Monday,
August 24, 1998, at 8:00 a.m., Pacific Daylight Time,
at the Company's executive offices, One Airport Center,
7700 N.E. Ambassador Place, Portland, Oregon, 97220,
for the following purposes:
1. To elect two (2) Class I Directors to serve for a
term of three (3) years each; and one (1) Class II
Director to serve for a term of one (1) year.
2. Approve an amendment to the 1997 Equity
Participation Plan of Rentrak Corporation to
increase the aggregate number of shares of common
stock that may be issued thereunder from 550,000
shares to 1,100,000 shares and to increase the
number of shares subject to options and other
awards that may be granted under the plan to any
individual in any fiscal year from 250,000 shares
to 400,000 shares.
3. To hear and consider reports from certain officers
of the Company; and
4. To transact such other business as may properly
come before the meeting or any adjournments
thereof.
The Board of Directors has fixed the close of business
on June 23, 1998, as the record date for determining
shareholders entitled to notice of, and to vote at, the
meeting and any adjournments thereof.
The Proxy Statement accompanies this Notice.
By Order of the
Board of Directors
/S/ F. Kim Cox
F. Kim Cox, Secretary
July 1, 1998
Please sign, date and return the enclosed Proxy as
soon as possible. A return envelope is enclosed
for your convenience.
RENTRAK CORPORATION
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held August 24, 1998
DATE, TIME, PLACE OF MEETING
This Proxy Statement and the accompanying proxy
and 1998 Annual Report are being mailed on or about
July 10, 1998, to the shareholders of Rentrak
Corporation (the "Company") in connection with the
solicitation by the Company's Board of Directors of the
enclosed proxy for use at the Company's 1998 Annual
Meeting of Shareholders (the "Annual Meeting"). The
Annual Meeting will be held Monday, August 24, 1998, at
8:00 a.m. Pacific Daylight Time, at the Company's
executive offices, One Airport Center, 7700 N.E.
Ambassador Place, Portland, Oregon 97220.
PURPOSE OF ANNUAL MEETING
The Annual Meeting has been called for the
following purposes: (i) to elect two (2) Class I
Directors to serve for a term of three (3) years each;
and one (1) Class II Director to serve for a term of
one (1) year; (ii) to approve an amendment to the 1997
Equity Participation Plan of Rentrak Corporation to
increase the aggregate number of shares of Common Stock
that may be issued thereunder from 550,000 shares to
1,100,000 shares and to increase the number of shares
subject to options and other awards that may be granted
under the plan to any individual in any fiscal year
from 250,000 shares to 400,000 shares; (iii) to hear
and consider reports from certain officers of the
Company; and (iv) to transact such other business as
may properly come before the meeting or any
adjournments thereof. Section 2.3.1 of the Company's
1995 Restated Bylaws sets forth procedures to be
followed for introducing business at a shareholders
meeting.
All shares represented by the enclosed proxy, if
received prior to the meeting, will be voted in the
manner specified by the shareholder. To the extent
that a proxy is submitted without specification, the
shares represented by the proxy will be voted FOR each
Director nominee and FOR approval of the amendment to
the 1997 Equity Participation Plan of Rentrak
Corporation.
The Company has no knowledge of any other matters
to be presented at the Annual Meeting. In the event
that other matters do properly come before the Annual
Meeting in accordance with the Company's 1995 Restated
Bylaws, the persons named in the proxy will vote such
proxy in accordance with their judgment on such
matters.
REVOCATION OF PROXIES
The execution of a proxy will not affect a
shareholder's right to attend the Annual Meeting and
vote in person. Any shareholder may revoke their proxy
either by giving written notice of such revocation to
the Secretary of the Company at its principal executive
offices at One Airport Center, 7700 N.E. Ambassador
Place, Portland, Oregon 97220, prior to the Annual
Meeting, or by revoking the proxy in person at the
Annual Meeting. A proxy may also be revoked upon the
Company's timely receipt of a properly executed, later
dated proxy covering the same shares as the earlier
proxy.
SOLICITATION OF PROXIES
Proxies in the form enclosed with this Proxy
Statement are being solicited by the Company's Board of
Directors for use at the Annual Meeting. The two
persons named as proxies therein have been selected by
the Board of Directors and will vote all shares for
which valid proxies are granted to them. Unless
otherwise specified in the proxy, the proxy will be
voted to ELECT as Directors all of the nominees listed
under Proposal 1 below and to APPROVE the amendment to
the 1997 Equity Participation Plan of Rentrak
Corporation.
The cost of soliciting proxies for the Annual
Meeting will be borne by the Company. In addition to
solicitation by mail, Directors, officers and employees
of the Company may solicit proxies from shareholders of
the Company, personally or by telephone or telegram,
without receiving any additional remuneration. The
Company has asked brokerage houses, nominees and other
fiduciaries to forward soliciting materials to
beneficial owners of the Company's Common Stock and
will reimburse all such persons for their expenses. In
addition, the Company reserves the right to use the
services of an independent proxy solicitation firm to
assist with the solicitation of proxies. If the
services of an independent proxy solicitation firm are
used, the cost is estimated not to exceed $35,000.
1999 SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals
to be considered for inclusion in the Proxy Statement
for the 1999 Annual Meeting of Shareholders is April
26, 1999.
VOTING SECURITIES
Only holders of record of the Company's Common
Stock on June 23, 1998, the record date fixed by the
Board of Directors for the Annual Meeting, are entitled
to notice of, and to vote at, the Annual Meeting and
any adjournments thereof. On June 23, 1998, 11,006,224
shares of the Company's Common Stock, .001 par value,
were outstanding and held of record by approximately
375 shareholders. All outstanding shares of the
Company's Common Stock are to be voted as a single
class, and each share of the Company's Common Stock is
entitled to one vote. The presence, in person or by
proxy, of the holders of a majority of the outstanding
shares of the Company's Common Stock constitutes a
quorum.
Assuming the existence of a quorum, the
affirmative vote of a plurality of the votes cast at
the Annual Meeting, in person or by proxy, will be
required to elect persons to the Board of Directors.
Abstention from voting and broker non-votes will have
no effect on the outcome of the election of Directors.
Holders of Common Stock are not entitled to cumulate
their votes in the election of Directors. As a result,
the holders of more than 50% of the shares voting for
the election of Directors can elect all of the
Directors if they choose to do so. Assuming the
existence of a quorum, the affirmative vote of a
majority of the votes cast at the Annual Meeting, in
person or by proxy, will be required to approve the
amendment to the 1997 Equity Participation Plan of
Rentrak Corporation. With respect to shares relating
to any proxy as to which a broker non-vote is indicated
on a proposal, those shares will not be considered
present and entitled to vote with respect to the
amendment. Therefore, each abstention or broker non-
vote will have the same effect as a vote against such
amendment.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's 1995 Restated Bylaws provide that
the Board of Directors, presently consisting of nine
Directors, be divided into three classes, Class I,
Class II and Class III, with each class to be as nearly
equal in number as possible. One of the Company's
current Class I Directors, Mr. Peter Dal Bianco, is
vacating his seat after nearly nine years of service to
the Company. Instead of seeking a replacement for Mr.
Dal Bianco, the Board of Directors eliminated his Class
I seat by reducing the number of Directors from nine to
eight, effective on the date of the Annual Meeting.
At the Annual Meeting, the shareholders are being asked
to elect two (2) Class I Directors, Messrs. Ron
Berger and Pradeep Batra, for a term of three (3) years
each, and one (1) Class II Director, Mr. Skipper
Baumgarten, for a term of one (1) year. Each Director
will hold office until the annual meeting at which his
term expires and until his successor is duly elected
and qualified. If vacancies occur, the Board of
Directors may elect a replacement to serve for the
remainder of the unexpired term.
The Board of Directors believes that each nominee
will be available to serve as a Director. However, if
any nominee is not a candidate on the date of the
Annual Meeting or otherwise declines to or cannot serve
as a Director, the proxy will be voted for such other
person or persons as the Board of Directors may
recommend. Proxies cannot be voted for more than three
(3) nominees.
The Board of Directors recommends a vote FOR the
election of each of the following Director nominees.
NOMINEES AS CLASS I DIRECTORS (TERMS EXPIRE IN 2001)
PRADEEP BATRA (52). Since February 1985, Mr.
Batra has served as President of Unique Business
Systems (UBS), a vertical market software developer.
Among other things, UBS develops and markets POS
software which is used by retailers of the Company to
capture transaction activity which is reported to the
Company. UBS has a POS vendor agreement with the
Company. Mr. Batra is currently a Class I Director,
having been elected by the Board of Directors in
February 1998 to fill the new Class I seat created when
the Board of Directors increased the number of
Directors from 7 to 9. Mr. Batra also serves as a
Director of UBS.
RON BERGER (50). Since founding the Company in
1977, Mr. Berger has served as President and Chief
Executive Officer of the Company, except for brief
periods in other positions in 1981 and 1984. Since
September 1984, he has also served as the Company's
Chairman of the Board. Mr. Berger is currently a Class
I Director, having been elected by the Board of
Directors in February 1997 to fill the Class I vacancy
created by the death of L. Barton Alexander.
Immediately prior to such election, Mr. Berger held the
Class III seat now occupied by Herbert Fischer. Mr.
Berger also serves as a Director of Rentrak Japan K.K.,
and is a member of the Board of Directors of American
Contractors Indemnity Co., Los Angeles, California, the
International Franchise Association and the Video
Software Dealers Association.
NOMINEE AS CLASS II DIRECTOR (TERM EXPIRES IN 1999)
SKIPPER BAUMGARTEN (51). Since 1990, Mr.
Baumgarten has served as President of Surety Associates
Holding Company. Mr. Baumgarten also serves as CEO and
Chairman of the Board of American Contractors Indemnity
Co., Los Angeles, California, an insurance company.
Mr. Baumgarten is currently a Class II Director, having
been elected by the Board of Directors in February 1998
to fill the new Class II seat created when the Board of
Directors increased the number of Directors from 7 to
9. Under the Company's 1995 Restated Bylaws, Directors
such as Mr. Baumgarten, who are elected by the Board of
Directors to fill a newly created seat, may serve only
until the Company's next Annual Meeting of
Shareholders. For this reason, Mr. Baumgarten's
current term expires on the date of the Annual Meeting,
while the terms of the Company's other Class II
Directors do not expire until the date of the Company's
1999 Annual Meeting of Shareholders (the "1999 Annual
Meeting").
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
The remaining Class II and Class III Directors
whose terms have not yet expired and are therefore not
standing for election this year are as follows:
CLASS II DIRECTORS (TERMS EXPIRE IN 1999)
MUNEAKI MASUDA (47). Mr. Masuda founded Rentrak
Japan, a joint venture formed with Convenience Culture
Club ("CCC"). The Company currently owns a ten percent
equity interest in Rentrak Japan and CCC's parent
company is the controlling stockholder. Since December
1988, Mr. Masuda has served as Chairman of CCC. Mr.
Masuda also serves as President of DIRECTV Japan. Mr.
Masuda has been a Director of the Company since August
1990. Pursuant to a Common Stock Purchase Agreement
between the Company and CCC, entered into as of
December 20, 1989, the Company's Board of Directors is
required, subject to fiduciary obligations to all
shareholders, to nominate Mr. Muneaki Masuda, CCC's
designee, as a Director and use its best efforts to
vote in favor of Mr. Masuda those shares for which the
Company's management and Board hold proxies or are
otherwise entitled to vote. Mr. Masuda is also a
Director of Blowout Entertainment, Inc., GAGA
Communications and Culture Publishers.
STEPHEN ROBERTS (60). In July 1990, Mr. Roberts
formed R&G Video, which acquired the home video rights
for the New World film library. Mr. Roberts is a
member of the Academy of Motion Pictures Arts and
Sciences, the Academy of Television Arts and Sciences,
and a former Director of the Motion Picture Association
of America. Mr. Roberts has been a Director of the
Company since December 1988 and currently serves as a
consultant to the Company.
CLASS III DIRECTORS (TERMS EXPIRE IN 2000)
JAMES JIMIRRO (61). Since 1986, Mr. Jimirro has
been the Chairman of the Board of Directors, President
and Chief Executive Officer of J2 Communications, a
program supplier to the Company. Mr. Jimirro has been
a Director of the Company since November 1990.
BILL LEVINE (78). In January 1988, Mr. LeVine
founded and became President of LeVine Enterprises,
Inc., an investment firm. Mr. LeVine is also a past
member of the Board of Directors of the International
Franchise Association. Mr. LeVine serves as a Director
of the First Business Bank of Los Angeles, California,
B.C.T. Inc., of Fort Lauderdale, Florida, Fast Frame of
Los Angeles, California Closet of San Francisco,
California, Surety Associates Holding Company and
American Contractors Indemnity Co., Los Angeles,
California. Mr. LeVine has been a Director of the
Company since April 1985.
HERBERT FISCHER (59). Since 1990, Mr. Fischer has
been the President of Mediacopy, a company that
duplicates video cassettes for major movie studios.
Mr. Fischer has been a Director of the Company since
February 27, 1997.
See "CERTAIN RELATIONSHIPS AND TRANSACTIONS" for a
discussion of certain agreements and relationships
between the Company and its Directors.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors has a Compensation
Committee, a Stock Option Committee and an Audit
Committee. The Board does not have a nominating
committee.
The Compensation Committee was comprised of James
Jimirro, Bill LeVine and Stephen Roberts and was
responsible for evaluating the performance of the
Company's management and determining the method of
compensating the Company's salaried employees. During
the fiscal year ended March 31, 1998, the Compensation
Committee held one (1) meeting.
The Stock Option Committee was comprised of James
Jimirro and Bill LeVine, and was responsible for
administering the 1997 Non-Officer Employee Stock
Option Plan and the 1997 Equity Participation Plan of
Rentrak Corporation. During the fiscal year ended
March 31, 1997, the Stock Option Committee held one (1)
meeting.
The Audit Committee was comprised of Peter Dal
Bianco, Bill LeVine and Stephen Roberts and was
responsible for evaluating the integrity of the
Company's financial reporting to shareholders. During
the fiscal year ended March 31, 1998, the Audit
Committee held four (4) meetings.
During the fiscal year ended March 31, 1998, there
were three (3) regular meetings of the Company's Board
of Directors which were held in person, and six (6)
special meetings which were conducted by telephone
conference call. Each Director attended at least 75%
of the total number of meetings held by the Board of
Directors and the committees of the Board of Directors
on which he served during the fiscal year ended March
31, 1998, except for Muneaki Masuda, who attended 67
percent of the Company's Board meetings, and Pradeep
Batra and Skipper Baumgarten, who were elected to the
Board of Directors on February 23, 1998.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act requires the
Company's Directors and executive officers and persons
who beneficially own more than ten percent of the
outstanding shares of the Company's common stock ("ten
percent shareholders"), to file with the SEC initial
reports of beneficial ownership and reports of changes
in beneficial ownership of shares of common stock and
other equity securities of the Company. To the
Company's knowledge, based solely upon a review of the
copies of Forms 3, 4 and 5 (and amendments thereto)
furnished to the Company or otherwise in its files, all
of the Company's officers, Directors and ten percent
shareholders complied with all applicable Section 16(a)
filing requirements except for The Walt Disney Company,
which failed to timely file a Form 3 when it became a
ten percent shareholder during fiscal 1998. The Walt
Disney Company has since filed the required Form 3.
<TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND DIRECTORS
The following table sets forth, as of May 28, 1998, information furnished to the Company with
respect to the ownership of the Company's Common Stock by each of the Company's Directors
and nominees to the Board of Directors, the Chief Executive and the named executive officers,
all officers and Directors as a group, and each person (including any group) known by the
Company to be beneficial owner of more than 5% of the Company's Common Stock.
