-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E0lDft7D/A/zBGVu42q01sALqhdkQ51SiQcPzTs7EXwHdT+4bW14wiGJEDztOqS5 kDz+W9lgSgENEER4zqoqlw== 0000800458-95-000026.txt : 19951121 0000800458-95-000026.hdr.sgml : 19951121 ACCESSION NUMBER: 0000800458-95-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 DATE AS OF CHANGE: 19951117 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENTRAK CORP CENTRAL INDEX KEY: 0000800458 STANDARD INDUSTRIAL CLASSIFICATION: 6794 IRS NUMBER: 930780536 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15159 FILM NUMBER: 95593291 BUSINESS ADDRESS: STREET 1: 7227 NE 55TH AVENUE CITY: PORTLAND STATE: OR ZIP: 97218 BUSINESS PHONE: 5032847581 MAIL ADDRESS: STREET 1: 7227 NE 55TH AVENUE CITY: PORTLAND STATE: OR ZIP: 97218 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL VIDEO INC DATE OF NAME CHANGE: 19881004 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to For Quarter Ended: Commission file number: 0-15159 RENTRAK CORPORATION (Exact name of registrant as specified in its charter) OREGON 93-0780536 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification no.) 7227 N.E. 55th Avenue, Portland, Oregon 97218 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (503) 284-7581 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( ) As of November 6, 1995, the Registrant had 12,126,684 shares of Common Stock outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements The following unaudited financial statements of RENTRAK CORPORATION (the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote dis- closures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three month and six month periods ended September 30, 1995 are not necessarily indicative of the results to be expected for the entire fiscal year ended March 31, 1996. Consolidated Statements of Operations for the three month periods ended September 30, 1995 and September 30, 1994 Consolidated Statements of Operations for the six month periods ended September 30, 1995 and September 30, 1994 Consolidated Balance Sheets as of September 30, 1995 and March 31, 1995 Consolidated Statements of Cash Flows for the six month periods ended September 30, 1995 and September 30, 1994 Notes to Consolidated Financial Statements RENTRAK CORPORATION STATEMENTS OF OPERATIONS
(Unaudited) Three Months Ended Sept 30, 1995 1994 REVENUES: Rentrak Home Entertainment - PPT $ 25,822,775 $ 17,872,943 Pro Image - Sports Apparel 8,341,518 3,324,422 BlowOut Entertainment & Other 4,426,013 1,517,095 38,590,306 22,714,460 OPERATING COSTS AND EXPENSES: Cost of sales 28,781,600 16,736,221 Selling and administrative 10,458,894 5,015,225 39,240,494 21,751,446 INCOME (LOSS) FROM OPERATIONS (650,188) 963,014 OTHER INCOME (EXPENSE): Interest income 279,999 149,806 Interest expense (236,235) - Other (74,500) - (30,736) 149,806 INCOME (LOSS) BEFORE INCOME TAXES (680,924) 1,112,820 INCOME TAX PROVISION (BENEFIT) (454,021) 288,866 NET INCOME (LOSS) $ (226,903) $ 823,954 PRIMARY EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE (Note C) $ (0.02) $ 0.07 SHARES USED IN PER SHARE CALCULATION (Note C) 11,897,209 13,075,528 FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE (Note C) $ (0.02) $ 0.07 SHARES USED IN PER SHARE CALCULATION (Note C) 11,897,209 14,040,202 The accompanying notes are an integral part of these statements. RENTRAK CORPORATION STATEMENTS OF OPERATIONS (Unaudited) Six Months Ended Sept 30, 1995 1994 REVENUES: Rentrak Home Entertainment - PPT $ 47,847,732 $ 34,534,274 Pro Image - Sports Apparel 14,203,547 5,125,678 BlowOut Entertainment & Other 6,683,795 3,026,014 68,735,074 42,685,966 OPERATING COSTS AND EXPENSES: Cost of sales 51,623,215 31,397,412 Selling and administrative 19,213,585 11,101,681 70,836,800 42,499,093 INCOME (LOSS) FROM OPERATIONS (2,101,726) 186,873 OTHER INCOME (EXPENSE): Interest income 549,284 301,374 Interest expense (244,560) - Other 439,732 2,826,849 744,456 3,128,223 INCOME (LOSS) BEFORE INCOME TAXES (1,357,270) 3,315,096 INCOME TAX PROVISION (BENEFIT) (794,250) 729,321 NET INCOME (LOSS) $ (563,020) $ 2,585,775 PRIMARY EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE (Note C) $ (0.05) $ 0.22 SHARES USED IN PER SHARE CALCULATION (Note C) 11,710,528 12,474,939 FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE (Note C) $ (0.05) $ 0.21 SHARES USED IN PER SHARE CALCULATION (Note C) 11,797,893 12,957,276 The accompanying notes are an integral part of these statements. RENTRAK CORPORATION BALANCE SHEETS ASSETS (Unaudited) Sept 30, March 31, 1995 1995 CURRENT ASSETS: Cash and cash equivalents $ 6,779,338 $ 10,709,405 Accounts receivable, net of allowance for doubtful accounts of $180,887 at Sept 30, 1995 and $642,580 at March 31, 1995 17,293,647 14,711,439 Advances to program suppliers (Note E) 2,712,514 2,683,710 Inventory 6,723,013 5,480,793 Deferred tax asset 471,849 915,404 Other current assets 4,209,195 2,112,021 Total current assets 38,189,556 36,612,772 VIDEO CASSETTE RENTAL INVENTORY, net 6,080,348 810,239 PROPERTY AND EQUIPMENT, net 8,513,982 4,924,122 INTANGIBLES, net 15,887,290 11,011,121 NOTES RECEIVABLE, net (Note I) 1,721,279 3,035,787 OTHER INVESTMENTS, net (Note I) 5,523,577 2,601,693 DEFERRED TAX ASSET 1,487,890 1,926,673 OTHER ASSETS 3,233,073 3,577,035 $ 80,636,995 $ 64,499,442 The accompanying notes are an integral part of these statements. RENTRAK CORPORATION BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) Sept 30, March 31, 1995 1995 CURRENT LIABILITIES: Current portion of long-term debt $ 543,931 $ - Borrowings on line of credit 4,700,000 - Accounts payable 17,745,889 17,799,146 Accrued liabilities 7,764,954 3,301,513 Accrued compensation 1,339,399 2,016,820 Deferred revenue 1,569,903 1,408,076 Total current liabilities 33,664,076 24,525,555 LONG TERM DEBT, less current portion 559,419 - COMMITMENTS AND CONTINGENCIES (Note I) STOCKHOLDERS' EQUITY: Preferred stock $.001 par value; Authorized: 10,000,000 shares - - Common stock, $.001 par value; Authorized: 30,000,000 shares Issued and outstanding: 12,126,686 shares at September 30, 1995 and 11,277,246 shares at March 31, 1995 12,126 11,277 Capital in excess of par value 49,811,109 44,598,939 Net unrealized gain (loss) on investment securities (Note D) 1,281,723 (170,747) Accumulated deficit (1,961,739) (1,398,719) Less- Deferred charge - warrants (2,729,719) (3,066,863) 46,413,500 39,973,887 $ 80,636,995 $ 64,499,442 The accompanying notes are an integral part of this balance sheet. RENTRAK CORPORATION STATEMENT OF CASH FLOWS (Unaudited) Six Months Ended Sept 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (Loss) $ (563,020) $ 2,585,775 Adjustments to reconcile income (loss) to net cash provided (used) in operations Gain on investment/asset sales (236,964) (2,826,849) Depreciation 1,069,403 835,108 Amortization of intangibles 681,348 280,279 Amortization of warrants 337,144 - Provision for doubtful accounts (461,693) (71,270) Retailer financing program reserves (503,098) (2,190,699) Studio advance reserves 350,000 377,300 Change in specific accounts, net of effects of purchase of business: Accounts receivable (1,890,640) (1,641,839) Advance to program suppliers (378,804) 761,664 Inventory 2,000,584 (1,140,100) Other current assets (242,876) (4,799,425) Accounts payable 2,705,287 (1,849,360) Accrued liabilities and compensation 3,606,738 567,778 Deferred revenue 161,827 - Net cash (used) by continuing operations 6,635,236 (9,111,638) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (7,579,734) (934,360) Payment for purchase of business, net of cash acquired (511,579) (77,507) Purchases of other assets and intangibles (2,731,117) (1,718,663) Investment/reduction in retailer financing program (6,018,774) 2,190,699 Proceeds from sale of investments/assets 1,100,000 2,836,849 Purchases of investments - (4,400,253) Maturity of investments - 4,344,506 Net cash (used) provided by investing activities (15,741,204) 2,241,271 CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of long-term debt 696,939 - Issuance of Common Stock 4,478,962 1,277,525 Net cash provided by financing activities 5,175,901 1,277,525 NET DECREASE IN CASH AND CASH EQUIVALENTS (3,930,067) (5,592,842) CASH AND CASH EQUIVALENTS AT BEGINNING OF THIS PERIOD 10,709,405 13,815,718 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,779,338 $ 8,222,876 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for - Interest $ 30,601 $ - Income taxes $ 69,903 $ 112,559 NON-CASH INVESTING ACTIVITIES: Increase (decrease) in net unrealized gain on investment securities $ 1,376,992 $ (1,434,182) Purchases of businesses through issuance of common stock $ 5,213,125 $ 4,425,280