<CAPTION>
Amount and
Nature of Percent
Beneficial Of Shares
Name and Address of Beneficial Owner (1) Ownership Outstanding
<S> <C> <C> <C>
Ed Barnick 55,319 (2) *
Pradeep Batra 4,500 *
Skipper Baumgarten 0 *
Ron Berger 1,400,683 (3) 11.65%
F. Kim Cox 251,448 (4) 2.23%
Peter Dal Bianco 167,349 (5) 1.52%
Herbert Fischer 15,000 (6) *
Jim Jimirro 33,906 (7) *
Bill Levine 437,511 (6) 3.97%
Michael Lightbourne 32,000 (8) *
Muneaki Musada 1,019,839 (9) 9.25%
Stephen Roberts 136,493 (10) 1.23%
Amir Yazdani 63,914 (11) *
All Officers and Directors as a group
(16 persons) 3,709,150 (12) 29.22%
Culture Convenience Club Co., Ltd. 390,000 (13) 3.54%
1-4-70 Shiromi, 16th Floor
Chuo-ku, Osaka 540, Japan
Rentrak Japan, K.K 614,000 (14) 5.58%
4-20-3 Ebisu
Shibuya-Ku, Tokyo 150, Japan
Blockbuster Videos, Inc. 1,000,000 (15) 8.33%
1201 Elm Street
Dallas, Texas 75270
Walt Disney Company 1,234,563 (16) 10.09%
500 South Buena Vista St.
Burbank, CA
</TABLE>
(*) Less than 1.00%.
(1) The address of each of the directors is the Company's address,
One Airport Center, 7700 N.E. Ambassador Place, Portland, Oregon 97220.
(2) Includes 55,319 shares of Common Stock subject to options exercisable
within 60 days of the date of the table.
(3) Includes 32,200 shares of Common Stock held by Mr. Berger's parents
and 1,012,325 shares ofcommon stock subject to options exercisable
within 60 days of the date of the table. Mr. Berger
disclaims beneficial ownership of all shares held by his parents.
(4) Includes 249,444 shares of Common Stock subject to options exercisable
within 60 days of the date of the table.
(5) Includes 32,099 shares of Common Stock subject to options exercisable
within 60 days of the date of the table.
(6) Includes 5,000 shares of Common Stock subject to options exercisable
within 60 days of the date of the table.
(7) Includes 28,486 shares of Common Stock subject to options exercisable
within 60 days of the date of the table.
(8) Includes 32,000 shares of Common Stock subject to options exercisable
within 60 days of the date of the table.
(9) Mr. Masuda is an officer and controlling shareholder of Culture
Convenience Club Co., Ltd. and So-Tsu Company. So-Tsu Company and
Mr. Masuda are controlling shareholders of Rentrak
Japan, K.K. Includes 390,000 shares owned by Culture Convenience
Club, Ltd., and 614,000 shares owned by Rentrak Japan, K.K.
Also includes 15,839 shares of Common Stock exercisable
within 60 days of the date of the table.
(10) Includes 99,511 shares of Common Stock subject to options
exercisable within 60 days of the date of the date of the table.
(11) Includes 63,358 shares of Common Stock subject to options exercisable
within 60 days of the date of the date of the table.
(12) Includes 1,688,891 shares of Common Stock subject to options exercisable
within 60 days of the date of the table.
(13) As indicated in footnote 9 to this table, these shares are beneficially
owned by Muneaki Masuda, a Director of the Company and controlling
shareholder of Culture Convenience Club Co., Ltd.
(14) As indicated in footnote 9 to this table, these shares are
beneficially owned by Muneaki Masuda,
a Director of the Company and controlling shareholder of Rentrak Japan,
K.K.
(15) Includes 1,000,000 shares of Common Stock subject to warrants exercisable
within 60 days of the date of the table.
(16) Includes 1,234,563 shares of Common Stock subject to warrants exercisable
within 60 days of the date of the table.
Unless otherwise indicated in the notes to the foregoing table,
beneficial ownership of each of the shares of Common Stock listed in
the foregoing table is comprised of sole voting power
and sole investment power.
EXECUTIVE OFFICERS
The following table identifies the executive officers
of the Company as of March 31, 1998, the age each executive,
the positions they hold, the year in which they began
serving in their capacities, and their past business
experience:
Position Current Position(s)
Held with Company and
Name Age Since Past Business Experience
Ed Barnick 41 1992 Vice President,
Distribution. Distribution
Director from 1988 until
January 1, 1992. Prior to
joining the Company in May of
1988, Mr. Barnick served as
Distribution Manager for
Bergen Brunswig Medical and
was employed with both Payless
Northwest Distribution Center
and United Parcel Service.
Ron Berger 49 1984 President, Chief
Executive Officer and Chairman
of the Board; Since founding
the Company in 1977, Mr.
Berger has served as President
and Chief Executive Officer,
except for brief periods in
other positions in 1981 and
1984. Since September 1984,
he has also served as the
Company's chairman of the
Board. Mr. Berger also serves
as a member of the following
Boards of Directors: American
Contractors Indemnity Co.;
Video Software Dealers
Association; Fast Forward
Foundation; and The Nature
Conservancy of Oregon.
F. Kim Cox 45 1995 Executive Vice
President, Chief Financial
Officer, Secretary, Treasurer;
From 1991 until 1995, Mr. Cox
served as Executive Vice
President - Strategic
Planning, Secretary,
Treasurer; From 1985 until
June 1, 1991, Mr. Cox served
as Chief Financial Officer and
Vice President of Finance.
Prior to joining the Company
in 1985, Mr. Cox was a
practicing attorney with the
firm Garvey, Schubert, Adams &
Barer from 1983 to 1985, and
with the firm of McClaskey &
Greig from 1980 to 1983.
Prior to that, Mr. Cox
practiced accounting with the
firm Arthur Anderson & Co.
Marty Graham 40 1991 Vice President,
Product Development. Prior to
joining the Company in October
of 1988 as Director of Product
Development, Mr. Graham served
as General Manager and
Secretary/ Treasurer of
Pacific Western Video
Corporation since 1984, which
owns and operates two video
retailer outlets, both of
which participate in the
Company's PPT Program.
Michael
Lightbourne 51 1997 Executive Vice
President. Mr. Lightbourne
was Senior Vice President,
Marketing from 1992 to 1996,
and served as Vice President,
Marketing from 1991 to 1992.
Prior to joining the Company
as Director of Sales in
September of 1988, Mr.
Lightbourne was President and
founder of MRL Enterprises, a
sales and marketing consulting
firm which he began in 1982.
Carolyn Pihl 40 1998 Vice President,
Finance, Chief Accounting
Officer. From May 1996 until
February 1998, Ms. Pihl served
as Chief Accounting Officer.
Prior to joining the Company
in 1996, Ms. Pihl was a Senior
Manager in the Audit and
Business Advisory Group with
Arthur Anderson & Co. from
1991 to 1996.
Christopher
Roberts 30 1994 Vice President,
Sales. Prior to becoming Vice
President, Sales, Mr. Roberts
was National Director of Sales
for the Company, a position he
held since September 1992.
Amir Yazdani 38 1993 Vice President,
Management Information
Systems. Prior to becoming
Vice President, Management
Information Systems, Mr.
Yazdani served as the
Company's Director of
Management Information
Systems.
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended March 31,
1998, 1997 and 1996, all compensation earned by Rentrak to the Chief
Executive officer and the four highest paid executive officers whose salary
and bonus for the last completed fiscal year exceeds $100,000 (the "Named
Executive Officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
Other Restricted Securities
Fiscal Year Annual Stock Underlying LTIP All Other
Name and Ended Bonus Compen- Award(s) Options/ Payouts Compen-
Principal Position March 31, Salary($) ($) sation($) ($) SARs(#)(1) ($) sation ($)(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ed Barnick, Vice 1998 116,468 36,000 0 0 30,714 (2) 0 14,685
President, Distribution 1997 93,537 17,500 0 0 0 0 1,160
1996 91,740 24,459 0 0 10,714 0 37
Ron Berger, President 1998 408,972 62,258 0 0 0 0 31,241
and Chief Executive 1997 349,393 268,665 0 0 0 0 125,435
Officer 1996 315,833 0 0 0 0 0 28,438
F. Kim Cox, Executive 1998 198,397 62,824 0 0 0 0 8,195
Vice President, Chief 1997 187,344 21,000 0 0 0 0 4,899
Financial Officer, 1996 150,583 18,067 0 0 231,879 0 5,375
Secretary and Treasurer
Michael Lightbourne, 1998 200,239 89,000 0 0 170,000 0 4,251
Executive Vice President 1997 100,159 5,000 0 0 0 0 3,533
1996 153,708 5,793 0 0 8,130 0 5,661
Amir Yazdani, Vice 1998 187,127 10,000 0 0 10,000 0 3,711
President, Information 1997 142,549 15,000 0 0 0 0 3,788
Systems 1996 109,266 0 0 0 18,968 0 3,343
</TABLE>
(1) All figures in this column, prior to fiscal 1998,
reflect an antidilution adjustment following the spin-off of Blowout
Entertainment, Inc. in fiscal 1997 Such adjustment did not change
the aggregate exercise price of the outstanding options.
(2) Includes one option for 10,000 shares subject to antidilution
adjustment following the spin-off of Blowout Entertainment,
Inc., in fiscal 1997. Such adjustment did not change the
aggregate exercise price of the outstanding option.
(3) Amounts disclosed in this column reflect the following matching
contributions during fiscal 1998 on behalf of the named
executives with regard to Rentrak's 401-K plan: Ed Barnick $1,160,
Ron Berger $1,500, F. Kim Cox $1,500 and Amir
Yazdani $1,500. The Company also made payments to supplemental
disability and life insurance plans during fiscal
1998 for the following named executives: Ed Barnick $2,954,
Ron Berger $9,478, F. Kim Cox $6,695, and Amir Yazdani
$2,211. In addition, other compensation for Ron Berger and
Ed Barnick includes lease and maintenance payments on
automobiles.
STOCK OPTION AWARDS
The following table sets forth information concerning stock
option grants to the Named Executive Officers during
fiscal year ended March 31, 1998. The Company did not grant any
stock appreciation rights to the Named
Executive Officers during such fiscal year.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of stock Price Appreciation
Individual Grants for Option Term
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (#)(1 Fiscal Year ($/Sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Ed Barnick 10,000 1.63% 2.938 03/31/2007 $31,709 $67,890
10,714 1.74% 4.842 04/01/2006 $10,453 $42,861
10,000 1.63% 9.780 03/31/2008 $56,945 $148,606
Ron Berger 0 0 0 0 0 0
F. Kim Cox 0 0 0 0 0 0
Michael Lightbourne 10,000 1.63% 2.875 04/01/2007 $18,081 $45,820
150,000 24.39% 3.688 07/10/2007 $347,857 $881,539
10,000 1.63% 5.875 02/23/2008 $36,948 $93,632
Amir Yazdani 5,000 0.81% 2.875 04/01/2007 $9,040 $22,910
5,000 0.81% 5.875 02/23/2008 $18,474 $46,816
</TABLE>
(1) The stock options vest 25% per year over a period of 4 years except
Mr. Lightbourne's which vest 20% per year over a period of five years.
STOCK OPTION EXERCISES
The following table sets forth information concerning stock option
exercises by the Named Executive Officers during the fiscal year ended
March 31, 1998, and the value of in-the-money options (i.e., options in
which the market value of Rentrak Common Stock exceeds the exercise
price of the options) held by such individuals on March 31, 1998.
No stock appreciation rights ("SAR's") have been granted to, or are
currently held by, the Named Executive Officers. The value of the
in-the-money options is based on the difference between the exercise price
of such options and the closing price of Rentrak Common Stock on March
31,1998, which was $9.50. The value realized on exercised options is
based on the difference between the exercise price for the options and
the closing price of Rentrak Common Stock on the date of exercise.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options/SARs at FY-End at FY-End ($)
Aquired on Value
Exercise Realized (#) Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Ed Barnick 0 0 49,158 / 31,697 225,483 / 116,242
Ron Berger 0 0 795,722 / 433,206 3,740,004 / 2,015,462
F. Kim Cox 0 0 199,614 / 132,172 1,051,790 / 616,915
Michael Lightbourne 0 0 0 / 170,000 0 / 974,375
Amir Yazdani 0 0 57,230 / 21,652 319,155 / 109,100
COMPENSATION OF DIRECTORS
The Company compensates non-employee Directors for their
services by payment of $500 for each Board meeting attended in
person and $500 for each telephone conference Board meeting. In
addition, each non-employee Director is paid an annual board fee
of $15,000. The Company reimburses all Directors for their
travel expenses for each meeting attended in person. During
fiscal year 1998, each non-employee Director was granted an
option to acquire 5,000 shares of the Company's Common Stock
pursuant to the Company's Amended and Restated Directors Stock
Option Plan. Beginning April 1, 1998, automatic grants of
options to nonemployee Directors will occur annually under the
Company's 1997 Equity Participation Plan of Rentrak Corporation.
On April 1 of each year the following additional options will be
granted: (i) an option to purchase 10,000 shares of the Company's
Common Stock to each nonemployee Director of the Company; and
(ii) an option to purchase 2,500 shares of the Company's Common
Stock to any nonemployee Chairman of the Board and to each
nonemployee Committee Chairman.
EMPLOYMENT AGREEMENTS
ED BARNICK. Effective January 1, 1996, the Company entered
into a four year employment agreement with Mr. Barnick under
which he is employed as the Vice President, Distribution . Under
the agreement, Mr. Barnick receives an annual salary of $90,880,
subject to an increase of four percent (4%) on January 1, 1997,
and by three percent (3%) on each subsequent January 1st of each
year during the term of the agreement. If Mr. Barnick is
terminated for certain reasons other than for "cause," as defined
in the agreement, within two years after a change of control of
the Company, as defined in the agreement, he is entitled to
receive the lesser of: (i) his base salary through the end of
the agreement; or (ii) six months' of base salary. If the
Company terminates Mr. Barnick without cause, he is entitled to
receive the base salary accrued as of the date of termination,
plus severance in the amount of six months' base salary, payable
in installments as if still employed, subject to reduction should
Mr. Barnick find alternative employment, or if he does not
exercise his best efforts to find such employment. If Mr.
Barnick is terminated for cause, he will receive only the full
amount of all compensation accrued as of the date of termination.
If Mr. Barnick is terminated due to his death or disability, he
(or his legal representative) will receive in a lump sum, only
the base salary amount of all compensation accrued through and
including the date of termination. The agreement expires on
December 31, 1999.
RON BERGER. Effective June 1, 1994, the Company entered
into a five year employment agreement with Mr. Berger under which
Mr. Berger is employed as the Chairman of the Board of Directors,
Chief Executive Officer and President of the Company. Under the
agreement, Mr. Berger received an annual base salary of $360,000
for the period ending May 31, 1998. Mr. Berger is also entitled
to receive certain cash bonuses under formulae based upon the
Company's pre-tax profits. On April 21, 1998, Mr. Berger entered
into a new five year employment agreement, where he is to receive
$400,000 through March 31, 1999, subject to increases on April 1
of each year during the term of the agreement of the greater of
four percent (4%) or the change in the Consumer Price Index for
the preceding year. If Mr. Berger is terminated for certain
reasons other than for "cause," as defined in the agreement, he
is entitled to receive all of the compensation set forth in the
agreement for the remaining term of the agreement. If Mr. Berger
is terminated for cause, he will receive only the full amount of
all compensation accrued as of the date of termination. In the
event of a "change of control" of the Company, as defined in the
agreement, Mr. Berger may elect to receive severance equal to the
greater of: (i) the remaining compensation under the agreement;
or (ii) three times the amount received in the prior fiscal year.
If Mr. Berger is terminated due to his health or disability, he
(or his estate or legal representative) is entitled to receive
the compensation set forth in the agreement for one year
following termination. The agreement expires on March 31, 2003.
F. KIM COX. Effective April 20, 1995, the Company entered
into a four year employment agreement with Mr. Cox under which he
is employed as the Executive Vice President of the Company.