RENTRAK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A: Basis of Consolidation The consolidated financial statements include the accounts of the Company, its majority owned subsidiaries, and those subsidiaries in which the Company has a controlling interest after elimination of all intercompany accounts and transactions. Investments in affiliated companies owned 20 to 50 percent are accounted for by the equity method. The Pro Image's ("TPI") year-end is February 28. As there are no intervening events which materially affect the financial position or results of operations, the consolidated statements include TPI's balance sheet as of August 31, 1995 and February 28, 1995 and the statement of operations and cash flows for the three month and six month periods ended August 31, 1995 and 1994, respectively. NOTE B: Adjustments to Unaudited Interim Financial Statements All normal and recurring adjustments have been made to the unaudited interim financial statements which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. NOTE C: Net Income/Loss Per Share For the quarter and six month periods ended September 30, 1995, net loss per share of common stock is computed on the basis of the weighted average shares of common stock outstanding plus common equivalent shares arising from dilutive stock options, using the treasury stock method. The Company's outstanding warrants were not dilutive during these periods. For the quarter and six month periods ended September 30, 1994, net earnings per share is computed using the "modified" treasury stock method. Under this method, the number of treasury shares assumed to be purchased with the proceeds form the exercise of dilutive stock options and warrants is limited to 20 percent of the outstanding shares at period end. Proceeds from exercise of the options and warrants in excess of those used to purchase treasury shares were assumed to have been invested in government securities with the resultant interest income, adjusted for appropriate tax effects, added to net income for purposes of calculating earnings per share. NOTE D: Investment Securities Securities, classified as available for sale, are shown at market with an adjustment to shareholders' equity to reflect unrealized gains and losses, net of tax. Short-term investments are recorded at cost which approximates market and consist of U.S. Treasury obligations and certificates of deposit. NOTE E: Guarantees and Advances The Company has entered into several guarantee contracts with program suppliers providing titles for distribution under the Pay Per Transaction ("PPT") revenue sharing system. In general, these contracts guarantee the suppliers minimum payments. In some cases these guarantees were paid in advance. Any advance payments which the Company has made and which will be realized within the current year are included in advances to program suppliers. The long-term portion is included in other assets. Both the current and long-term portion are amortized to cost of sales as revenues are generated from the related cassettes. The Company, using empirical data, estimates the projected revenue stream to be generated under these guarantee arrangements and accrues for projected losses or reduces the carrying amount of advances to program suppliers for any guarantee that it estimates will not be fully recovered through future revenues. As of September 30, 1995, the Company has recorded $989,231 for potential losses under such guarantee arrangements. NOTE F: Interest in Foreign Corporation In December 1989, the Company entered into an agreement with a Japanese Corporation and formed a jointly-owned Japanese corporation, Rentrak Japan. Rentrak Japan's purpose is to market PPT in the Pacific Rim. The Company has provided its PPT technology and certain trademarks and service marks. The Japanese owner has provided substantially all operating capital. The Company has a one-fourth interest in Rentrak Japan. The Company accounts for its interest in Rentrak Japan using the equity method. As of September 30, 1995, the Company's investment in Rentrak Japan has been written down to zero. The Company has provided no guarantees or other financial commitments for the investee which would require the recognition of additional losses under the equity method. For the three month and six month periods ended September 30, 1995, the joint venture realized a profit. Summarized financial data for the joint venture, after translation to U.S. currency, at September 30, 1995, and for the three month and six month periods then ended is as follows: Current assets $ 35,186,508 Noncurrent assets $ 4,781,614 Current liabilities $ 37,228,619 Noncurrent liabilities $ 4,346,497 Shareholders' deficit $ (1,606,995) For The Three Months Ended September 30, 1995: Net sales $ 28,725,554 Cost of sales $ 24,050,782 Net Income $ 335,930 For The Six Months Ended September 30, 1995: Net sales $ 60,662,438 Cost of sales $ 50,396,337 Net Income $ 1,541,998
NOTE G: Major Suppliers For the quarter ended September 30, 1995, the Company had one program supplier whose product generated 27 percent and a second that generated an additional 15 percent of Rentrak revenues. For the six month period ended September 30, 1995, the Company had one program supplier whose product generated 28 percent and a second that generated an additional 17 percent of Rentrak revenues. No other program suppliers provided product which generated more than 10 percent of revenue for either the three month or six month periods ended September 30, 1995. For the quarter ended September 30, 1994, the Company had one program supplier whose product generated 25 percent and a second that generated an additional 12 percent of Rentrak revenues. For the six month period ended September 30, 1994, the Company had one program supplier whose product generated 25 percent and a second that generated an additional 15 percent of Rentrak revenues. No other program suppliers provided product which generated more than 10 percent of revenue for either the three month or six month periods ended September 30, 1994. NOTE H: BlowOut Entertainment Acquisitions In May 1995 the Company acquired 3.2 million shares of Entertainment One, Inc. ("E-1"). When combined with the 669,230 shares the Company purchased in 1994, the Company's ownership increased to 57.22% of the issued and outstanding stock of E-1, or a controlling interest. As of October 31, 1995, E-1 operated 72 video departments inside Wal Mart stores in 27 states. The consolidated statements include E-1's Balance Sheet as of September 30, 1995 and the Statement of Operations and Cash Flows for the four month period ended September 30, 1995. On August 31, 1995 the Company acquired certain assets of SuperCenter Entertainment Corporation ("SEC") which constitute SEC's retail video business. As consideration for the acquisition, the Company issued SEC 878,000 shares of Common Stock of the Company. As of October 31, 1995, SEC operates 53 video rental departments inside Wal Mart shopping centers and 25 video rental outlets inside K-Mart and Super K-Mart shopping centers. As a result of rapid expansion during the past year, the operations have been unprofitable to date. Summarized pro forma financial data for the three month and six month periods ended September 30, 1995 and 1994, presented as if the SEC acquisition had occurred at the beginning of each period, is as follows:
For The Three Months Ended September 30 1995 1994 Revenues $40,059,917 $23,685,146 Net Income (Loss) $ (542,019)$ 354,943 Net Income (Loss) per share $ ( 0.04)$ 0.02 For The Six Months Ended September 30 1995 1994 Revenues $72,197,475 $44,150,083 Net Income (Loss) $ (814,966)$ 1,879,465 Net Income (Loss) per share $ (0.07)$ 0.14
The pro forma information given above does not purport to be indicative of the results that actually would have been obtained if the operations were combined during the periods presented, and is not intended to be a projection of future results or trends. The pro forma information above does not include E-1 as it was determined to be insignificant. The Company's consolidated statements include SEC's Balance Sheet as of September 30, 1995 and the Statement of Operations and Cash Flows for the one month period ended September 30, 1995. NOTE I: Retailer Financing Program The Company has established a retailer financing program whereby on a selective basis the Company will provide financing to video retailers which the Company believes have demonstrated the prospect for substantial growth in the industry. In connection with these financings, the Company typically makes a loan and/or equity investment in the retailer. In some cases, a warrant to purchase stock may be obtained. As part of such financing, the retailer typically agrees to cause all of its current and future retail locations to participate in the PPT System for a designated period of time. These loans and investments are speculative in nature and involve a high degree of risk and no assurance of a satisfactory return on investment can be given. The Board of Directors has authorized up to $14 million to be used in connection with the Company's retailer financing program. As of October 1995 the Company loaned, invested in, or made oral or written commitments to loan to or invest in various video retailers in amounts totalling substantially all of the $14 million authorized. The loans, investments or commitments are to various retailers and individually range from $200,000 to $2,000,000. The investments are accounted for at cost as all investments represent less than 10 percent of the entity's equity. The notes, which have payment terms that vary according to the individual loan agreements, are due in 1995 through 1999. Interest rates on the various loans range from the prime rate plus 1 percent to the prime rate plus 3 percent. As the loans or investments are made, and periodically throughout the terms of the agreements, the Company assesses the recoverability of the amounts based on the financial position of each retailer. As of September 30, 1995, the Company has invested or loaned approximately $7.5 million under the program. Because of the financial condition of a number of these retailers, the Company has reserved approximately 33 percent or $2.4 million of the original loan or investment amount. NOTE J: Long Term Debt In connection with the acquisition of E-1, the Company assumed long term debt of approximately $1.3 million. The debt, which has payment terms that vary according to the individual loan agreements, is due in 1995 through 2000. Interest rates on the various loans range from 0 percent to prime rate plus 2.25 percent (11.0 percent as of September 30, 1995). NOTE K: Income Tax Provision/Benefit The Company's effective income tax rate increased from 22 percent for the six month period ended September 30, 1994 to 59 percent for the six month period ended September 30,1995. The increase is primarily due to the non- deductibility of certain intangible assets for tax purposes. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations For a more meaningful analysis, results are presented for four groups of operations: Rentrak Home Entertainment ("RHE") which includes North American PPT Operations; Pro Image, Inc. and its subsidiaries ("TPI"); BlowOut Entertainment, which includes BlowOut Video, Inc.; E-1.; and the leased video department operations of SEC and Supermarket Video Management, Inc (SVI) and Other Domestic Subsidiaries and Corporate. The following tables break out these groups for the three month and six month periods ended September 30, 1995 and September 30, 1994. All significant intercompany transactions have been eliminated.
OTHER QUARTER ENDED RHE TPI(1) BLOWOUT SUBS/ SEPTEMBER 30, 1995 ENTERTAINMENT CORPORATE CONSOLIDATED Revenues $25,822,775 $8,341,518 $4,163,709 $ 262,304 $38,590,306 Cost of sales 21,369,521 5,434,264 1,963,885 13,930 28,781,600 Gross profit margin 4,453,254 2,907,254 2,199,824 248,374 9,808,706 SG&A 2,514,169 3,708,252 3,068,386 1,168,087 10,458,894 Other income (expense) (11,392) (42,476) 84,832 (61,700) (30,736) Income (loss) before taxes $1,927,693 $ (843,474) $ (783,730) $(981,413) (680,924) Income tax benefit 454,021 Net loss $ (226,903) 1. Includes Results of Operations from June 1, 1995 through August 31, 1995 QUARTER ENDED RHE TPI(2) BLOWOUT OTHER SUBS/ CONSOLIDATED SEPTEMBER 30, 1994 ENTERTAINMENT CORPORATE Revenues $ 17,872,943 $3,324,422 $ 1,266,472 $ 250,623 $ 22,714,460 Cost of sales 13,854,892 2,356,455 524,874 - 16,736,221 Gross profit margin 4,018,051 967,967 741,598 250,623 5,978,239 SG&A 1,873,432 1,182,230 943,425 1,016,138 5,015,225 Other income (expense) (244,178) 7,991 (90) 386,083 149,806 Income (loss) before taxes $ 1,900,441 (206,272) (201,917) (379,432) 1,112,820 Income tax (288,866) (provision) Net income $ 823,954 (2) Includes Results of Operations from June 1,1994 through August 31, 1994 SIX MONTHS ENDED RHE TPI(1) BLOWOUT OTHER CONSOLIDATED SEPTEMBER 30, 1995 ENTERTAINMENT SUBS/ CORPORATE Revenues $47,847,723 $14,203,547 $ 6,120,208 $ 563,587 $ 68,735,074 Cost of sales 39,750,959 8,796,707 3,061,619 13,930 51,623,215 Gross profit margin 8,096,773 5,406,840 3,058,589 549,657 17,111,859 SG&A 5,111,638 7,446,191 4,378,520 2,277,236 19,213,585 Other income (expense) 20,026 (29,550) 579,434 174,546 744,456 Income (loss) before taxes $ 3,005,161 $(2,068,901) (740,497) (1,553,033 (1,357,270) Income tax benefit 794,250 Net loss $ (563,020) SIX MONTHS ENDED RHE TPI(2) BLOWOUT OTHER CONSOLIDATED SEPTEMBER 30, 1994 ENTERTAINMENT SUBS/ CORPORATE Revenues $ 34,534,274 $5,125,678 $ 2,587,178 $ 438,836 $ 42,685,966 Cost of sales 26,870,476 3,564,390 962,546 - 31,397,412 Gross profit margin 7,663,798 1,561,288 1,624,632 438,836 11,288,554 SG&A 5,377,712 1,977,062 1,889,817 1,857,090 11,101,681 Other income 2,481,772 15,538 - 630,913 3,128,223 Income (loss) before taxes $ 4,767,858 $ (400,236) $ (265,185) $ (787,341)$ 3,315,096 Income tax (729,321) (provision) Net income $ 2,585,775 (1) Includes Results of Operations from March 1, 1995 through August 31, 1995 (2) Includes Results of Operations from March 1, 1994 through August 31, 1994
Rentrak Home Entertainment For the quarter ended September 30, 1995, total revenue from RHE increased $7.9 million, or 44 percent, rising to $25.8 million from $17.9 million in the quarter ended September 30, 1994. For the six month period ended September 30, 1995, total revenue from RHE increased $13.3 million, or 39 percent, rising to $47.8 million from $34.5 million in the six months ended September 30, 1994. The increase in total revenue was primarily due to the growth in (i) the number of retailers approved to lease Cassettes from the Company (the "Participating Retailers"); (ii) the number of participating program suppliers ("Program Suppliers"), primarily Buena Vista; (iii) the number of titles released to the system; and (iv) the total number of Cassettes leased under the system. By quarter-end, the number of Participating Retailers had grown 24 percent to 4,077 from 3,301 a year earlier. As of September 30, 1995, there were 3,467 retailers located in the United States and 610 located in Canada. Cost of sales for the quarter ended September 30, 1995 rose to $21.4 million from $13.9 million the prior year, an increase of $7.5 million, or 54 percent. Cost of sales for the six months ended September 30, 1995 rose to $39.8 million from $26.9 million the prior year, an increase