Under the agreement, Mr. Cox receives an annual salary of
$160,000, subject to increases at the Company's discretion during
the term of the agreement. If Mr. Cox is terminated for certain
reasons other than for "cause," as defined in the agreement, he
is entitled to receive one year's base salary, subject to
reduction should Mr. Cox find alternative employment of
"comparable status," as defined in the agreement, or if he does
not exercise his best efforts to find such employment of
comparable status. If Mr. Cox is terminated due to his death or
disability, he (or his legal representative) is entitled to
receive a lump sum severance payment equal to 180 days' base
salary. The agreement expires on April 19, 1999.
MICHAEL LIGHTBOURNE. Effective July 10, 1997, the Company
entered into a five year employment agreement with Mr.
Lightbourne under which he is employed as the Executive Vice
President of the Company. Under the agreement, Mr. Lightbourne
receives an annual salary of $170,000, subject to increases each
year during the term of the agreement of the greater of five
percent (5%) or the change in the Consumer Price Index for the
preceding year. If the Company terminates Mr. Lightbourne
without cause, he is entitled to receive the base salary accrued
as of the date of termination, plus severance of all compensation
payable in installments as if still employed through the end of
the agreement, subject to reduction should Mr. Lightbourne find
alternative employment during the severance period. If Mr.
Lightbourne is terminated for cause, he will receive only the
full amount of all compensation accrued as of the date of
termination. If Mr. Lightbourne is terminated due to his death
or disability, he (or his estate or legal representative), will
receive in a lump sum, all compensation which would otherwise
have been paid during the term of the agreement. The agreement
expires on July 9, 2002.
AMIR YAZDANI. Effective December 20, 1995, the Company
entered into a three year employment agreement with Mr. Yazdani
under which he is employed as the Executive Vice President,
Management Information Systems, of the Company. Under the
agreement, Mr. Yazdani receives an annual salary of $145,000 for
the period ending June 30, 1997, and $170,000 for the period
ending June 8, 1998. If Mr. Yazdani is terminated for certain
reasons other than for "cause," as defined in the agreement,
within two years after a change of control of the Company, as
defined in the agreement, he is entitled to receive the lesser
of: (i) his base salary through the end of the agreement; or
(ii) six months' base salary. If the Company terminates Mr.
Yazdani without cause, he is entitled to receive six months' base
salary, subject to reduction should Mr. Yazdani find other
employment or should he not exercise his best efforts to find
such other employment. If Mr. Yazdani is terminated for cause or
due to his death or disability, he (or his estate or legal
representative), will receive only the full amount of all
compensation accrued as of the date of termination. The
agreement expires on June 8, 1999.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES ON THE
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND ALL EXECUTIVE
OFFICERS AND REPORT ON REPRICING OF OPTIONS
The "Report of the Compensation Committee on the
Compensation of the Chief Executive Officer and All Executive
Officers and Report on Repricing of Options" shall not be deemed
incorporated by reference by any general statement incorporating
this Proxy Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed
under such Acts.
The Compensation and Stock Option Committees of the Company
determines the compensation of all executive officers of the
Company, including Ron Berger, the Company's Chairman of the
Board and Chief Executive Officer. Compensation decisions for
all executive officers of the Company are based on the Company's
executive compensation philosophy. This compensation philosophy
has four primary principles: (i) link executive compensation to
the creation of sustainable increases in shareholder value; (ii)
provide executive compensation rewards contingent upon
organizational performance; (iii) differentiate compensation
based on individual executive contribution; and (iv) encourage
the retention of a sound management team.
To implement this philosophy, the Compensation and Stock
Option Committees structure executive compensation by employing
three primary components - annual salary, performance bonuses and
a long-term incentive program consisting of stock option grants.
The Stock Option Committee is responsible for administering the
1997 Equity Participation Plan of Rentrak Corporation. Ownership
of shares of the Company's Common Stock by executives is
encouraged and forms a significant component of the total
executive compensation package. The higher the position of the
executive, the greater the percentage his compensation is likely
to consist of long-term incentive programs. In addition, the
Compensation Committee looks to competitive factors in the
development of total executive compensation packages.
Annual Salary and Performance Bonuses
The Compensation Committee fixes the yearly salary of each
executive officer. The yearly salary reflects the level of
duties and responsibilities of the executive officer, the
executive officer's experience and prior performance, industry
practices and the financial performance of the Company in both
absolute and relative terms. Salaries are reviewed annually by
the Compensation Committee and are increased when warranted by
executive performance and competitive practices. In establishing
various compensation levels for executive officers, including the
Chief Executive Officer, the Compensation Committee took into
account the revenues generated by domestic PPT, management's
commitment to developing new products and management's effort to
diversify its business within the video industry.
The Compensation Committee also awards performance bonuses.
Performance bonuses, if earned, are generally paid once the
Company's fiscal year end results are known. Performance bonuses
are based upon: (i) the executive officer's performance against
individual goals; (ii) the performance of the executive officer's
unit within the Company against that unit's goals; and (iii) the
performance of the Company against Company goals. Goals vary
from year to year and from unit to unit and, with regard to
executive officers, usually include both quantitative and
qualitative factors. In fixing the bonuses for fiscal 1998,
quantitative goals evaluated by the Compensation Committee
included goals based on specific profit targets. Qualitative
goals included goals based on strategic positioning and business
development.
From time to time, the Compensation Committee has awarded
one-time bonus payments to certain executive officers as a result
of extraordinary circumstances, such as the consummation of
financing or the attainment of special unit goals.
Long-Term Incentive Program
Stock option grants are used to motivate employees to focus
on the Company's long-term performance, and the Company has long
maintained stock option plans for all qualified employees,
including all executive officers. The Stock Option Committee
fixes the terms and the size of the grants of stock options to
all recipients, including all executive officers. The size of
the grants is based upon the employees' duties, responsibilities,
performance, experience and anticipated contribution to the
Company.
The Stock Option Committee typically awards stock options to
executive officers on an annual basis in the exercise of their
discretion. Additional grants may be made in the event of an
executive officer's promotion. In fiscal 1998, the Company
granted options to purchase 290,714 shares of Rentrak Common
Stock to executive officers of the Company.
Compensation of Ron Berger, Chairman of the Board and Chief
Executive Officer
Ron Berger has served as Chairman of the Board and Chief
Executive Officer of the Company since September 1984. In fixing
salary and target bonus levels, as well as determining the size
of any stock option grants, the Compensation and Stock Option
Committees reviewed the financial performance of the Company,
including revenue and profit levels as compared to the Company's
performance goals. In addition, the Compensation and Stock
Option Committees reviewed the following factors: Mr. Berger's
performance as Chairman of the Board and Chief Executive Officer,
his importance to the Company, and the successful implementation
of the
Company's strategic goals and the compensation packages of chief
executive officers of other comparably sized companies.
In fiscal 1998, Mr. Berger was awarded a bonus of
approximately $62,000. He was not awarded any stock options.
Report On Repricing Of Options
In April 1994, Mr. Berger was awarded a stock option
covering one million shares of the Company's Common Stock at an
exercise price of $5.25, the exercisability of which was subject
to the Company's achievement of certain performance objectives.
Subsequent to the issuance of the April option, the Stock Option
Committee and Mr. Berger agreed to cancel the option due to a
potential adverse impact on the Company's financial statements
from the use of performance objectives. In consideration for the
cancellation of the April grant, in December 1994, Mr. Berger was
awarded a replacement stock option covering one million shares of
the Company's Common Stock at an exercise price of $6.375. Such
grant was made pursuant to the 1986 Second Amended and Restated
Stock Option Plan (the "1986 Plan"). In April 1995, the
Compensation Committee reviewed its grant of the December 1994
option, noting that the decrease in the Company's stock price had
defeated the purpose of the original issuance of the option to
provide the intended incentive. The Compensation Committee
discussed the benefit of providing realistic and meaningful
incentives to the Company's Chairman. The Compensation Committee
reviewed the concept of the option originally granted and the
issuance of a new option at the present stock price. In so
doing, the Compensation Committee approved the cancellation of
the option granted in December 1994 pursuant to the 1986 Plan and
granted a new option effective April 1995 at an exercise price of
$5.250, which approximated fair market value at date of grant.
The following table summarizes the stock option repricing.
</TABLE>
<TABLE>
<CAPTION>
TEN-YEAR OPTION/SAR REPRICINGS
Length of
Number of Market Price Original Option
Securities of Stock at Term
Underlying Time of Exercise Price Remaining at
Options/SARs Pricing or at Time of New Date of
Repriced or Amendment Repricing or Exercise Repicing or
Name Date Amended(#) ($) Amendment ($) Price ($) Amendment
<S> <C> <C> <C> <C> <C> <C>
Ron Berger 04/18/95 1,000,000 5.125 6.375 5.250 8.98 yrs.
</TABLE>
By: The Compensation Committee: By: The Stock Option Committee:
James Jimirro James Jimirro
Bill LeVine Bill LeVine
Stephen Roberts
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, the Compensation Committee had the
following members: James Jimirro, Bill LeVine and Stephen
Roberts. Stephen Roberts provided consulting services to the
Company during fiscal 1998, for which he received $63,996. The
Company plans to continue to use Mr. Roberts as a consultant
during fiscal 1999. Ron Berger sat on the Compensation
Committee.
Ron Berger is a director and member of the Compensation
Committee of American Contractors Indemnity Co., a company for
which Skipper Baumgarten, a director of the Company, serves as
Chief Executive Officer. Mr. Baumgarten became a member of the
Company's Compensation Committee in June 1998.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN OF RENTRAK
CORPORATION NASDAQ MARKET INDEX AND PEER INDUSTRY GROUP.
The Chart on page 21 compares the five year cumulative total
return on Rentrak's Common Stock with that of the NASDAQ Market
index and a peer industry group. This graph assumes $100 was
invested on April 1, 1993 in the Company's Common Stock, the
NASDAQ market index and the peer group index and that any
dividends were reinvested. The peer group is composed of:
Alliance Communication CP CL B, Alliance Gaming Corp., Alpha
Hospitality CP, American Bingo & Gaming, American Skiing Co,
American Vantage Co., American Wagering, Inc., AMF Bowling,
Inc., Anchor Gaming, Apparel Technologies, Inc., Argosy Gaming
Company, Audio Book Club, Inc., Avenue Entertainment, GRP., Bally
Total Fitness Hldg., Blowout Entertainment, Bowl America, Inc. A,
Brassie Golf Corp., Casino America, Inc., CDNow Incorporated,
Cedar Fair (L.P.), Century Casinos Inc., Colorado Casino Resorts,
Digital Communications Technology Inc., Doc Data N.V., Dove
Entertainment Inc., Dover Dows Entertain, Family Golf Centers
Inc., First Entertainment, Inc., Four Media Company, Gametech
Internat Inc., Genisys Rsvtn Systm Inc., Golden Bear Golf Inc.,
Guitar Center, Inc., Handleman Co., Hollywood Entertainment,
Image Entertainment Inc., Imax Corp., Inland Entertainment Corp.,
Integrity Incorporated A, Interactive Entertainment,
Interamericas Commun CP, Interlott Tech Inc., Irata Inc. CL A,
ITT Corp, Jackpot Enterprises Inc., K-Tel International Inc.,
Livent Inc., Macrovision Corp., Magicworks Entertainment, Malibu
Entertainment WW, Marquee Group Inc., Master Glazier's Karate,
Millennium Sports Management, Movie Gallery Inc., Multimedia
Games Inc., Musicland Stores Corp., N-Vision Inc., Navarre Corp.,
Netlive Communication, On Stage Entertainment, Paradise Music &
Ent Inc., Pinnacle Systs, Inc., Platinum Entertainment, Players
Internat Inc., Powerhouse Technologies, Premiere Parks Inc.,
Quintel Entertainment, Renaissance Entertain CP, Senior Tour
Players Dev, Skyline Multimedia Ent, Spec's Music Inc.,
Ticketmaster Group Inc., Trans World Entertain CP, Unitel Video
Inc., Vaughn's Communications, Video Services Corp, Video Update
Inc. CL A, Visual Edge Systems Inc., West Coast Entertainment CP,
Worldwide Entrtn&Sports, and Zomax Optical Media Inc.
The following Chart shall not be deemed incorporated by
reference by any general statement incorporating this proxy
statement into any filing under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such
Acts.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG RENTRAK
CORPORATION, PEER GROUP INDEX AND NASDAQ MARKET INDEX
<TABLE>
<CAPTION>
Measurement
Period Rentrak Corp. Peer Group NASDAQ Market
(Fiscal Year Index
Covered)
Measurement PT- 3/31/93 $100.00 $100.00 $100.00
<C> <C> <C> <C>
3/31/94 $ 86.96 $124.91 $115.57
3/31/95 $113.04 $ 99.03 $122.61
3/31/96 $ 91.30 $ 99.80 $164.91
3/31/97 $ 47.83 $ 92.48 $184.50
3/31/98 $165.22 $137.22 $278.82
</TABLE>
PROPOSAL 2: ADOPTION OF AMENDMENT TO THE 1997 EQUITY
PARTICIPATION PLAN OF RENTRAK CORPORATION
INTRODUCTION
At the Annual Meeting, the Company's shareholders are being
asked to approve an amendment to the 1997 Equity Participation
Plan of Rentrak Corporation (the "Plan"). The Board of Directors
initially approved the Plan on February 27, 1997, and the
Company's shareholders approved the Plan at the 1997 Annual
Meeting of Shareholders. As of June 26, 1998, nearly all shares
of the Company's Common Stock authorized for issuance under the
Plan had either been issued or been made subject to outstanding
options or other awards granted thereunder. Accordingly, the
Board of Directors approved an amendment to the Plan (the
"Amendment") to increase the aggregate number of shares that may
be issued under the Plan from 550,000 shares to 1,100,000 shares.
The Amendment would also increase the number of shares subject to
options and other awards that may be granted under the Plan to
one person in a single fiscal year from 250,000 shares to
400,000 shares. The full text of the Amendment is attached as
Exhibit A to this proxy statement.
The Board of Directors is of the opinion that the Plan and
its predecessor, the 1986 Plan, have been of significant
importance and benefit to the Company and its shareholders by
enabling the Company to attract and retain officers and other key
employees and by increasing their commitment to the Company's
continued success and better aligning their economic interest
with the Company and its shareholders. The Board of Directors is
also of the opinion that the Plan enables the Company to attract
and retain non-employee directors. In the view of the Board of
Directors, the proposed Amendment will enable the Company to
continue to realize the benefits of stock options.
The Board recommends a vote FOR the approval of the
amendment to the 1997 Equity Participation Plan of Rentrak
Corporation.
SUMMARY DESCRIPTION OF THE PLAN
Eligibility
Under the Plan, all employees (including officers) and
consultants of the Company are eligible to receive stock options,
restricted stock awards, performance awards, stock payments,
deferred stock awards and dividend equivalents (collectively,
"Incentive Awards"). On April 1 of each year in which the Plan
is in effect, all nonemployee Directors of the Company will
receive an automatic annual grant of stock options, and any
nonemployee Chairman of the Board and all nonemployee Board
committee Chairs will receive an additional automatic annual
grant of stock options (collectively, "Director's Options"). At
present, there are approximately 175 eligible employees and
consultants and 8 eligible nonemployee Directors.
Administration
The Stock Option Committee of the Board (the "Committee"),
or such other committee as the Board may later designate,
administers the Plan with respect to Incentive Awards issuable to
employees and consultants. The Committee must be comprised of
two or more Directors, each of whom qualifies as both a
"nonemployee Director" for purposes of Rule 16b-3 of the
Securities Exchange Act of 1934 (the "Exchange Act") and an
"outside Director" for purposes of Code Section 162(m). Such
Committee members are appointed by and serve at the pleasure of
the Board. The Committee is authorized to interpret the Plan and
any agreements pursuant to which Incentive Awards are granted, to
adopt rules that the Committee deems appropriate for the
administration of the Plan, and to interpret, amend or revoke any
such rules. Any such interpretations and rules with respect to
ISOs must be consistent with Section 422 of the Code. The full
Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan, except where
such action would conflict with Rule 16b-3 of the Exchange Act or
Section 162(m) of the Code.
The Plan authorizes the Committee to make such adjustments
as it deems necessary to preserve the economic value of
outstanding and future Incentive Awards, if the Committee
determines that an adjustment is appropriate to prevent dilution
or enlargement of grantees' rights in the event of certain
distributions to stockholders, extraordinary corporate
transactions or other events specified in the Plan. The
Committee may also take certain other action that it deems
necessary and appropriate in connection with such distributions,
transactions and events, including any one or more of the
following: (i) purchase Incentive Awards; (ii) prohibit the
exercise of Incentive Awards; (iii) accelerate the vesting of
Incentive Awards; (iv) provide that any successor or survivor
corporation shall assume the Company's obligations with respect
to Incentive Awards; (v) adjust the number and type of shares
subject to and the criteria included in Incentive Awards; and
(vi) eliminate all restrictions and/or forfeiture provisions in
connection with restricted stock or deferred stock awards.
The full Board administers the Plan with respect to
Director's Options and has the same adjustment authority as the
Committee in connection with certain distributions to
stockholders, extraordinary corporate transactions or other
events specified in the Plan; provided, however, that the Board
may not take any such action to the extent that it would be
inconsistent with the applicable exemptive conditions of Rule 16b-
3 under the Exchange Act.
Securities Subject To The Plan
At present, the Company may not issue more than 550,000
shares of its common stock (the "Shares") under the Plan, which
Shares may be made available from the Company's authorized but
unissued common stock. If the Company's shareholders approve the
Amendment, then the Company may issue an additional 550,000
Shares (for a total of 1,100,00 Shares) under the Plan. Shares
subject to an Incentive Award or Director's Option that expires
or is canceled, forfeited, settled in cash, or otherwise
terminates without a delivery of such Shares, including Shares
withheld or surrendered in payment of any exercise or purchase
price of, or taxes relating to, an Incentive Award or Director's
Option, will again be available for Incentive Awards and
Director's Options under the Plan; provided, however, that no
Shares may again be optioned, granted or awarded if such action
would cause an ISO to fail to qualify as such.
On June 23, 1998, the closing price per share of the
Company's common stock was $6.094.
Stock Option Grants
The Plan authorizes the Committee to exercise its absolute
discretion in determining which employees and consultants will be
granted stock options; the number of Shares to be subject to
stock options granted to such employees or consultants, which
amount may not currently exceed 250,000 Shares per person per
year (400,000 Shares if the Amendment is approved); whether stock
options granted to employees are to be ISOs or NSOs (consultants
are not eligible to receive ISOs); and the terms and conditions
of such stock options. The Committee also has discretion with
respect to the exercise price, vesting period and exercise period
of stock options, subject to the limitations discussed below.
The exercise price per share of ISOs and stock options
intended to qualify as performance based compensation under Code
Section 162(m) may not be less than 100 percent of the fair
market value of a share of the Company's common stock on the date
the option is granted. The exercise price of ISOs granted to an
individual then owning more than 10 percent of the total combined
voting power of all classes of stock of the Company or any
subsidiary or parent thereof may not be less than 110 percent of
the fair market value of a share of the Company's common stock on
the date the ISO is granted. For all other options granted to
employees and consultants under the Plan, including NSOs, the
Committee will establish the exercise price per share, which in
no event may be less than the par value of a share of the
Company's common stock unless otherwise permitted by applicable
state law.
The exercise price for ISOs and NSOs granted under the Plan
may be paid in cash or in outstanding shares of the Company's
common stock. Options may also be exercised on a cashless basis
through the same-day sale of the purchased shares. The Committee
may also permit the optionee to pay the exercise price through a
promissory note payable in installments over a period of years.
The amount financed may include any federal or state income or
employment taxes incurred by reason of the option exercise.
The Committee may exercise its discretion in establishing a
vesting period or schedule, if any, for stock options granted to
employees and consultants; provided, however, that unless the
Committee provides otherwise, no stock option shall be
exercisable by an employee or consultant who is then subject to
Section 16 of the Exchange Act until six months and one day after
the grant date of such stock option. The Committee may, in its
sole and absolute discretion and subject to whatever terms and
conditions it selects, accelerate the vesting period of any stock
option granted to an employee or consultant.
The Committee may exercise its discretion in establishing
the exercise period of any stock option granted to employees and
consultants; provided, however, that ISOs may not have a term of
more than ten years from the date of grant, or five years from
such date if the ISO is granted to an individual then owning more
than ten percent of the total combined voting power of all
classes of stock of the Company or any subsidiary or parent
corporation thereof.
As consideration for the grant of a stock option to an
employee or consultant, such employee or consultant must agree to
remain in the employ of or to consult for the Company or any
subsidiary of the Company for a period of at least one year, or
such shorter period as the Committee may establish in the stock
option agreement or otherwise permit following the grant date of
such option.
Directors Options
Under the Plan, the Board will annually grant an option to
purchase ten thousand (10,000) Shares to each Independent
Director of the Company. The Board will also grant an additional
option to purchase two thousand five hundred (2,500) Shares to
any nonemployee Chairman of the Board and to each nonemployee
Committee Chairman.
Options granted to Independent Directors ("Directors
Options") must have an exercise price per share equal to
100 percent of the fair market value of a share of the Company's
common stock on the date the option is granted. The period
during which the right to exercise a Director Option in whole or
in part vests shall be set by the Board and the Board may
determine that such an Option may not be exercise in whole or in
part for a specified period after it is granted; provided,
however, that unless the Board otherwise provides in the terms
of the Option or otherwise, no option shall be exercisable by any
Director within the period ending six months and one day after
the date the Option is granted. At any time after grant of a
Director Option, the Board may, in its sole and absolute
discretion and subject to whatever terms and conditions it
selects, accelerate the period during which a Director Option
vests. In consideration of the grant of a Director's Option, a
non-employee Director must agree to serve as a Director until the
next annual meeting of the Company's shareholders. Prior to
April 1998, the Plan provided that Director Options would vest in
four, equal annual installments.
Award of Restricted Stock
The Plan authorizes the Committee to select from time to
time, in its absolute discretion, certain employees or
consultants for an award of restricted stock. The Committee will
establish the purchase price, if any, and such restrictions as
the Committee determines to be appropriate, which restrictions
may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on the duration
of a recipient's employment with the Company, Company performance
and individual performance. Unless the Committee otherwise
provides, no share of restricted stock granted to a person
subject to Section 16 of the Exchange Act may be assigned or
otherwise transferred until at least six months and one day after
the grant date of such restricted stock. Restricted stock may
not be sold or encumbered until all restrictions terminate or
expire; provided, however, that the Committee may remove any or
all such restrictions on such terms and conditions as the
Committee determines to be appropriate.
Following an award of restricted stock, the Company will
issue a certificate representing the subject Shares in the name
of each award recipient, and the Company will hold such
certificate in escrow for the employee's or consultant's account.
Upon the delivery of such Shares into escrow, a restricted
stockholder will have, unless otherwise provided by the
Committee, all of the rights of a stockholder with respect to
such Shares, subject to the restrictions in the restricted stock
agreement, including the right to receive all dividends and all
distributions paid or made with respect to the Shares. However,
the Company retains the right to repurchase any restricted stock
still subject to such restrictions immediately upon a termination
of employment (as defined in the Plan) or, if applicable, upon a
termination of consultantcy (as defined in the Plan) between the
restricted stockholder and the Company, with a cash price per
share equal to the price paid by the restricted stockholder for
such restricted stock. Provision may be made that no such right
of repurchase will exist in the event of a termination of
employment or consultantcy without cause, following a change in
control of the Company, or because of the restricted
stockholder's retirement, death, or disability, or otherwise.
If the Committee intends for particular restricted stock
awards to qualify as "performance based compensation" that is not
subject to the limitation on tax deductibility imposed by Section
162(m) of the Code, the awards will be subject to such other
restrictions as may be required to so qualify. These additional
restrictions must include the achievement of specific performance
goals related to one or more of the following: pre-tax income;
operating income; cash flow; earnings per share; return on
equity; return on invested capital or assets; and cost reductions
or savings. During the first 90 days of each fiscal year, the
Committee must select those persons, if any, who will be granted
qualifying restricted stock awards, select the performance goal
or goals applicable to the fiscal period in question, establish
the various targets and bonus amounts which may be earned during
the fiscal period in question, and specify the relationship
between the targets and amounts to be earned by each recipient.
Following the completion of the fiscal period in question, the
Committee must certify in writing whether the applicable
performance targets have been achieved for such fiscal period.
The Committee may, in its discretion, reduce (but not increase)
the amount payable at a given level of performance to take into
account additional factors that the Committee deems relevant to
the assessment of individual or corporate performance during the
fiscal period in question. A qualifying restricted stock award
may not currently cover more than 250,000 Shares per recipient
per year (400,000 Shares if the Amendment is approved).
As consideration for the issuance of restricted stock, in
addition to the payment of any purchase price, an employee or
consultant must agree to remain in the employ of or to consult
for the Company or any subsidiary of the Company for a period of
at least one year after the grant date of such restricted stock.
Performance Awards, Deferred Stock, Stock Payments And
Dividend Equivalents
The Plan authorizes the Committee to grant one or more
"performance awards" to such employees or consultants as the
Committee may from time to time select. Performance awards may
be linked to the market value, book value, net profits, or other
measure of the value of common stock or other specific
performance criteria determined appropriate by the Committee, in
each case on a specified date or dates or over any period or
periods determined by the Committee, or may be based upon the
appreciation and the market value, book value, net profits or
other measure of the value of a specified number of shares of
common stock over a fixed period or periods determined by the
Committee. In making such determinations, the Committee will
consider the contributions, responsibilities and other
compensation of the particular employee or consultant, and any
other such factors as the Committee deems relevant in light of
the specific type of award. Payment of any performance award may
be made in cash, in common stock, or a combination of both, as
determined by the Committee.
The Plan also authorizes the Committee to grant an award of
"deferred stock" to such employees or consultants as the
Committee may from time to time select, which award entitles the
recipient to receive Shares upon the satisfaction of any
conditions the Committee may impose. The number of Shares
subject to a deferred stock award will be determined by the
Committee and may be linked to the market value, book value, net
profits or other measure of the value of the Company's common
stock or other specific performance criteria determined to be
appropriate by the Committee, in each cash on a specified date or
dates or over any period or periods determined by the Committee.
Common stock underlying a deferred stock award will not be issued
until the deferred stock award has vested. Unless otherwise
provided by the Committee, a grantee of a deferred stock award
shall have no right as a Company stockholder with respect to such
deferred stock until such time as the award has vested and the
common stock underlying the award has been issued.
The Plan also authorizes the Committee to grant "stock
payments" to any employee or consultant selected by the Committee
in a manner determined from time to time by the Committee. The
number of shares shall be determined by the Committee and may be
based upon the fair market value, book value, net profits or
other measure of the value of common stock or other specific
performance criteria deemed appropriate by the Committee,
determined on the date such stock payment is made or on any date
thereafter.
The Plan also authorizes the Committee to grant "dividend
equivalents" to any employee or consultant in connection with any
other Incentive Award (other than restricted stock) granted under
the Plan. Dividend equivalents provide an Incentive Award
recipient with cash payments equal to the dividend amount paid on
the number of Shares subject to unvested and/or unexercised
options, unvested deferred stock awards, and unvested performance
awards. Dividend equivalents are payable in cash or additional
Shares in accordance with a formula and are subject to such
limitations as the Committee establishes. Dividend equivalents
granted with respect to stock options intended to qualify as
performance-based compensation for purposes of Code Section
162(m) will be payable regardless of whether such stock options
are exercised.
If the Committee intends for particular performance awards,
deferred stock awards and/or stock payments to qualify as
"performance based compensation" that is not subject to the
limitation on tax deductibility imposed by Section 162(m) of the
Code, the awards and/or payments will be subject to such other
restrictions as may be required to so qualify. These additional
restrictions must include the achievement of specific performance
goals related to one or more of the following: pre-tax income;
operating income; cash flow; earnings per share; return on
equity; return on invested capital or assets; and cost reductions
or savings. During the first 90 days of each fiscal year, the
Committee must select those persons, if any, who will be granted
qualifying awards and/or payments, select the performance goal or
goals applicable to the fiscal period in question, establish the
various targets and bonus amounts which may be earned during the
fiscal period in question, and specify the relationship between
the targets and amounts to be earned by each recipient.
Following the completion of the fiscal period in question, the
Committee must certify in writing whether the applicable
performance targets have been achieved for such fiscal period.
The Committee may, in its discretion, reduce (but not increase)
the amount payable at a given level of performance to take into
account additional factors that the Committee deems relevant to
the assessment of individual or corporate performance during the
fiscal period in question. A qualifying performance award,
deferred stock award or stock payment may not cover more than
400,000 Shares per recipient per year.
The Committee will establish, in its discretion, the
exercise and vesting period of any performance award, deferred
stock award, stock payment or dividend equivalent. In
consideration of the grant of any performance award, deferred
stock award, stock payment or dividend equivalent, the grantee
must agree to remain in the employ of or to consult for the
Company or any subsidiary of the Company for a period of at least
one year after the grant date of such performance award, deferred
stock award, stock payment or dividend equivalent (or such
shorter period as the Committee shall establish in the agreement
or by the Committee's action following such grant).
Nature Of Plan Amendments That May Be Enacted Without
Stockholder Approval
The Board may amend or modify the Plan in any and all
respects, except that the Board may not, without the approval of
the Company's shareholders: (i) increase the maximum number of
shares issuable under the Plan (except in connection with certain
changes in capitalization) or modify the Award Limit; or
(ii) take any other action that would otherwise require
shareholder approval under any applicable law, regulation or
rule.
Unless sooner terminated by the Board, the Plan will, in all
events, terminate ten years after the date the Board adopted the
Plan. Any Incentive Awards or Director's Options outstanding at
the time of such termination will remain in force in accordance
with the provisions of the agreement and/or instruments
evidencing such Incentive Awards or Director's Options.
New Plan Benefits
In February 1998, the Board of Directors authorized the
Company to enter into new long-term employment agreements with
Ron Berger, the Company's Chairman and Chief Executive Officer,
and Kim Cox, the Company's Executive Vice President and Chief
Financial Officer. Mr. Berger and Mr. Cox have served as
Rentrak's senior executives since 1977 and 1985, respectively,
and the Board determined that it was in the best interests of the
Company to retain their services. In connection with its
approval of the employment agreements, the Compensation Committee
also authorized the issuance of an option to purchase an
aggregate 800,000 Shares to Mr. Berger and an option to purchase
an aggregate 100,000 Shares to Mr. Cox. At that time, the
Company's stock price was $5.875 per share. The Committee's
decision was based on the significant benefit to the company of
retaining Mr. Berger and Mr. Cox and incentivizing them to focus
on the long-term performance of the Company.
However, because there are currently less than 900,000
Shares available for issuance under the Plan, the Committee
subsequently decided to grant such options over time. In June
1998, the Committee granted Mr. Berger an option to purchase
154,920 Shares of Rentrak Common Stock and granted Mr. Cox an
option to purchase 19,365 Shares, both at an exercise price of
$5.475 per Share (the market price of the Company's stock on the
date of the grant). At the same time, the Committee approved the
Amendment to increase the number of shares issuable under the
Plan by 550,000 shares and increase the Award Limit under the
Plan as described above. Assuming that the Amendment is approved
by the Company's shareholders, on the date of such approval, the
Committee intends to grant Mr. Berger and Mr. Cox options to
purchase 355,560 and 44,440 shares, respectively, both with an
exercise price equal to the market price of the Rentrak Common
Stock at the time of the grant. During 1999, the Committee
intends to further increase the number of shares issued under the
Plan and, subject to shareholder approval of such increase, to
grant Mr. Berger and Mr. Cox additional options to purchase
289,580 and 36,195 shares of Rentrak Common Stock, respectively.