of $12.9 million, or 48 percent. These changes approximately parallel the changes in total revenues. For the quarter and six months ended September 30, 1995, the gross profit margin decreased to 17 percent from 22 percent the previous year. The decrease for the quarter is primarily due to the inclusion of the nonrecurring payment of $0.5 million from Rentrak Japan in the quarter ended September 30, 1994 and the inclusion of an additional $168,000 of warrant cost amortization in the quarter ended September 30, 1995. The decrease for the six months is primarily due to the inclusion of the nonrecurring payment of $1.0 million from Rentrak Japan in the six months ended September 30, 1994 and the inclusion of an additional $336,000 of warrant cost amortization in the six months ended September 30, 1995. In addition, as compared to the quarter and six month periods ended September 30, 1994, the decrease reflects an increase in major motion picture studio product which traditionally has a lower gross margin. Selling, general and administrative expenses were $2.5 million for the quarter ended September 30, 1995 compared to $1.9 million for the quarter ended September 30, 1994. Selling, general and administrative expenses were $5.1 million for the six months ended September 30, 1995 compared to $5.4 million for the six months ended September 30, 1994. As a percentage of total revenue, selling, general and administrative expenses were 10 percent for the quarters ended September 30, 1995 and September 30, 1994. As a percentage of total revenue, selling, general and administrative expenses decreased to 11 percent for the six months ended September 30, 1995 from 16 percent the previous year. Other income (expense) increased from an expense of $0.2 million for the quarter ended September 30, 1994 to expense of less than $0.1 million for the quarter ended September 30, 1995, an increase of $0.2 million. Other income decreased from $2.5 million for the six months ended September 30, 1994 to less than $0.1 million for the six months ended September 30, 1995, a decrease of $2.5 million. This decrease was due to the sale of certain investment securities for a gain of $2.8 million in the quarter ended June 30, 1994. For the quarter ended September 30, 1995, RHE recorded a pretax profit of $1.9 million, or 7 percent of total revenue, compared to a pretax profit of $1.9 million, or 11 percent of total revenue, for the quarter ended September 30, 1994. For the six months ended September 30, 1995, RHE recorded a pretax profit of $3.0 million, or 6 percent of total revenue, compared to a pretax profit of $4.8 million, or 14 percent of total revenue, for the quarter ended September 30, 1994. The Pro Image, Inc. Comparisons to the quarter and six month periods ended August 31, 1994, are not meaningful because the acquisition of Team Spirit, Inc. ("Team Spirit") occurred on September 1, 1994, but are presented for informational purposes. Total revenue from TPI increased to $8.3 million for the quarter ended August 31, 1995 from $3.3 million for the quarter ended August 31, 1994, an increase of $5.0 million, or 151 percent. Total revenue from TPI increased to $14.2 million for the six months ended August 31, 1995 from $5.1 million for the six months ended August 31, 1994, an increase of $9.1 million, or 177 percent. Cost of sales was $5.4 million, an increase of $3.1 million (131 percent) over the $2.4 million recorded for the quarter ended August 31, 1994. Cost of sales was $8.8 million, an increase of $5.2 million (147 percent) over the $3.6 million recorded for the six months ended August 31, 1994. Selling, general and administrative expenses increased to $3.7 million in the quarter ended August 31, 1995 from $1.2 million for the quarter ended August 31, 1994, an increase of $2.5 million, or 214 percent. Selling, general and administrative expenses increased to $7.4 million in the six months ended August 31, 1995 from $2.0 million for the six months ended August 31, 1994, an increase of $5.5 million, or 277 percent. As a percentage of total revenue, selling, general and administrative expenses increased to 44 percent for the quarter ended August 31, 1995 from 36 percent a year earlier. As a percentage of total revenue, selling, general and administrative expenses increased to 52 percent for the six months ended August 31, 1995 from 39 percent a year earlier. For the quarter ended August 31, 1995, TPI recorded a pretax loss of $0.8 million, or 10 percent of total revenue. This compares with a pretax loss of $0.2 million, or 6 percent of total revenue, for the quarter ended August 31, 1994. For the six months ended August 31, 1995, TPI recorded a pretax loss of $2.1 million, or 15 percent of total revenue. This compares with a pretax loss of $0.4 million, or 8 percent of total revenue, for the six months ended August 31, 1994. Management expects TPI's revenue to increase substantially in the current fiscal year due to the inclusion of Team Spirit for the entire year, revenue generated from new company-owned Pro Image retail stores, and franchise fees generated internationally. BlowOut Entertainment Comparisons to the quarter and six month periods ended September 30, 1994 are not meaningful because of the acquisition of a controlling interest in E-1 (May, 1995) and SEC (September, 1995), but are presented for informational purposes. In a series of acquisitions culminating in June 1995, the Company acquired a fifty-seven percent (57%) interest in E-1, a company which operates "store within a store" outlets in Wal-Mart Supercenter stores under the trade name "BlowOut Video". The Company holds additional convertible debt of E-1 which, if fully converted, would increase its interest in E-1 to ninety-four percent (94%). E-1 currently operates 70 stores in Wal-Mart Supercenter stores, all of which are participating retailers in the Rentrak PPT System. Only 22 of the E-1 stores have been open for more than a year. To date, E-1 has not generated a profit. On August 31, 1995, the Company acquired certain assets of SEC consisting of 45 retail video "store within a store" outlets in Wal-Mart Supercenter stores and 25 retail video outlets in K-Mart and K-Mart "SuperK" stores. The acquired stores, which will be operated by the Company under the trade name "BlowOut Video", rent and sell video cassettes, video games, computer games and programs, and CD-ROM titles, and are participating retailers in the Rentrak PPT System. These operations were rapidly expanded over the last year and to date have not generated a profit. Together, the Company and E-1 are the sole operators of the "store within a store" video outlets in Wal-Mart stores and the largest operator of "store within a store" outlets in K-Mart stores. The Company and E-1 have entered into master leases with Wal Mart. The Company has also entered into a master lease with K-Mart. Each individual video outlet lease under the Wal-Mart and K-Mart master leases is for a five year term with an option to extend for an additional five years. Pursuant to the master leases, neither the Company nor E-1 is required to open any further video outlets in either Wal-Mart or K-Mart stores, and neither Wal-Mart nor K-Mart is obligated to lease any further video outlets to either the Company or E-1. Wal-Mart has recently announced that it intends to open 110 Supercenters during 1996. Assuming Wal-Mart consents to leasing additional video outlets in such stores and assuming sufficient capital resources are available to the Company or E-1, it is the Company's and E-1's current intention to open additional video outlets in substantially all, if not all, of such Supercenters. It is anticipated that the Company and E-1 each will incur substantial opening and start-up costs in connection with the opening of additional stores ($65,000 to $100,000 per store), and there can be no assurance that video operations will generate a profit in the foreseeable future. Total revenue from BlowOut Entertainment increased to $4.2 million for the quarter ended September 30, 1995 from $1.3 million for the quarter ended September 30, 1994, an increase of $2.9 million. Total revenue from BlowOut Entertainment increased to $6.1 million for the six months ended September 30, 1995 from $2.6 million for the six months ended September 30, 1994, an increase of $3.5 million. Cost of sales was $2.0 million, an increase of $1.5 million over the $0.5 million recorded for the quarter ended September 30, 1994. Cost of sales was $3.1 million, an increase of $2.1 million over the $1.0 million recorded for the six months ended September 30, 1994. As a percentage of total revenue, cost of sales increased to 47 percent for the quarter ended September 30, 1995 from 41 percent a year earlier. As a percentage of total revenue, cost of sales increased to 50 percent for the six months ended September 30, 1995 from 37 percent a year earlier. Selling, general and administrative expenses increased to $3.1 million in the quarter ended September 30, 1995 from $0.9 million for the quarter ended September 30, 1994, an increase of $2.2 million, or 225 percent. Selling, general and administrative expenses increased to $4.4 million in the six months ended September 30, 1995 from $1.9 million for the six months ended September 30, 1994, an increase of $2.5 million, or 132 percent. As a percentage of total revenue, selling, general and administrative expenses remained at 74 percent for the quarter ended September 30, 1995. As a percentage of total revenue, selling, general and administrative expenses decreased to 72 percent for the six months ended September 30, 1995 from 73 percent a year earlier. For the quarter ended September 30, 1995, BlowOut Entertainment recorded a pretax loss of $0.8 million, or 19 percent of total revenue. This compares with a pretax loss of $0.2 million, or 16 percent of total revenue, for the quarter ended September 30, 1994. For the six months ended September 30, 1995, BlowOut Entertainment recorded a pretax loss of $0.7 million, or 12 percent of total revenue. This compares with a pretax loss of $0.3 million, or 10 percent of total revenue, for the six months ended September 30, 1994. Changes in revenues, cost of sales, selling and administrative costs and pretax losses were due to the inclusion of E-1 as of June 1, 1995 and the acquisition of SEC as of September 1, 1995. There are certain risks associated with the Company's "store within a store" operations that Rentrak stockholders and prospective investors should consider carefully. Both the Company and E-1 are following aggressive expansion strategies during 1996, within Wal-Mart and K-Mart stores. Substantial capital outlays and management resources are required to open each new store, and there can be no assurance that either the Company or E-1 will be able to obtain sufficient capital on reasonable terms or that it will be able to attract and retain a sufficient number of skilled store managers to implement its growth strategy. Furthermore, neither E-1 nor SEC operated at a profit, and there can be no assurance that E-1 or the Company will be able to meet the demands of a growth strategy and operate at a profit an any time in the foreseeable future. Through its subsidiaries, the Company has entered into master leases with Wal-Mart and K-Mart, respectively, for its stores, and E-1 has entered into a similar master lease with Wal-Mart. The master leases provide for an initial five-year term for each new store, with an additional five-year optional renewal term. Either party to the Wal-Mart lease can elect to close stores which fail to generate a minimum level of revenues, although any such closure would require the Company or E-1, as the case may be, to pay Wal-Mart a termination fee (equal to $3,000) for each store closed. Neither company has any exclusive right to open stores or any control over the geographic area or market in which the new stores will be located. The master leases also allow Wal-Mart or K-Mart, under certain conditions, to restrict the ability of the company and E-1 to sell videocassette titles which are being sold in particular Wal-Mart or K-Mart stores, respectively. Both the Company and E-1 are highly dependent on their relationships with their host stores. There can be no assurance that Wal-Mart or K-Mart will not open additional stores in markets which the Company or E-1 deem to be either highly competitive or otherwise undesirable, or that the number of future stores opened by Wal-Mart or K-Mart will meet the Company or E-1's current expansion plans. Either Wal-Mart or K-Mart could change its development or operation plans at any time, and there can be no assurance that either the Company or E-1 will be able to operate stores within either the Wal-Mart or K-Mart stores for any period of time following the terms provided in the master leases. Furthermore, if Wal-Mart or K-Mart terminate their relationship with the Company or E-1, there can be no assurance that the Company or E-1 could find a suitable national retail mass merchant with sufficient stores to support their "store within a store" retail concept. The Company and E-1 operate stores in 21 different states. The geographic diversity of these states poses special challenges with respect to store management, inventory controls and communications. The opening of additional stores in new states or regions could lead to redundancies and inefficiencies in operations. The video rental industry is highly competitive. Competitors such as Blockbuster Video have substantially greater financial resources and marketing capabilities. Because a majority of the Wal-Mart and K-Mart stores are located in rural areas, the video operations also face competition from supermarket rental operations, one of the fastest growing segments of the video rental market. In addition, the Company and E-1 compete with a number of other leisure and retail entertainment providers, including television, movie theaters, bowling alleys and sporting events. Through its acquisition of the SEC operations and a controlling interest in E-1, the Company has significantly increased the overall level and scope of its business operations. The expansion in the scope of the Company's operations has resulted in a need for a significant investment in infrastructure and systems. The challenges of the Company's expansion are expected to be magnified with the opening of additional outlets. These challenges include, without limitation, securing adequate financial resources to successfully integrate and manage the operation, retention of key employees, integration of the outlets into the PPT system and consolidation of certain operations, each of which could pose significant challenges. Future operating results may be affected by the number and timing of store openings, the quality of new release titles available for rental and sale, weather and other special and unusual events. Spending on entertainment items such as video rentals and purchases is discretionary and may be particularly susceptible to regional and national economic conditions. In addition, any concentration of new store openings and related new store pre-opening costs near the end of a fiscal quarter could have an adverse effect on the financial results for that quarter. Other Subsidiaries Other Subsidiaries is primarily comprised of a software development company. The software development company ceased operations on September 30, 1995. Total revenue from Other Subsidiaries was $0.3 million for the quarter ended September 30, 1995 and the quarter ended September 30, 1994. Total revenue from Other Subsidiaries, increased to $0.6 million for the six months ended September 30, 1995 from $0.4 million for the six months ended September 30, 1994, an increase of $0.2 million, or 28 percent. Selling, general and administrative expenses increased to $0.3 million in the quarter ended September 30, 1995 from $0.2 million for the quarter ended September 30, 1994, an increase of $0.1 million, or 73 percent. Selling, general and administrative expenses