Those options would be granted concurrently with the 1999 Annual
Meeting of Shareholders (on or about August 1999), both with an
exercise price equal to the market price of the Company's Common
Stock at the time of the grant. Such options would be granted
in the future assuming Mr. Berger's and Mr. Cox's continued
employment with the Company. The actual number of options
granted in fiscal 1999 would be increased above or decreased
below 289,520 and 36,195, respectively, depending on the value of
the options granted in 1998. The value of the options would be
estimated by the Committee using the Black-Scholes model. For
example, if the average exercise price of the options granted in
1998 is greater than $5.875, then the number of shares subject to
the options granted in 1999 will be increased. Conversely, if
the average exercise price of the options granted in 1998 is less
than $5.875, the then the number of shares subject to the options
granted in 1999 will be decreased. The Committee's objective in
establishing this formula is to approximate the economic benefit
of a one-time grant of such options to Messrs. Berger and Cox
with an exercise price of $5.875 per Share.
Federal Income Tax Consequences Of Awards Granted Under The
Plan
The following is a brief description of the federal income
tax treatment generally applicable to ISOs, NSOs and restricted
stock awards granted under the Plan, based on the federal income
tax laws in effect on the date hereof. The exact federal income
tax treatment of an ISO, NSO or restricted stock award will
depend upon the specific nature of the grant. Because the
following is only a brief summary of the federal income tax
rules, grantees should not rely thereon for individual tax
advice, as each taxpayer's situation and the consequences of any
particular transaction will vary depending upon the specific
facts and circumstances involved. Each taxpayer is advised to
consult with his or her own tax advisor for particular federal,
as well as state and local, income and any other tax advice.
Incentive Stock Options. Generally, an optionee recognizes
no taxable income upon the grant or exercise of an ISO that meets
the requirements of Code Section 422. However, the amount by
which the fair market value of the stock acquired at the time of
exercise exceeds the option exercise price (the "spread") is
taken into the account in determining the amount, if any, of the
alternative minimum tax due from the optionee in the year in
which the option is exercised. In addition, if the optionee
exercises the option by paying the option price with shares of
stock, the transfer of such stock may result in taxable income to
the optionee even though the transfer itself will not affect the
favorable tax treatment of the stock received as a result of
exercising the option.
If an optionee holds the stock acquired through the exercise
of the option for more than two years from the date in which the
option was granted and more than one year from the date on which
the option was exercised, and if the optionee is an employee of
the Company at all times from the date of the grant of the option
through the date that is three months before the date of
exercise, any gain or loss on the subsequent disposition of such
stock will be taxed to such optionee as mid-term or long-term
capital gain or loss equal to the difference between the
consideration received upon such disposition and the option
exercise price.
Generally, if an optionee disposes of the stock received on
exercise of an incentive stock option less than two years after
the date the option was granted or less than one year
after the date the option was exercised, then, at the time of
disposition, the optionee will recognize ordinary income in the
amount equal to the lesser of (i) the stock's fair market value
on the date of exercise over the option exercise price; or (ii)
the amount received for the stock over the option exercise price.
Any gain in excess of this amount will be taxed as capital gain.
To the extent that an optionee recognizes ordinary income by
reason of a disqualifying disposition of stock according to the
exercise of an incentive stock option, the Company generally will
be entitled to a corresponding business expense deduction in the
tax year in which the disqualifying disposition occurs.
Non-Qualified Stock Options. NSOs are not intended to be
incentive stock options under Section 422 of the Code. An
optionee does not recognize taxable income upon the grant of an
NSO, provided the NSO does not have a readily ascertainable fair
market value at the time of grant.
Upon the exercise of an NSO, the optionee generally will
recognize ordinary income in an amount equal to the difference
between the fair market value of the stock on the date of
exercise and the exercise price. However, in the event an
optionee cannot sell the stock acquired on exercise of an NSO
without incurring liability under Section 16(b) of the Exchange
Act, or the stock is otherwise subject to a substantial risk of
forfeiture, the optionee will not recognize ordinary income with
respect to the issuance of the stock until such time as the
optionee can sell the stock without incurring liability under
Section 16(b) of the Act or the stock is no longer subject to a
substantial risk of forfeiture unless the optionee files an
election with the Internal Revenue Service pursuant to Section
83(b) of the Code. If such an election is made, the optionee
will be taxed in the year the option is exercised on the
difference between the exercise price and the fair market value
of the stock at the time of exercise. This amount will be taxed
as ordinary income.
If no election is made pursuant to Section 83(b) of the
Code, the recognition of income with respect to the exercise will
be delayed until the restriction imposed by Section 16(b) of the
Exchange Act or such other risk of forfeiture (as the case may
be) lapses, and the optionee will be taxed at ordinary income
rates on the difference between the exercise price of the NSO and
the fair market value of the stock at the time the restriction or
risk of forfeiture lapses.
Provided the Company complies with applicable federal income
tax reporting requirements with respect to payment of
compensation, the Company will generally be entitled to a
business expense deduction in the tax year in which the exercise
occurs in an amount equal to the ordinary income recognized by
the optionee.
Any gain or loss on a disposition of the stock acquired upon
the exercise of an NSO will be treated as long-term, mid-term or
short-term capital gain or loss to the optionee, depending upon
the period for which the stock has been held. The gain or loss
recognized on a taxable disposition generally will be an amount
equal to the difference between the selling price and the
optionee's basis in such stock. The optionee's basis generally
is equal to the fair market value of such stock on the date the
NSO was exercised (or on the date the risk of forfeiture lapses,
if such stock is subject to a substantial risk of forfeiture).
There generally are no federal income tax consequences to
the Company by reason of the disposition by an optionee of stock
acquired upon the exercise of an NSO.
Restricted Stock. A recipient of restricted stock generally
will recognize ordinary income, and the Company will be entitled
to a deduction, in an amount equal to the excess of the fair
market value of the stock (determined without regard to any
restrictions other than those that by their terms never lapse)
over the amount, if any, paid for the stock. For this purpose,
the fair market value of the stock is generally determined on the
earlier of the date on which the stock is no longer subject to a
substantial risk of forfeiture or is transferable (without the
transferee being subject to a substantial risk of forfeiture) and
the income with respect to the receipt of the stock is reportable
by recipient in that year. In the event the recipient cannot
sell the stock without incurring liability under Section 16(b) of
the Exchange Act, the recipient generally will not recognize
ordinary income with respect to the receipt of the stock until
the recipient can sell the stock without incurring liability
under Section 16(b) of the Act and the fair market value of the
stock (for purposes of determining the recipient's income
resulting from the receipt of the stock) will be determined as of
that date.
If the recipient files an election with the Internal Revenue
Service pursuant to Section 83(b) of the Code within 30 days of
the receipt of the stock, the recipient will be taxed in the year
the stock is received on the difference between the fair market
value of the stock at the time of receipt and the amount paid for
the stock, if any. This amount will be taxed as ordinary income.
If shares with respect to which a Section 83(b) election has been
made are forfeited, the recipient generally will be entitled to a
capital loss equal to the amount, if any, that the recipient had
paid for the forfeited shares as distinguished from the amount
that the recipient had recognized as income as a result of the
Section 83(b) election.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Peter Dal Bianco, a stockholder and current member of the
Company's Board of Directors, holds an interest in several retail
outlets participating in the Company's PPT system. The Company
realized revenues of $250,534 from these outlets during fiscal
1998. The Company expects to continue to do business with Mr.
Dal Bianco's retail outlets in fiscal 1999.
Stephen Roberts, a stockholder and a member of the Company's
Board of Directors, provided consulting services to the Company
during fiscal 1998, for which he received $63,996. The Company
plans to continue to use Mr. Roberts as a consultant during
fiscal 1999.
Marty Graham, an officer of the Company, holds an interest
in two retail outlets participating in the Company's PPT System.
The Company realized revenues of $72,812 from these outlets
during fiscal 1998. The Company expects to continue to do
business with Mr. Graham's retail outlets in fiscal 1999.
Dr. Pradeep Batra, a member of the Company's Board of
Directors, controls Unique Business Systems ("UBS") a company
that provided marketing services to the Company . The Company
paid UBS $137,800 in commissions during fiscal 1998. The
Company's contract with UBS expires December 31, 1999. The
Company is in the process of negotiating a new contract with UBS.
Pursuant to the Company's Officer Loan Program, Ron Berger
borrowed a total of $400,000 from the Company during fiscal 1996
in three separate loan transactions. The three loans, which
accrued interest at the prime rate were paid in full during
fiscal 1998.
Mr. Berger also borrowed $300,000 from the Company during
fiscal 1998 which accrued interest at the prime rate plus .25%.
This loan was paid in full prior to March 31, 1998. The largest
aggregate indebtedness outstanding during Fiscal 1998 under Mr.
Berger's loans were $400,000.
INDEPENDENT ACCOUNTANTS
The Company's independent public accountants for its fiscal
year ended March 31, 1998, were Arthur Andersen LLP, which
management intends to continue to retain during the current
fiscal year. No election, approval or ratification of the choice
of independent public accountant by the shareholders is required.
A representative of Arthur Andersen LLP is expected to be present
at the Annual Meeting and will have the opportunity to make a
statement if he or she desires to do so. Such representative is
also expected to be available to respond to appropriate
questions.
OTHER BUSINESS
Management does not presently know of any matters that will
be presented for action at the Annual Meeting other than those
herein set forth. However, if any other matters properly come
before the Annual Meeting, the holders of proxies solicited by
the Board of Directors of the Company will have discretionary
authority to vote the shares represented by all proxies granted
to them on such matters in accordance with their best judgment.
FINANCIAL INFORMATION
A copy of the 1998 Annual Report of the Company, including
audited financial statements, is being sent to shareholders with
this Proxy Statement.
REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED MARCH 31,
1998, WILL BE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON
WRITTEN REQUEST TO CAROLYN A. PIHL, CHIEF ACCOUNTING OFFICER,
RENTRAK CORPORATION, ONE AIRPORT CENTER, 7700 N.E. AMBASSADOR
PLACE, PORTLAND, OR 97220. COPIES OF EXHIBITS TO THE ANNUAL
REPORT ON FORM 10-K ARE AVAILABLE, BUT A REASONABLE FEE WILL BE
CHARGED TO ANY SHAREHOLDER REQUESTING EXHIBITS.
By Order of the Board of Directors,
/S/ F. Kim Cox
__________________________________
F. Kim Cox
Secretary
Portland, Oregon
Date: July 1, 1998
[LOGO OF RENTRAK CORPORATION APPEARS HERE]
RENTRAK CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Ron Berger and F. Kim Cox as
Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote as designated
below, all the shares of Common Stock of Rentrak Corporation (the
"Company") held of record by the undersigned on June 23, 1998, at
the annual meeting of the shareholders to be held at the
Company's executive offices, One Airport Center, 7700 N.E.
Ambassador Place, Portland, Oregon 97220, on August 24, 1998, at
8 a.m., Pacific Time, or any adjournment thereof.
1. Election of Directors to the Terms Specified:
[ ] FOR all nominees listed below (except as marked to
the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
below.
Instruction: To withhold authority to vote for any
individual nominee, strike a line through the nominee's name
in the list below:
Pradeep Batra (3 Years), Ron Berger (3 Years), Skipper
Baumgarten (1 year)
2. Proposal to Approve the Amendment to the 1997 Equity
Participation Plan of Rentrak Corporation:
[ ] FOR approval of the Amendment.
[ ] AGAINST approval of the Amendment.
[ ] WITHHOLD AUTHORITY to vote to approve the
Amendment.
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
This proxy, when properly executed, will be voted as
directed herein. If no direction is made, this proxy will be voted FOR
the three nominees to the Board of Directors of Rentrak Corporation and
FOR approval of the amendment to the 1997 Equity Participation Plan of
Rentrak Corporation.
Please date and sign exactly as name appears hereon. When
shares are held as joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
Dated: _____________________, 1998
_____________________________________
Signature
_____________________________________
Signature if held jointly
Please mark, sign, date and return the proxy using the
enclosed envelope.
Exhibit A
AMENDMENT TO
THE 1997 EQUITY PARTICIPATION PLAN
OF
RENTRAK CORPORATION
THIS AMENDMENT (the "Amendment") to the 1997 Equity
Participation Plan of Rentrak Corporation (the "Plan") is hereby
adopted by Rentrak Corporation, an Oregon corporation (the
"Company").
1. Incorporation; Definitions. The terms and provisions
of this Amendment are incorporated by this reference in the Plan
as though fully set forth therein. Terms not otherwise described
herein shall have the meanings ascribed to them in the Plan.
2. Conflicts. In the event of any conflict between the
terms and provisions of this Amendment and those of the Plan, the
terms and provisions of this Amendment shall control.
3. Amendment.
a. Award Limit. Section 1.2 of the Plan is hereby
amended to read in its entirety as follows:
1.2 Award Limit.
"Award Limit" shall mean 400,000 shares of
Common Stock.
b. Shares Subject to Plan. Section 2.1(a) of the
Plan is hereby amended to read in its entirety as follows:
2.2 Shares Subject to Plan.
(a) The shares of stock subject to Options,
awards of Restricted Stock, Performance Awards, Dividend
Equivalents, awards of Deferred Stock or Stock Payments shall be
Common Stock, initially shares of the Company's Common Stock, par
value $.001 per share. The aggregate number of such shares which
may be issued upon exercise of such options or rights or upon any
such awards under the Plan shall not exceed one million one
hundred thousand (1,100,000). The shares of Common Stock
issuable upon exercise of such options or rights or upon any such
awards may be either previously authorized but unissued shares or
treasury shares.
4. No Other Change. Except as specifically modified in
this Amendment, all other provisions and terms of the Plan shall
remain unchanged and in full force and effect.
I hereby certify that the foregoing Amendment was duly
adopted by the Board of Directors of Rentrak Corporation on
____________, 1998.
Executed on this __ day of __________, 1998.
F. Kim Cox
Secretary
THE 1997 EQUITY PARTICIPATION PLAN
OF
RENTRAK CORPORATION
Rentrak Corporation, an Oregon corporation, has adopted
The 1997 Equity Participation Plan of Rentrak Corporation (the
"Plan"), effective February ___, 1997, for the benefit of its
eligible employees, consultants and directors. The Plan consists
of two plans, one for the benefit of Employees (as such term is
defined below) and consultants and one for the benefit of
Independent Directors (as such term is defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors,
Employees and consultants to further the growth, development and
financial success of the Company by personally benefiting through
the ownership of Company stock and/or rights which recognize such
growth, development and financial success.
(2) To enable the Company to obtain and retain the
services of directors, Employees and consultants considered
essential to the long range success of the Company by offering
them an opportunity to own stock in the Company and/or rights
which will reflect the growth, development and financial success
of the Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used
in
this Plan they shall have the meanings specified below, unless
the context clearly indicates otherwise.
1.2 Award Limit. "Award Limit" shall mean
250,000
shares of Common Stock.
1.3 Board. "Board" shall mean the Board of
Directors
of the Company.
1.4 Change in Control. "Change in Control" shall
mean
a change in ownership or control of the Company effected through
either of the following transactions:
(a) any person or related group of persons (other
than
the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of securities
possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders
to accept; or
(b) there is a change in the composition of the Board
over a period of thirty-six (36) consecutive months (or less)
such that a majority of the Board members (rounded up to the
nearest whole number) ceases, by reason of one or more proxy
contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously
since the beginning of such period or (ii) have been elected or
nominated for election as Board members during such period by at
least a majority of the Board members described in clause (i) who
were still in office at the time such election or nomination was
approved by the Board.