increased to $0.7 million in the six months ended September 30, 1995 from $0.5 million for the six months ended September 30, 1994, an increase of $0.2 million, or 51 percent. As a percentage of total revenue, selling, general and administrative expenses increased to 119 percent for the quarter ended September 30, 1995 from 72 percent a year earlier. As a percentage of total revenue, selling, general and administrative expenses increased to 125 percent for the six months ended September 30, 1995 from 106 percent a year earlier. For the quarter ended September 30, 1995, Other Subsidiaries recorded a pretax loss of $0.3 million, or 102 percent of total revenue. This compares with a pretax profit of $0.1 million, or less than 1 percent of total revenue, for the quarter ended September 30, 1994. For the six months ended September 30, 1995, Other Subsidiaries recorded a pretax loss of $0.4 million, or 64 percent of total revenue. This compares with a pretax loss of less than $0.1 million, or 6 percent of total revenue, for the six months ended September 30, 1994. Corporate Selling general and administrative expenses were $0.8 million in the quarter ended September 30, 1995 and the quarter ended September 30, 1994. Selling general and administrative expenses increased to $1.6 million in the six months ended September 30, 1995 from $1.4 million in the six months ended September 30, 1994, an increase of $0.2 million, or 13 percent. Other Income (Expense) decreased to $0.1 million for the quarter ended September 30, 1995 from $0.4 million in the quarter ended September 30, 1994, a decrease of $0.3 million, or 63 percent. Other Income (Expense) decreased to $0.4 million for the six months ended September 30, 1995 from $0.6 million in the quarter ended September 30, 1994, a decrease of $0.1 million, or 40 percent. The Company recognized a tax benefit of $0.5 million in the quarter ended September 30, 1995, as compared to a tax provision of $0.3 million in the quarter ended September 30, 1994. The Company recognized a tax benefit of $0.8 million in the six months ended September 30, 1995, as compared to a tax provision of $0.7 million in the six months ended September 30, 1994. Consolidated Balance Sheet Total assets increased from $64.5 million as of March 31, 1995 to $80.6 million as of September 30, 1995, an increase of $16.1 million. As of September 30, 1995, rental inventory had increased $5.3 million to $6.1 million from $0.8 million as of March 31, 1995. This increase is primarily due to the consolidation of E-1 and the acquisition of SEC. As of September 30, 1995, property and equipment had increased $3.6 million to $8.5 million from $4.9 million at year-end. Of this increase, approximately $1.7 million was related to the E-1 acquisition and $1.6 million was related to the SEC acquisition. At quarter-end, intangibles had risen to $15.9 million from $11.0 million at the end of fiscal year 1994, an increase of $4.9 million. Most of this amount was related to the acquisition of E-1 and SEC. Accrued compensation decreased $0.7 million from $2.0 million March 31, 1995, to $1.3 million September 30, 1995. The decrease is primarily due to the payment of annual bonuses. All warrants which the Company issued during the quarter ended June 30, 1994, have been valued by an outside valuation firm using standard warrant valuation models. The value of the warrants of $3.5 million has been recorded in the equity section and will be amortized over the associated periods to be benefited by each group of warrants. For the quarter expense associated with the warrants was $0.2 million. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1995, the Company had cash and other liquid investments of $6.8 million, compared to $10.7 million at March 31, 1995. At September 30, 1995, the Company's current ratio (current assets/current liabilities) declined to 1.13 from 1.49 at March 31, 1995. This decline was primarily due to inclusion of E-1. The Company has an agreement with a financial institution for a line of credit in the amount of $10.0 million. The agreement expires on October 27, 1996. Interest is payable monthly at a rate that varies in relation to the bank's prime rate plus .5 percent. The lender has been granted a warrant to purchase 10,000 unregistered shares of common stock of the Company at $7 per share, which exceeded market value at the date of grant. The line of credit is secured by substantially all of the Company's assets, excluding TPI's. The terms of the agreement require, among other things, a minimum amount of tangible net worth, minimum quick ratio and minimum ratio of total liabilities to tangible net worth. The agreement also restricts the amount of net losses, loans and indebtedness and limits the payment of dividends on the Company's stock. The Company has borrowed $4.7 million under the line of credit as of September 30, 1995. In July 1995, TPI entered into a $6.0 million line-of-credit agreement with a financial institution. Interest on borrowings under this credit agreement accrue at the bank's prime rate plus .25 percent. Borrowings are collateralized by the Company's accounts receivable and inventory, and require monthly payments of accrued interest. The available borrowing under this agreement is the lesser of $6.0 million or the borrowing base as described in the agreement with the final $1.0 million being available only with a concurrent cash equity infusion to The Pro Image of an equal dollar amount. There were no borrowings under the credit agreement at August 31, 1995. The credit agreement expires on July 31, 1997. In August 1994, the Company acquired all of the outstanding stock of Team Spirit. Team Spirit operated 39 licensed sports apparel stores in 15 states, most of which are in the Midwest. Simultaneously with the acquisition, Rentrak transferred all of the assets of Team Spirit to TPI, and Team Spirit became a wholly owned subsidiary of TPI. As consideration for the acquisition, the Company issued approximately 557,000 shares of common stock. The Company intends to continue to expand its licensed sports apparel business through further acquisitions, through sales of new franchises and through the opening of new corporate stores. Working capital needed to fund the increased inventory and fixed assets associated with the increase in company-owned stores is expected to be provided by existing bank credit agreements. The Company intends to pay the purchase price for any such acquisitions in cash, shares of the Company's common stock or other securities, or a combination thereof. On May 26, 1995 the Company acquired 3.2 million shares of E-1. When combined with the 669,230 shares the Company purchased in 1994, the Company's ownership now consists of 57.22% of the issued and outstanding stock of E-1, or a controlling interest. On August 31, 1995 the Company acquired certain assets of SuperCenter Entertainment Corporation ("SEC") which constitute SEC's retail video business. As consideration for the acquisition, the Company issued SEC 878,000 shares of Common Stock of the Company. There are certain risks associated with the Company's "store within a store" operations that Rentrak stockholders and prospective investors should consider carefully. Both the Company and E-1 are following aggressive expansion strategies during 1996, within Wal-Mart and K-Mart stores. Substantial capital outlays and management resources are required to open each new store, and there can be no assurance that either the Company or E-1 will be able to obtain sufficient capital on reasonable terms or that it will be able to attract and retain a sufficient number of skilled store managers to implement its growth strategy. Furthermore, neither E-1 nor SEC operated at a profit, and there can be no assurance that E-1 or the Company will be able to meet the demands of a growth strategy and operate at a profit an any time in the foreseeable future. Through its subsidiaries, the Company has entered into master leases with Wal-Mart and K-Mart, respectively, for its stores, and E-1 has entered into a similar master lease with Wal-Mart. The master leases provide for an initial five-year term for each new store, with an additional five-year optional renewal term. Either party to the Wal-Mart lease can elect to close stores which fail to generate a minimum level of revenues, although any such closure would require the Company or E-1, as the case may be, to pay Wal-Mart a termination fee (equal to $3,000) for each store closed. Neither company has any exclusive right to open stores or any control over the geographic area or market in which the new stores will be located. The master leases also allow Wal-Mart or K-Mart, under certain conditions, to restrict the ability of the company and E-1 to sell videocassette titles which are being sold in particular Wal-Mart or K-Mart stores, respectively. The Company has established a retailer financing program whereby on a selective basis the Company will provide financing to video retailers which the Company believes have demonstrated the prospect for substantial growth in the industry. In connection with these financings, the Company typically makes a loan and/or equity investment in the retailer. In some cases, a warrant to purchase stock may be obtained. As part of such financing, the retailer typically agrees to cause all of its current and future retail locations to participate in the PPT System for a designated period of time. These loans and investments are speculative in nature and involve a high degree of risk and no assurance of a satisfactory return on investment can be given. The Board of Directors has authorized up to $14 million to be used in connection with the Company's retailer financing program. As of October 1995 the company has loaned, invested in, or made oral or written commitments to loan to or invest in various video retailers in amounts totalling substantially all of the $14 million authorized. The loans, investments or commitments are to various retailers and individually range from $200,000 to $2,000,000. The investments are accounted for at cost as all investments represent less than 10 percent of the entity's equity. The notes, which have payment terms that vary according to the individual loan agreements, are due in 1995 through 1999. Interest rates on the various loans range from the prime rate plus 1 percent to the prime rate plus 3 percent. As the loans or investments are made, and periodically throughout the terms of the agreements, the Company assesses the recoverability of the amounts based on the financial position of each retailer. As of September 30, 1995, the Company has invested or loaned approximately $7.5 million under the program. Because of the financial condition of a number of these retailers, the Company has reserved approximately 33 percent or $2.4 million of the original loan or investment amount. To raise additional funding to continue the expansion of E-1 and SEC the Company is considering the placement of long-term debt or the issuance of additional securities in the public market. No assurance can be given that any of the credit facilities will be extended or new ones obtained or that the Company will be able to issue either long-term debt or additional securities on terms acceptable to the Company. Subject to the foregoing, the Company believes its existing cash, cash generated from operations and available credit facilities (assuming such facilities are extended or new ones obtained) will be sufficient to meet its cash requirements for at least the next 12 months. PART II Item 1. Legal Proceedings. None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of matters to a Vote of Security Holders (a) On August 28, 1995, the Company conducted its Annual Meeting of Shareholders ("meeting"). (b) Both of the Company's nominees to election as Director were elected. Voting for Directors was as follows:
Nominees For Percentage(3) Withheld Percentage L. Barton 8,644,002 98.96% 90,931 1.04% Alexander Peter Dal Bianco 8,645,097 98.97% 89,836 1.03% (3) Percentage of votes cast at the Meeting or by Proxy
Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit 10 - Employment agreement with Ron Berger Exhibit 11 - Calculations of Net Income Per Share (b) Reports on Form 8-K - Three Item 5 - Other Events Item 7 - Financial Statements and Exhibits - filed September 1, 1995 Item 2 - Acquisition or Disposition of Assets Item 7 - Financial Statements and Exhibits - filed September 15, 1995 Item 7 - Financial Statement and Exhibits - filed November 14, 1995 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated this 14th day of November, 1995 RENTRAK CORPORATION: /S/ Karl D. Wetzel Karl D. Wetzel Chief Accounting Officer Signing on behalf of the registrant EX-11 2 Exhibit 11 Rentrak Corporation Computation of Net Income (Loss) Per Share
For the Three Months Ended For the Six Months Ended September 30, 1995 September 30, 1995 Fully Fully Primary Diluted Primary Diluted Weighted average number of shares of common stock 11,527,397 11,527,397 11,378,797 11,378,797 outstanding Dilutive effect of exercise of stock options, net of 369,812 369,812 331,731 419,096 assumed purchases of treasury stock with proceeds from exercise of options Weighted average number of shares of common stock and common 11,897,209 11,897,209 11,710,528 11,797,893 stock equivalents outstanding Net Income (Loss) ($226,903) ($226,903) ($563,020) ($563,020) Net Income (Loss) per ($0.02) ($0.02) ($0.05) ($0.05) Share
EX-27 3
5 9-MOS MAR-31-1996 SEP-30-1995 6,799,338 0 17,293,647 180,887 6,723,013 38,189,556 8,513,982 6,672,657 80,636,995 33,664,076 0 12,126 0 0 46,401,374 80,636,995 68,735,074 68,735,074 51,623,215 70,836,800 (989,016) 0 244,560 (1,357,270) (794,250) (563,020) 0 0 0 (563,020) (0.05) (0.05)
EX-10 4 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (this "Agreement") is made and entered into as of this ____ day of ______________, 1995 by and between RENTRAK CORPORATION, an Oregon corporation ("Employer"), and RON BERGER ("Employee"). WHEREAS, Employer currently employs Employee in the capacity of Chairman of the Board of Directors ("Chairman"), President and Chief Executive Officer and Employee is one of the key executives of the Employer; WHEREAS, Employer and Employee have entered into an Employment Agreement dated as of June 1, 1994 (the "Employment Agreement") and Employer and Employee desire to modify the terms of the Employment Agreement upon the terms and subject to the conditions of this Agreement; WHEREAS, the terms of this Agreement shall supersede in its entirety the terms of the Employment Agreement; WHEREAS, Employer considers it essential to the best interests of its shareholders to foster the continuous employment of Employee; WHEREAS, the Board of Directors of Employer (the "Board") recognizes that, as is the case with many publicly-held corporations, the possibility of a Change of Control (as defined below) may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of Employer and its shareholders; WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of Employer's management, including Employee, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of Change of Control; and WHEREAS, the Board has determined that it is in the best interests of Employer and its shareholders to clarify certain provisions of the Employment Agreement in order to more effectively carry out the purposes of Employment Agreement and avoid potential disputes in connection with the enforcement of the Employment Agreement following a Change of Control. NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: 1. EMPLOYMENT. 