1.5 Code. "Code" shall mean the Internal Revenue Code
of 1986, as amended.
1.6 Committee. "Committee" shall mean the Stock
Option Committee of the Board, or another committee of the Board,
appointed as provided in Section 8.1.
1.7 Common Stock. "Common Stock" shall mean the
common stock of the Company, par value $.001 per share, and any
equity security of the Company issued or authorized to be issued
in the future, but excluding any preferred stock and any
warrants, options or other rights to purchase Common Stock. Debt
securities of the Company convertible into Common Stock shall be
deemed equity securities of the Company.
1.8 Company. "Company" shall mean Rentrak
Corporation, an Oregon corporation.
1.9 Corporate Transaction. "Corporate Transaction"
shall mean any of the following stockholder-approved transactions
to which the Company is a party:
(a) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal
purpose of which is to change the State in which the Company is
incorporated, form a holding company or effect a similar
reorganization as to form whereupon this Plan and all Options are
assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition
of all or substantially all of the assets of the Company, in
complete liquidation or dissolution of the Company in a
transaction not covered by the exceptions to clause (a), above;
or
(c) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than
fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred or issued to a
person or persons different from those who held such securities
immediately prior to such merger.
1.10. Deferred Stock. "Deferred Stock" shall mean
Common Stock awarded under Article VII of this Plan.
1.11. Director. "Director" shall mean a member of the
Board.
1.12. Dividend Equivalent. "Dividend Equivalent"
shall mean a right to receive the equivalent value (in cash or Common
Stock) of dividends paid on Common Stock, awarded under Article
VII of this Plan.
1.13. Employee. "Employee" shall mean any officer or
other employee (as defined in accordance with Section 3401(c) of
the Code) of the Company, or of any corporation which is a
Subsidiary.
1.14. Exchange Act. "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
1.15. Fair Market Value. "Fair Market Value" of a share
of Common Stock as of a given date shall be (i) the closing price
of a share of Common Stock on the principal exchange on which
shares of Common Stock are then trading, if any (or as reported
on any composite index which includes such principal exchange),
on the trading day previous to such date, or if shares were not
traded on the trading day previous to such date, then on the next
preceding date on which a trade occurred, or (ii) if Common Stock
is not traded on an exchange but is quoted on NASDAQ or a
successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the
trading day previous to such date as reported by NASDAQ or such
successor quotation system; or (iii) if Common Stock is not
publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Committee (or the Board, in
the case of Options granted to Independent Directors) acting in
good faith.
1.16. Grantee. "Grantee" shall mean an Employee or
consultant granted a Performance Award, Dividend Equivalent,
Stock Payment, or an award of Deferred Stock, under this Plan.
1.17. Incentive Stock Option. "Incentive Stock Option"
shall mean an option which conforms to the applicable provisions
of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee.
1.18. Independent Director. "Independent Director"
shall mean a member of the Board who is not an Employee of the
Company.
1.19. Non-Qualified Stock Option. "Non-Qualified Stock
Option" shall mean an Option which is not designated as an
Incentive Stock Option by the Committee.
1.20. Option. "Option" shall mean a stock option
granted under Article III of this Plan. An Option granted under
this Plan shall, as determined by the Committee, be either a Non-
Qualified Stock Option or an Incentive Stock Option; provided,
however, that Options granted to Independent Directors and
consultants shall be Non-Qualified Stock Options.
1.21. Optionee. "Optionee" shall mean an Employee,
consultant or Independent Director granted an Option under this
Plan.
1.22. Performance Award. "Performance Award" shall mean
a cash bonus, stock bonus or other performance or incentive award
that is paid in cash, Common Stock or a combination of both,
awarded under Article VII of this Plan.
1.23. Plan. "Plan" shall mean The 1997 Equity
Participation Plan of Rentrak Corporation.
1.24. QDRO. "QDRO" shall mean a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
1.25. Restricted Stock. "Restricted Stock" shall mean
Common Stock awarded under Article VI of this Plan.
1.26. Restricted Stockholder. "Restricted Stockholder"
shall mean an Employee or consultant granted an award of
Restricted Stock under Article VI of this Plan.
1.27. Rule 16b-3. "Rule 16b-3" shall mean that certain
Rule 16b-3 under the Exchange Act, as such Rule may be amended
from time to time.
1.28. Section 162(m) Participant. "Section 162(m)
Participant" shall mean any Employee designated by the Committee
as an Employee whose compensation for the fiscal year in which
the Employee is so designated or a future fiscal year may be
subject to the limit on deductible compensation imposed by
Section 162(m) of the Code.
1.29. Stock Payment. "Stock Payment" shall mean (i) a
payment in the form of shares of Common Stock, or (ii) an option
or other right to purchase shares of Common Stock, as part of a
deferred compensation arrangement, made in lieu of all or any
portion of the compensation, including without limitation,
salary, bonuses and commissions, that would otherwise become
payable to an Employee or consultant in cash, awarded under
Article VII of this Plan.
1.30. Subsidiary. "Subsidiary" shall mean any
corporation in an unbroken chain of corporations beginning with
the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50
percent or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
1.31. Termination of Consultancy. "Termination of
Consultancy" shall mean the time when the engagement of an
Optionee, Grantee or Restricted Stockholder as a consultant to
the Company or a Subsidiary is terminated for any reason, with or
without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement; but excluding
terminations where there is a simultaneous commencement of
employment with the Company or any Subsidiary. The Committee, in
its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether
a Termination of Consultancy resulted from a discharge for good
cause, and all questions of whether particular leaves of absence
constitute Terminations of Consultancy. Notwithstanding any
other provision of this Plan, the Company or any Subsidiary has
an absolute and unrestricted right to terminate a consultant's
service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in
writing.
1.32. Termination of Directorship. "Termination of
Directorship" shall mean the time when an Optionee who is an
Independent Director ceases to be a Director for any reason,
including, but not by way of limitation, a termination by
resignation, failure to be elected, death or retirement. The
Board, in its sole and absolute discretion, shall determine the
effect of all matters and questions relating to Termination of
Directorship with respect to Independent Directors.
1.33. Termination of Employment. "Termination of
Employment" shall mean the time when the employee-employer
relationship between an Optionee, Grantee or Restricted
Stockholder and the Company or any Subsidiary is terminated for
any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of
an Optionee, Grantee or Restricted Stockholder by the Company or
any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of
the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the
Company or a Subsidiary with the former employee. The Committee,
in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good
cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that,
unless otherwise determined by the Committee in its discretion, a
leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and
to the extent that, such leave of absence, change in status or
other change interrupts employment for the purposes of Section
422(a)(2) of the Code and the then applicable regulations and
revenue rulings under said Section. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an
absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in
writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) The shares of stock subject to Options, awards of
Restricted Stock, Performance Awards, Dividend Equivalents,
awards of Deferred Stock or Stock Payments shall be Common Stock,
initially shares of the Company's Common Stock, par value $.001
per share. The aggregate number of such shares which may be
issued upon exercise of such options or rights or upon any such
awards under the Plan shall not exceed five hundred fifty
thousand (550,000). The shares of Common Stock issuable upon
exercise of such options or rights or upon any such awards may be
either previously authorized but unissued shares or treasury
shares.
(b) The maximum number of shares which may be subject
to Options granted under the Plan to any individual in any fiscal
year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Options which are
canceled continue to be counted against the Award Limit and if,
after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation
of the Option and a grant of a new Option and both the Option
deemed to be canceled and the Option deemed to be granted are
counted against the Award Limit.
2.2. Add-back of Options and Other Rights. If any
Option, or other right to acquire shares of Common Stock under
any other award under this Plan, expires or is canceled without
having been fully exercised, or is exercised in whole or in part
for cash as permitted by this Plan, the number of shares subject
to such Option or other right but as to which such Option or
other right was not exercised prior to its expiration,
cancellation or exercise may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1.
Furthermore, any shares subject to Options or other awards which
are adjusted pursuant to Section 9.3 and become exercisable with
respect to shares of stock of another corporation shall be
considered canceled and may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. Shares of
Common Stock which are delivered by the Optionee or Grantee or
withheld by the Company upon the exercise of any Option or other
award under this Plan, in payment of the exercise price thereof,
may again be optioned, granted or awarded hereunder, subject to
the limitations of Section 2.1. If any share of Restricted Stock
is forfeited by the Grantee or repurchased by the Company
pursuant to Section 6.6 hereof, such share may again be optioned,
granted or awarded hereunder, subject to the limitations of
Section 2.1. Notwithstanding the provisions of this Section 2.2,
no shares of Common Stock may again be optioned, granted or
awarded if such action would cause an Incentive Stock Option to
fail to qualify as an incentive stock option under Section 422 of
the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1. Eligibility. Any Employee or consultant selected
by the Committee pursuant to Section 3.4(a)(i) shall be eligible
to be granted an Option. Each Independent Director of the
Company shall be eligible to be granted Options at the times and
in the manner set forth in Section 3.4(d).
3.2. Disqualification for Stock Ownership. No person
may be granted an Incentive Stock Option under this Plan if such
person, at the time the Incentive Stock Option is granted, owns
stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or
any then existing Subsidiary or parent corporation (within the
meaning of Section 422 of the Code) unless such Incentive Stock
Option conforms to the applicable provisions of Section 422 of
the Code.
3.3. Qualification of Incentive Stock Options. No
Incentive Stock Option shall be granted to any person who is not
an Employee.
3.4. Granting of Options
(a) The Committee shall from time to time, in its
absolute discretion, and subject to applicable limitations of
this Plan:
(i) Select from among the Employees or
consultants (including Employees or consultants who have
previously received Options or other awards under this Plan)
such of them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the
number of shares to be subject to such Options granted to
the selected Employees or consultants;
(iii) Subject to Section 3.3, determine whether
such Options are to be Incentive Stock Options or Non-
Qualified Stock Options and whether such Options are to
qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such
Options, consistent with this Plan; provided, however, that
the terms and conditions of Options intended to qualify as
performance-based compensation as described in Section
162(m)(4)(C) of the Code shall include, but not be limited
to, such terms and conditions as may be necessary to meet
the applicable provisions of Section 162(m) of the Code.
(b) Upon the selection of an Employee or consultant to
be granted an Option, the Committee shall instruct the Secretary
of the Company to issue the Option and may impose such conditions
on the grant of the Option as it deems appropriate. Without
limiting the generality of the preceding sentence, the Committee
may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee
or consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Dividend
Equivalents or Stock Payments or other rights which have been
previously granted to him under this Plan or otherwise. An
Option, the grant of which is conditioned upon such surrender,
may have an option price lower (or higher) than the exercise
price of such surrendered Option or other award, may cover the
same (or a lesser or greater) number of shares as such
surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of
such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan
may be modified by the Committee to disqualify such option from
treatment as an "incentive stock option" under Section 422 of the
Code.
(d) (i) During the term of the Plan, each person who
is an Independent Director shall automatically be granted an
Option to purchase ten thousand (10,000) shares of Common
Stock (subject to adjustment as provided in Section 9.3) on
April 1st of each year; provided, however, that each such
person who is Chairman of the Board or of any Board
committee shall automatically be granted an Option to
purchase an additional two thousand five hundred (2,500)
shares of Common Stock (subject to adjustment as provided in
Section 9.3) on April 1st of each year. All the foregoing
Option grants authorized by this Section 3.4(d)(i) are
subject to stockholder approval of the Plan.
(ii) The Board may from time to time, in its
absolute discretion, and subject to applicable limitations
of this Plan:
(A) Determine whether, in its opinion, the
Independent Directors (or any of them) should be granted Non-
Qualified Stock Options in addition to the Options granted
pursuant to Section 3.4(d)(i);
(B) Subject to the Award Limit, determine
the number of shares to be subject to such Non-Qualified
Stock Options granted to selected Independent Directors; and
(C) Determine the terms and conditions of
such Non-Qualified Stock Options, consistent with this Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1. Option Agreement. Each Option shall be evidenced
by a written Stock Option Agreement, which shall be executed by
the Optionee and an authorized officer of the Company and which
shall contain such terms and conditions as the Committee (or the
Board, in the case of Options granted to Independent Directors)
shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-
based compensation as described in Section 162(m)(4)(C) of the
Code shall contain such terms and conditions as may be necessary
to meet the applicable provisions of Section 162(m) of the Code.
Stock Option Agreements evidencing Incentive Stock Options shall
contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2. Option Price. The price per share of the shares
subject to each Option shall be set by the Committee; provided,
however, that such price shall be no less than the par value of a
share of Common Stock, unless otherwise permitted by applicable
state law, and (i) in the case of Incentive Stock Options and
Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, such price shall
not be less than 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted; (ii) in the case
of Incentive Stock Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10%
of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within
the meaning of Section 422 of the Code) such price shall not be
less than 110% of the Fair Market Value of a share of Common
Stock on the date the Option is granted; and (iii) in the case of
Options granted to Independent Directors pursuant to Section
3.4(d)(i), such price shall equal 100% of the Fair Market Value
of a share of Common Stock on the date the Option is granted.
4.3. Option Term. The term of an Option shall be set
by the Committee in its discretion; provided, however, that, (i)
in the case of Options granted to Independent Directors pursuant
to Section 3.4(d)(i), the term shall be ten (10) years from the
date the Option is granted, without variation or acceleration
hereunder, but subject to Section 5.6, and (ii) in the case of
Incentive Stock Options, the term shall not be more than ten (10)
years from the date the Incentive Stock Option is granted, or
five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Committee may extend
the term of any outstanding Option in connection with any
Termination of Employment or Termination of Consultancy of the
Optionee, or amend any other term or condition of such Option
relating to such a termination.
4.4. Option Vesting
(a) The period during which the right to exercise an
Option in whole or in part vests in the Optionee shall be set by
the Committee and the Committee may determine that an Option may
not be exercised in whole or in part for a specified period after
it is granted; provided, however, that, unless the Committee
otherwise provides in the terms of the Option or otherwise, no
Option shall be exercisable by any Optionee who is then subject
to Section 16 of the Exchange Act within the period ending six
months and one day after the date the Option is granted; and
provided, further, that Options granted to Independent Directors
pursuant to Section 3.4(d)(i) shall become exercisable in
cumulative annual installments of 25% on each of the first,
second, third and fourth anniversaries of the date of Option
grant, without variation or acceleration hereunder except as
provided in Section 9.3(b). At any time after grant of an
Option, the Committee may, in its sole and absolute discretion
and subject to whatever terms and conditions it selects,
accelerate the period during which an Option (except an Option
granted to an Independent Director pursuant to Section 3.4(d)(i))
vests.
(b) No portion of an Option which is unexercisable at
Termination of Employment, Termination of Directorship or
Termination of Consultancy, as applicable, shall thereafter
become exercisable, except as may be otherwise provided by the
Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of
the Committee following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value
of stock with respect to which "incentive stock options" (within
the meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code) are exercisable for the first time by
an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options to the extent required by Section 422
of the Code. The rule set forth in the preceding sentence shall
be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the time the
Option with respect to such stock is granted.
4.5. Consideration. In consideration of the granting
of an Option, the Optionee shall agree, in the written Stock
Option Agreement, to remain in the employ of (or to consult for
or to serve as an Independent Director of, as applicable) the
Company or any Subsidiary for a period of at least one year (or
such shorter period as may be fixed in the Stock Option Agreement
or by action of the Committee following grant of the Option)
after the Option is granted (or, in the case of an Independent
Director, until the next annual meeting of stockholders of the
Company). Nothing in this Plan or in any Stock Option Agreement
hereunder shall confer upon any Optionee any right to continue in
the employ of, or as a consultant for, the Company or any
Subsidiary, or as a director of the Company, or shall interfere
with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any
Optionee at any time for any reason whatsoever, with or without
good cause.
ARTICLE V
EXERCISE OF OPTIONS
5.1. Partial Exercise. An exercisable Option may be
exercised in whole or in part. However, an Option shall not be
exercisable with respect to fractional shares and the Committee
(or the Board, in the case of Options granted to Independent
Directors) may require that, by the terms of the Option, a
partial exercise be with respect to a minimum number of shares.
5.2. Manner of Exercise. All or a portion of an
exercisable Option shall be deemed exercised upon delivery of all
of the following to the Secretary of the Company or his office:
(a) A written notice complying with the applicable
rules established by the Committee (or the Board, in the case of
Options granted to Independent Directors) stating that the
Option, or a portion thereof, is exercised. The notice shall be
signed by the Optionee or other person then entitled to exercise
the Option or such portion;
(b) Such representations and documents as the
Committee (or the Board, in the case of Options granted to
Independent Directors), in its absolute discretion, deems
necessary or advisable to effect compliance with all applicable
provisions of the Securities Act of 1933, as amended, and any
other federal or state securities laws or regulations. The
Committee or Board may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents
and registrars;
(c) In the event that the Option shall be exercised
pursuant to Section 9.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or
persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company
for the shares with respect to which the Option, or portion
thereof, is exercised. However, the Committee (or the Board, in
the case of Options granted to Independent Directors), may in its
discretion (i) allow a delay in payment up to thirty (30) days
from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for
transfer to the Company with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in
part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value
on the date of Option exercise equal to the aggregate exercise
price of the Option or exercised portion thereof; (iv) allow
payment, in whole or in part, through the delivery of property of
any kind which constitutes good and valuable consideration;
(v) allow payment, in whole or in part, through the delivery of a
full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under
the Code) and payable upon such terms as may be prescribed by the
Committee or the Board; (vi) allow payment, in whole or in part,
through the delivery of a notice that the Optionee has placed a
market sell order with a broker with respect to shares of Common
Stock then issuable upon exercise of the Option, and that the
broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option
exercise price; or (vii) allow payment through any combination of
the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the
Committee (or the Board, in the case of Options granted to
Independent Directors) may also prescribe the form of such note
and the security to be given for such note. The Option may not
be exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension
of credit is prohibited by law.
5.3. Conditions to Issuance of Stock Certificates.
The Company shall not be required to issue or deliver any certificate
or certificates for shares of stock purchased upon the exercise
of any Option or portion thereof prior to fulfillment of all of
the following conditions:
(a) The admission of such shares to listing on
all stock exchanges on which such class of stock is then listed;
(b) The completion of any registration or
other qualification of such shares under any state or federal law, or
under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body which the
Committee or Board shall, in its absolute discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other
clearance from any state or federal governmental agency which the Committee
(or Board, in the case of Options granted to Independent
Directors) shall, in its absolute discretion, determine to be
necessary or advisable;
(d) The lapse of such reasonable period of
time following the exercise of the Option as the Committee (or Board,
in the case of Options granted to Independent Directors) may
establish from time to time for reasons of administrative
convenience; and
(e) The receipt by the Company of full payment for
such shares, including payment of any applicable withholding tax.
5.4. Rights as Stockholders. The holders of Options
shall not be, nor have any of the rights or privileges of,
stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the
Company to such holders.
5.5. Ownership and Transfer Restrictions.
The Committee (or Board, in the case of Options granted to
Independent Directors), in its absolute discretion, may impose
such restrictions on the ownership and transferability of the
shares purchasable upon the exercise of an Option as it deems
appropriate. Any such restriction shall be set forth in the
respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares. The Committee may require
the Employee to give the Company prompt notice of any disposition
of shares of Common Stock acquired by exercise of an Incentive
Stock Option within (i) two years from the date of granting such
Option to such Employee or (ii) one year after the transfer of
such shares to such Employee. The Committee may direct that the
certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
5.6. Limitations on Exercise of Options Granted
to Independent Directors. Unless earlier terminated pursuant to
Section 9.3(c)(ii) or 9.3(c)(viii), no Option granted to an
Independent Director pursuant to Section 3.4(d)(i) may be
exercised to any extent by anyone after the first to occur of the
following events:
(a) the expiration of twelve (12) months from the
date of the Optionee's death;
(b) the expiration of twelve (12) months from the
date of the Optionee's Termination of Directorship by reason of his
permanent and total disability (within the meaning of Section
22(e)(3) of the Code);
(c) the expiration of three (3) months from the
date of the Optionee's Termination of Directorship for any reason
other than such Optionee's death or his permanent and total
disability, unless the Optionee dies within said three-month
period; or
(d) the expiration of ten years from the date
the Option was granted.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1. Award of Restricted Stock
(a) The Committee may from time to time, in
its absolute discretion:
(i) Select from among the Employees or
consultants (including Employees or consultants who have
previously received other awards under this Plan) such of
them as in its opinion should be awarded Restricted Stock;
and
(ii) Determine the purchase price, if any, and
other terms and conditions applicable to such Restricted
Stock, consistent with this Plan.
(b) The Committee shall establish the purchase price,
if any, and form of payment for Restricted Stock; provided,
however, that such purchase price shall be no less than the par
value of the Common Stock to be purchased, unless otherwise
permitted by applicable state law. In all cases, legal
consideration shall be required for each issuance of Restricted
Stock.
(c) Upon the selection of an Employee or consultant to
be awarded Restricted Stock, the Committee shall instruct the
Secretary of the Company to issue such Restricted Stock and may
impose such conditions on the issuance of such Restricted Stock
as it deems appropriate.
6.2. Restricted Stock Agreement. Restricted Stock
shall be issued only pursuant to a written Restricted Stock
Agreement, which shall be executed by the selected Employee or
consultant and an authorized officer of the Company and which
shall contain such terms and conditions as the Committee shall
determine, consistent with this Plan.
6.3. Consideration. As consideration for the issuance
of Restricted Stock, in addition to payment of any purchase
price, the Restricted Stockholder shall agree, in the written
Restricted Stock Agreement, to remain in the employ of, or to
consult for, the Company or any Subsidiary for a period of at
least one year after the Restricted Stock is issued (or such
shorter period as may be fixed in the Restricted Stock Agreement
or by action of the Committee following grant of the Restricted
Stock). Nothing in this Plan or in any Restricted Stock
Agreement hereunder shall confer on any Restricted Stockholder
any right to continue in the employ of, or as a consultant for,
the Company or any Subsidiary or shall interfere with or restrict
in any way the rights of the Company and any Subsidiary, which
are hereby expressly reserved, to discharge any Restricted
Stockholder at any time for any reason whatsoever, with or
without good cause.
6.4. Rights as Stockholders. Upon delivery of
the shares of Restricted Stock to the escrow holder pursuant to
Section 6.7, the Restricted Stockholder shall have, unless
otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the
restrictions in his Restricted Stock Agreement, including the
right to receive all dividends and other distributions paid or
made with respect to the shares; provided, however, that in the
discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions
set forth in Section 6.5.
6.5. Restriction. All shares of Restricted
Stock issued under this Plan (including any shares received by holders
thereof with respect to shares of Restricted Stock as a result of
stock dividends, stock splits or any other form of
recapitalization) shall, in the terms of each individual
Restricted Stock Agreement, be subject to such restrictions as
the Committee shall provide, which restrictions may include,
without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment
with the Company, Company performance and individual performance;
provided, however, that, unless the Committee otherwise provides
in the terms of the Restricted Stock Agreement or otherwise, no
share of Restricted Stock granted to a person subject to Section
16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed
from the date on which the Restricted Stock was issued, and
provided, further, that by action taken after the Restricted
Stock is issued, the Committee may, on such terms and conditions
as it may determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Restricted Stock
Agreement. Restricted Stock may not be sold or encumbered until
all restrictions are terminated or expire. Unless provided
otherwise by the Committee, if no consideration was paid by the
Restricted Stockholder upon issuance, a Restricted Stockholder's
rights in unvested Restricted Stock shall lapse upon Termination
of Employment or, if applicable, upon Termination of Consultancy
with the Company.
6.6. Repurchase of Restricted Stock. The
Committee shall provide in the terms of each individual Restricted Stock
Agreement that the Company shall have the right to repurchase
from the Restricted Stockholder the Restricted Stock then subject
to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a
Termination of Consultancy between the Restricted Stockholder and
the Company, at a cash price per share equal to the price paid by
the Restricted Stockholder for such Restricted Stock; provided,
however, that provision may be made that no such right of
repurchase shall exist in the event of a Termination of
Employment or Termination of Consultancy without cause, or
following a change in control of the Company or because of the
Restricted Stockholder's retirement, death or disability, or
otherwise.
6.7. Escrow. The Secretary of the Company or
such other escrow holder as the Committee may appoint shall retain
physical custody of each certificate representing Restricted
Stock until all of the restrictions imposed under the Restricted
Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8. Legend. In order to enforce the restrictions
imposed upon shares of Restricted Stock hereunder, the Committee
shall cause a legend or legends to be placed on certificates
representing all shares of Restricted Stock that are still
subject to restrictions under Restricted Stock Agreements, which
legend or legends shall make appropriate reference to the
conditions imposed thereby.
6.9. Provisions Applicable to Section 162(m)
Participants.
(a) Notwithstanding anything in the Plan to the
contrary, the Committee may grant Restricted Stock awards to a
Section 162(m) Participant that vest upon the attainment of
performance targets for the Company which are related to one or
more of the following performance goals: (i) pre-tax income,
(ii) operating income, (iii) cash flow, (iv) earnings per share,
(v) return on equity, (vi) return on invested capital or assets
and (vii) cost reductions or savings.
(b) To the extent necessary to comply with the
performance-based compensation requirements of Section
162(m)(4)(C) of the Code, with respect to Restricted Stock which
may be granted to one or more Section 162(m) Participants, no
later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period (or
such other time as may be required or permitted by Section 162(m)
of the Code), the Committee shall, in writing, (i) designate one
or more Section 162(m) Participants, (ii) select the performance
goal or goals applicable to the fiscal year or other designated
fiscal period, (iii) establish the various targets and bonus
amounts which may be earned for such fiscal year or other
designated fiscal period and (iv) specify the relationship
between performance goals and targets and the amounts to be
earned by each Section 162(m) Participant for such fiscal year or
other designated fiscal period. Following the completion of each
fiscal year or other designated fiscal period, the Committee
shall certify in writing whether the applicable performance
targets have been achieved for such fiscal year or other
designated fiscal period. In determining the amount earned by a
Section 162(m) Participant, the Committee shall have the right to
reduce (but not to increase) the amount payable at a given level
of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or
corporate performance for the fiscal year or other designated
fiscal period.
ARTICLE VII
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1. Performance Awards. Any Employee or consultant
selected by the Committee may be granted one or more Performance
Awards. The value of such Performance Awards may be linked to
the market value, book value, net profits or other measure of the
value of Common Stock or other specific performance criteria
determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined
by the Committee, or may be based upon the appreciation in the
market value, book value, net profits or other measure of the
value of a specified number of shares of Common Stock over a
fixed period or periods determined by the Committee. In making
such determinations, the Committee shall consider (among such
other factors as it deems relevant in light of the specific type
of award) the contributions, responsibilities and other
compensation of the particular Employee or consultant.
7.2. Dividend Equivalents. Any Employee or consultant
selected by the Committee may be granted Dividend Equivalents
based on the dividends declared on Common Stock, to be credited
as of dividend payment dates, during the period between the date
an Option, Deferred Stock or Performance Award is granted, and
the date such Option, Deferred Stock or Performance Award is
exercised, vests or expires, as determined by the Committee.
Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such
time and subject to such limitations as may be determined by the
Committee. With respect to Dividend Equivalents granted with
respect to Options intended to be qualified performance-based
compensation for purposes of Section 162(m) of the Code, such
Dividend Equivalents shall be payable regardless of whether such
Option is exercised.
7.3. Stock Payments. Any Employee or consultant
selected by the Committee may receive Stock Payments in the
manner determined from time to time by the Committee. The number
of shares shall be determined by the Committee and may be based
upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific
performance criteria determined appropriate by the Committee,
determined on the date such Stock Payment is made or on any date
thereafter.
7.4. Deferred Stock. Any Employee or consultant
selected by the Committee may be granted an award of Deferred
Stock in the manner determined from time to time by the
Committee. The number of shares of Deferred Stock shall be
determined by the Committee and may be linked to the market
value, book value, net profits or other measure of the value of
Common Stock or other specific performance criteria determined to
be appropriate by the Committee, in each case on a specified date
or dates or over any period or periods determined by the
Committee. Common Stock underlying a Deferred Stock award will
not be issued until the Deferred Stock award has vested, pursuant
to a vesting schedule or performance criteria set by the
Committee. Unless otherwise provided by the Committee, a Grantee
of Deferred Stock shall have no rights as a Company stockholder
with respect to such Deferred Stock until such time as the award
has vested and the Common Stock underlying the award has been
issued.
7.5. Performance Award Agreement, Dividend Equivalent
Agreement, Deferred Stock Agreement, Stock Payment Agreement.
Each Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment shall be evidenced by a written
agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such
terms and conditions as the Committee shall determine, consistent
with this Plan.
7.6. Term. The term of a Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment shall be
set by the Committee in its discretion.
7.7. Exercise Upon Termination of Employment. A
Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment is exercisable or payable only while the
Grantee is an Employee or consultant; provided that the Committee
may determine that the Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to Termination of Employment or Termination of
Consultancy without cause, or following a change in control of
the Company, or because of the Grantee's retirement, death or
disability, or otherwise.
7.8. Payment on Exercise. Payment of the amount
determined under Section 7.1 or 7.2 above shall be in cash, in
Common Stock or a combination of both, as determined by the
Committee. To the extent any payment under this Article VII is
effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.3.
7.9. Consideration. In consideration of the granting
of a Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment, the Grantee shall agree, in a written
agreement, to remain in the employ of, or to consult for, the
Company or any Subsidiary for a period of at least one year after
such Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment is granted (or such shorter period as
may be fixed in such agreement or by action of the Committee
following such grant). Nothing in this Plan or in any agreement
hereunder shall confer on any Grantee any right to continue in
the employ of, or as a consultant for, the Company or any
Subsidiary or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby
expressly reserved, to discharge any Grantee at any time for any
reason whatsoever, with or without good cause.
7.10. Provisions Applicable to Section 162(m)
Participants.
(a) Notwithstanding anything in the Plan to the
contrary, the Committee may grant any performance or incentive
awards described in Article VII to a Section 162(m) Participant
that vest or become exercisable upon the attainment of
performance targets for the Company which are related to one or
more of the following performance goals: (i) pre-tax income,
(ii) operating income, (iii) cash flow, (iv) earnings per share,
(v) return on equity, (vi) return on invested capital or assets
and (vii) cost reductions or savings.
(b) To the extent necessary to comply with the
performance-based compensation requirements of Section
162(m)(4)(C) of the Code, with respect to performance or
incentive awards described in Article VII which may be granted to
one or more Section 162(m) Participants, no later than ninety
(90) days following the commencement of any fiscal year in
question or any other designated fiscal period (or such other
time as may be required or permitted by Section 162(m) of the
Code), the Committee shall, in writing, (i) designate one or more
Section 162(m) Participants, (ii) select the performance goal or
goals applicable to the fiscal year or other designated fiscal
period, (iii) establish the various targets and bonus amounts
which may be earned for such fiscal year or other designated
fiscal period and (iv) specify the relationship between
performance goals and targets and the amounts to be earned by
each Section 162(m) Participant for such fiscal year or other
designated fiscal period. Following the completion of each
fiscal year or other designated fiscal period, the Committee
shall certify in writing whether the applicable performance
targets have been achieved for such fiscal year or other
designated fiscal period. In determining the amount earned by a
Section 162(m) Participant, the Committee shall have the right to
reduce (but not to increase) the amount payable at a given level
of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or
corporate performance for the fiscal year or other designated
fiscal period.
ARTICLE VIII.
ADMINISTRATION
8.1. Stock Option Committee. The Stock Option
Committee (or another committee or a subcommittee of the Board
assuming the functions of the Committee under this Plan) shall
consist solely of two or more Independent Directors appointed by
and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an
"outside director" for purposes of Section 162(m) of the Code.
Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
8.2. Duties and Powers of Committee. It shall be the
duty of the Committee to conduct the general administration of
this Plan in accordance with its provisions. The Committee shall
have the power to interpret this Plan and the agreements pursuant
to which Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Dividend Equivalents or Stock Payments are
granted or awarded, and to adopt such rules for the
administration, interpretation, and application of this Plan as
are consistent therewith and to interpret, amend or revoke any
such rules. Notwithstanding the foregoing, the full Board,
acting by a majority of its members in office, shall conduct the
general administration of the Plan with respect to Options
granted to Independent Directors. Any such grant or award under
this Plan need not be the same with respect to each Optionee,
Grantee or Restricted Stockholder. Any such interpretations and
rules with respect to Incentive Stock Options shall be consistent
with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time
exercise any and all rights and duties of the Committee under
this Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion
of the Committee.
8.3. Majority Rule; Unanimous Written Consent. In
administering the Plan, The Committee shall act by a majority of
its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by
all members of the Committee.
8.4. Compensation; Professional Assistance; Good Faith
Actions. Members of the Committee shall receive such
compensation for their services as members as may be determined
by the Board. All expenses and liabilities which members of the
Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the
approval of the Board, employ attorneys, consultants,
accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations
of any such persons. All actions taken and all interpretations
and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, Grantees,
Restricted Stockholders, the Company and all other interested
persons. No members of the Committee or Board shall be
personally liable for any action, determination or interpretation
made in good faith with respect to this Plan, Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Dividend
Equivalents or Stock Payments, and all members of the Committee
and the Board shall be fully protected by the Company in respect
of any such action, determination or interpretation.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1. Not Transferable. Options, Restricted Stock
awards, Deferred Stock awards, Performance Awards, Dividend
Equivalents or Stock Payments under this Plan may not be sold,
pledged, assigned, or transferred in any manner other than by
will or the laws of descent and distribution or pursuant to a
QDRO, unless and until such rights or awards have been exercised,
or the shares underlying such rights or awards have been issued,
and all restrictions applicable to such shares have lapsed. No
Option, Restricted Stock award, Deferred Stock award, Performance
Award, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements
of the Optionee, Grantee or Restricted Stockholder or his
successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the
extent that such disposition is permitted by the preceding
sentence.
During the lifetime of the Optionee or Grantee, only he
may exercise an Option or other right or award (or any portion
thereof) granted to him under the Plan, unless it has been
disposed of pursuant to a QDRO. After the death of the Optionee
or Grantee, any exercisable portion of an Option or other right
or award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option
Agreement or other agreement, be exercised by his personal
representative or by any person empowered to do so under the
deceased Optionee's or Grantee's will or under the then
applicable laws of descent and distribution.
9.2. Amendment, Suspension or Termination of this Plan.
Except as otherwise provided in this Section 9.2, this Plan may
be wholly or partially amended or otherwise modified, suspended
or terminated at any time or from time to time by the Board or
the Committee. However, without approval of the Company's
stockholders given within twelve months before or after the
action by the Board or the Committee, no action of the Board or
the Committee may, except as provided in Section 9.3, increase
the limits imposed in Section 2.1 on the maximum number of shares
which may be issued under this Plan or modify the Award Limit,
and no action of the Board or the Committee may be taken that
would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or
termination of this Plan shall, without the consent of the holder
of Options, Restricted Stock awards, Deferred Stock awards,
Performance Awards, Dividend Equivalents or Stock Payments, alter
or impair any rights or obligations under any Options, Restricted
Stock awards, Deferred Stock awards, Performance Awards, Dividend
Equivalents or Stock Payments theretofore granted or awarded,
unless the award itself otherwise expressly so provides. No
Options, Restricted Stock, Deferred Stock, Performance Awards,
Dividend Equivalents or Stock Payments may be granted or awarded
during any period of suspension or after termination of this
Plan, and in no event may any Incentive Stock Option be granted
under this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan
is adopted by the Board; or
(b) The expiration of ten years from the date the Plan
is approved by the Company's stockholders under Section 9.4.
9.3. Changes in Common Stock or Assets of the Company,
Acquisition or Liquidation of the Company and Other Corporate
Events.
(a) Subject to Section 9.3(d), in the event that the
Committee (or the Board, in the case of Options granted to
Independent Directors) determines that any dividend or other
distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization,
reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially
all of the assets of the Company (including, but not limited to,
a Corporate Transaction), or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights
to purchase Common Stock or other securities of the Company, or
other similar corporate transaction or event, in the Committee's
sole discretion (or in the case of Options granted to Independent
Directors, the Board's sole discretion), affects the Common Stock
such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available
under the Plan or with respect to an Option, Restricted Stock
award, Performance Award, Dividend Equivalent, Deferred Stock
award or Stock Payment, then the Committee (or the Board, in the
case of Options granted to Independent Directors) shall, in such
manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock
(or other securities or property) with respect to which
Options, Performance Awards, Dividend Equivalents or Stock
Payments may be granted under the Plan, or which may be
granted as Restricted Stock or Deferred Stock (including,
but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which
may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock
(or other securities or property) subject to outstanding
Options, Performance Awards, Dividend Equivalents, or Stock
Payments, and in the number and kind of shares of
outstanding Restricted Stock or Deferred Stock, and
(iii) the grant or exercise price with respect to
any Option, Performance Award, Dividend Equivalent or Stock
Payment.
(b) Subject to Sections 9.3(b)(vii) and 9.3(d), in the
event of any Corporate Transaction or other transaction or event
described in Section 9.3(a) or any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of
the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board, in the case
of Options granted to Independent Directors) in its discretion is
hereby authorized to take any one or more of the following
actions whenever the Committee (or the Board, in the case of
Options granted to Independent Directors) determines that such
action is appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made
available under the Plan or with respect to any option, right or
other award under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or
principles:
(i) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the
Committee (or the Board, in the case of Options granted to
Independent Directors) may provide, either by the terms of
the agreement or by action taken prior to the occurrence of
such transaction or event and either automatically or upon
the optionee's request, for either the purchase of any such
Option, Performance Award, Dividend Equivalent, or Stock
Payment, or any Restricted Stock or Deferred Stock for an
amount of cash equal to the amount that could have been
attained upon the exercise of such option, right or award or
realization of the optionee's rights had such option, right
or award been currently exercisable or payable or fully
vested or the replacement of such option, right or award
with other rights or property selected by the Committee (or
the Board, in the case of Options granted to Independent
Directors) in its sole discretion;
(ii) In its sole and absolute discretion, the
Committee (or the Board, in the case of Options granted to
Independent Directors) may provide, either by the terms of
such Option, Performance Award, Dividend Equivalent, or
Stock Payment, or Restricted Stock or Deferred Stock or by
action taken prior to the occurrence of such transaction or
event that it cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the
Committee (or the Board, in the case of Options granted to
Independent Directors) may provide, either by the terms of
such Option, Performance Award, Dividend Equivalent, or
Stock Payment, or Restricted Stock or Deferred Stock or by
action taken prior to the occurrence of such transaction or
event, that for a specified period of time prior to such
transaction or event, such option, right or award shall be
exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in (i) Section 4.4
or (ii) the provisions of such Option, Performance Award,
Dividend Equivalent, or Stock Payment, or Restricted Stock
or Deferred Stock;
(iv) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the
Committee (or the Board, in the case of Options granted to
Independent Directors) may provide, either by the terms of
such Option, Performance Award, Dividend Equivalent, or
Stock Payment, or Restricted Stock or Deferred Stock or by
action taken prior to the occurrence of such transaction or
event, that upon such event, such option, right or award be
assumed by the successor or survivor corporation, or a
parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the
successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and
kind of shares and prices;
(v) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the
Committee (or the Board, in the case of Options granted to
Independent Directors) may make adjustments in the number
and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, Performance
Awards, Dividend Equivalents, or Stock Payments, and in the
number and kind of outstanding Restricted Stock or Deferred
Stock and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in,
outstanding options, rights and awards and options, rights
and awards which may be granted in the future;
(vi) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the
Committee may provide either by the terms of a Restricted
Stock award or Deferred Stock award or by action taken prior
to the occurrence of such event that, for a specified period
of time prior to such event, the restrictions imposed under
a Restricted Stock Agreement or a Deferred Stock Agreement
upon some or all shares of Restricted Stock or Deferred
Stock may be terminated, and, in the case of Restricted
Stock, some or all shares of such Restricted Stock may cease
to be subject to repurchase under Section 6.6 or forfeiture
under Section 6.5 after such event; and
(vii) None of the foregoing discretionary actions
taken under this Section 9.3(b) shall be permitted with
respect to Options granted under Section 3.4(d) to
Independent Directors to the extent that such discretion
would be inconsistent with the applicable exemptive
conditions of Rule 16b-3. In the event of a Change in
Control or a Corporate Transaction, to the extent that the
Board does not have the ability under Rule 16b-3 to take or
to refrain from taking the discretionary actions set forth
in Section 9.3(b)(iii) above, each Option granted to an
Independent Director shall be exercisable as to all shares
covered thereby upon such Change in Control or during the
five days immediately preceding the consummation of such
Corporate Transaction and subject to such consummation,
notwithstanding anything to the contrary in Section 4.4 or
the vesting schedule of such Options. In the event of a
Corporate Transaction, to the extent that the Board does not
have the ability under Rule 16b-3 to take or to refrain from
taking the discretionary actions set forth in Section
9.3(b)(ii) above, no Option granted to an Independent
Director may be exercised following such Corporate
Transaction unless such Option is, in connection with such
Corporate Transaction, either assumed by the successor or
survivor corporation (or parent or subsidiary thereof) or
replaced with a comparable right with respect to shares of
the capital stock of the successor or survivor corporation
(or parent or subsidiary thereof).
(c) Subject to Section 9.3(d) and 9.8, the Committee
(or the Board, in the case of Options granted to Independent
Directors) may, in its discretion, include such further
provisions and limitations in any Option, Performance Award,
Dividend Equivalent, or Stock Payment, or Restricted Stock or
Deferred Stock agreement or certificate, as it may deem equitable
and in the best interests of the Company.
(d) With respect to Incentive Stock Options and
Options intended to qualify as performance-based compensation
under Section 162(m), no adjustment or action described in this
Section 9.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would
cause the Plan to violate Section 422(b)(1) of the Code or would
cause such option or stock appreciation right to fail to so
qualify under Section 162(m), as the case may be, or any
successor provisions thereto. Furthermore, no such adjustment or
action shall be authorized to the extent such adjustment or
action would result in short-swing profits liability under
Section 16 of the Exchange Act or violate the exemptive
conditions of Rule 16b-3 unless the Committee (or the Board, in
the case of Options granted to Independent Directors) determines
that the option or other award is not to comply with such
exemptive conditions. The number of shares of Common Stock
subject to any option, right or award shall always be rounded to
the next whole number.
9.4. Approval of Plan by Stockholders. This Plan will
be submitted for the approval of the Company's stockholders
within twelve months after the date of the Board's initial
adoption of this Plan. Options, Performance Awards, Dividend
Equivalents or Stock Payments may be granted and Restricted Stock
or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options, Performance Awards,
Dividend Equivalents or Stock Payments shall not be exercisable
and such Restricted Stock or Deferred Stock shall not vest prior
to the time when this Plan is approved by the stockholders, and
provided further that if such approval has not been obtained at
the end of said twelve-month period, all Options, Performance
Awards, Dividend Equivalents or Stock Payments previously granted
and all Restricted Stock or Deferred Stock previously awarded
under this Plan shall thereupon be canceled and become null and
void.
9.5. Tax Withholding. The Company shall be entitled to
require payment in cash or deduction from other compensation
payable to each Optionee, Grantee or Restricted Stockholder of
any sums required by federal, state or local tax law to be
withheld with respect to the issuance, vesting or exercise of any
Option, Restricted Stock, Deferred Stock, Performance Award,
Dividend Equivalent or Stock Payment. The Committee (or the
Board, in the case of Options granted to Independent Directors)
may in its discretion and in satisfaction of the foregoing
requirement allow such Optionee, Grantee or Restricted
Stockholder to elect to have the Company withhold shares of
Common Stock otherwise issuable under such Option or other award
(or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld.
9.6. Loans. The Committee may, in its
discretion, extend one or more loans to Employees in connection with the
exercise or receipt of an Option, Performance Award, Dividend
Equivalent or Stock Payment granted under this Plan, or the
issuance of Restricted Stock or Deferred Stock awarded under this
Plan. The terms and conditions of any such loan shall be set by
the Committee.
9.7. Forfeiture Provisions. Pursuant to its
general authority to determine the terms and conditions applicable to
awards under the Plan, the Committee (or the Board, in the case
of Options granted to Independent Directors) shall have the right
(to the extent consistent with the applicable exemptive
conditions of Rule 16b-3) to provide, in the terms of Options or
other awards made under the Plan, or to require the recipient to
agree by separate written instrument, that (i) any proceeds,
gains or other economic benefit actually or constructively
received by the recipient upon any receipt or exercise of the
award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the
award shall terminate and any unexercised portion of such award
(whether or not vested) shall be forfeited, if (a) a Termination
of Employment, Termination of Consultancy or Termination of
Directorship occurs prior to a specified date, or within a
specified time period following receipt or exercise of the award,
or (b) the recipient at any time, or during a specified time
period, engages in any activity in competition with the Company,
or which is inimical, contrary or harmful to the interests of the
Company, as further defined by the Committee (or the Board, as
applicable).
9.8. Limitations Applicable to Section 16 Persons
and Performance-Based Compensation. Notwithstanding any other
provision of this Plan, this Plan, and any Option, Performance
Award, Dividend Equivalent or Stock Payment granted, or
Restricted Stock or Deferred Stock awarded, to any individual who
is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including
any amendment to Rule 16b-3) that are requirements for the
application of such exemptive rule. To the extent permitted by
applicable law, the Plan, Options, Performance Awards, Dividend
Equivalents, Stock Payments, Restricted Stock and Deferred Stock
granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such applicable exemptive rule.
Furthermore, notwithstanding any other provision of this Plan,
any Option, Restricted Stock or performance or incentive award
described in Article VII intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in
Section 162(m) of the Code (including any amendment to Section
162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as performance-
based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent
necessary to conform to such requirements.
9.9. Effect of Plan Upon Options and Compensation
Plans. The adoption of this Plan shall not affect any other
compensation or incentive plans in effect for the Company or any
Subsidiary. Nothing in this Plan shall be construed to limit the
right of the Company (i) to establish any other forms of
incentives or compensation for Employees, Directors or
Consultants of the Company or any Subsidiary or (ii) to grant or
assume options or other rights otherwise than under this Plan in
connection with any proper corporate purpose including but not by
way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of
any corporation, partnership, limited liability company, firm or
association.
9.10. Compliance with Laws. This Plan, the granting and
vesting of Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Dividend Equivalents or Stock
Payments under this Plan and the issuance and delivery of shares
of Common Stock and the payment of money under this Plan or under
Options, Performance Awards, Dividend Equivalents or Stock
Payments granted or Restricted Stock or Deferred Stock awarded
hereunder are subject to compliance with all applicable federal
and state laws, rules and regulations (including but not limited
to state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if
requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the
Plan, Options, Restricted Stock awards, Deferred Stock awards,
Performance Awards, Dividend Equivalents or Stock Payments
granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
9.11. Titles. Titles are provided herein
for convenience only and are not to serve as a basis for
interpretation or construction of this Plan.
9.12. Governing Law. This Plan and any
agreements hereunder shall be administered, interpreted and enforced under
the internal laws of the State of Oregon without regard to
conflicts of laws thereof.