1.1 Position and Title. Employer hereby employs and engages the services of Employee for the position of Chairman of the Board of Directors, Chief Executive Officer and President of Employer, during the Term (as the term is defined in Section 2 of this Agreement) of this Agreement, on the terms and conditions hereinafter set forth. Employee further agrees to accept election and to serve during the Term of this Agreement in such positions and as an officer and/or director of any subsidiary or affiliate of Employer, without any additional compensation therefor, except as set forth in this Agreement, when and if elected to any such position by the shareholders of Employer or by the Board of Directors of Employer, as the case may be. This employment shall be exclusive to Employee except that with majority approval of the Board of Directors of Employer and the written consent of Employee, Employer may (i) elect a new Chairman provided that Employee shall remain as the President and Chief Executive Officer of Employer or (ii) elect a new President provided that Employee shall remain as Chairman and Chief Executive Officer. Employee agrees to serve Employer during the Term of this Agreement as provided herein and that the employment relationship specified herein shall be the exclusive employment of Employee. 1.2 Duties and Place of Employment. (a) Employee shall perform all duties customarily performed by executives of publicly-held companies engaged in a business similar to Employer's business and who are employed in the same capacity as Employee pursuant to this Agreement. Employee shall devote his full business time during normal business hours to the business and affairs of Employer, use his best efforts to promote the interests of Employer and, use his best efforts to perform faithfully and efficiently responsibilities assigned to Employee hereunder. To the extent Employee has performed personal, civic or charitable activities or served on corporate boards or committees not significantly interfering with the performance of his responsibilities to Employer prior to the date of this Agreement, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the date of this Agreement shall not be deemed to interfere with the performance of Employee's responsibilities to the Company. It is expressly agreed that Employee's continuing service on any boards or committees with which he shall be connected, as a member or otherwise, as of the date of this Agreement, or any such service approved by Employer during the Term of this Agreement, shall, not be deemed to interfere with the performance of Employee's services to Employer pursuant to this paragraph (a). Employee shall report directly and only to the Board of Directors or an executive committee of the Board of Directors. Employee shall perform his duties, at Employer's principal executive offices which are currently located at 7227 N.E. 55th Avenue, Portland, Oregon 97218, or such other location as shall be mutually agreed upon by Employee and Employer. Subject to the terms of this Agreement, Employee shall comply promptly and faithfully with Employer's reasonable instructions, directions, requests, rules and regulations. Employer shall not be deemed to have waived the right to require Employee to perform any duties hereunder by assigning Employee to any other duties or services. (b) After a Change of Control (as defined below) during the Term of this Agreement, Employee shall continue to serve Employer in the same capacity and have the same authority, responsibilities and status as he had as of the date immediately prior to the Change of Control. After a Change of Control, Employee's services shall be performed at the location where Employee was employed as of the date immediately prior to the Change of Control, or at such other location as may be mutually agreed between Employer and Employee. (c) For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred upon the first fulfillment of the conditions set forth in any one of the following four paragraphs: (1) any "person" (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities under an employee benefit plan of Employer, is or becomes a beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Employer, representing twenty-five percent (25%) or more of the combined voting power of Employer's then outstanding securities; or (2) a majority of the directors elected at any annual or special meeting of stockholders are not individuals nominated by Employer's then incumbent Board; or (3) the shareholders of Employer approve a merger or consolidation of Employer with any other corporation, other than a merger or consolidation which would result in the voting securities of Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of Employer or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of Employer approve a plan of complete liquidation of Employer or an agreement for the sale or disposition by Employer of all or substantially all of its assets. 2. TERM. The term ("Term") of this Agreement shall commence on June 1, 1994 and shall terminate on May 31, 1999, unless sooner terminated pursuant to Section 5, provided that in the event of a Change of Control, this Agreement shall terminate on the later of May 31, 1999 and two years after such Change of Control, unless sooner terminated pursuant to Section 5. Notwithstanding the foregoing, if the parties hereto shall, after such termination date, continue to perform this Agreement as provided hereunder, the Term of this Agreement shall automatically be extended until terminated by either party giving one hundred twenty (120) days prior written notice to the other at any time thereafter. 3. COMPENSATION. As full compensation for all services to be performed by Employee pursuant to this Agreement, Employer agrees to pay Employee the compensation set forth in this Section 3, in addition to such other benefits and compensation as are provided elsewhere in this Agreement. 3.1 Base Salary. (a) Employee shall be paid an annual base salary of $300,000 for the first year of employment under this Agreement. The annual base salary shall be paid to Employee in equal semi- monthly installments in arrears on the seventh (7th) and twenty- second (22nd) day of each month, commencing as of the month in which this Agreement is executed. Should the seventh (7th) or the twenty-second (22nd) day of any month not be a business day, Employee's semi-monthly installment of base salary otherwise due on such date shall be paid to Employee on the immediately preceding business day. Employee's initial base salary shall be increased pursuant to Section 3.1(b) hereof and, any increase in Employee's annual base salary shall in no way limit or reduce any other obligation of Employer hereunder. Once established at an increased specified rate, Employee's annual base salary hereunder shall not thereafter be reduced. (b) During the Term hereof, the base salary payable to Employee pursuant to Section 3.1(a) hereof shall be increased on each anniversary of the date of the commencement of the Term of this Agreement as follows: From June 1, 1995 to May 31, 1996 - $320,000 From June 1, 1996 to May 31, 1997 - $340,000 From June 1, 1997 to May 31, 1998 - $360,000 From June 1, 1998 to May 31, 1999 - $390,000 Section 3.1(a) of this Agreement shall thereupon be deemed to be amended without further action by Employer or Employee and Employee's base salary shall be as set forth above effective as of each anniversary date of this Agreement. (c) Nothing herein contained shall preclude the Board of Directors of Employer from authorizing the payment of additional compensation to Employee over and above the base salary at any time payable to him under this Agreement, whether as a bonus or otherwise. The payment of such additional compensation shall not operate as an amendment obligating Employer to make any similar payment or to pay additional compensation at any future time or for any future period or be deemed to affect the base salary in any manner. 3.2 Annual Bonus. In addition to the base salary, Employee shall be awarded, for each of Employer's fiscal years during the Term of this Agreement commencing with fiscal year ending March 31, 1995, an annual bonus (the "Annual Bonus") as determined by this Section 3.2. The Annual Bonus for fiscal year 1995 shall equal five percent (5%) of the amount by which "Employer's Pre-Tax Profits" (as that term is defined in Annex A attached hereto) exceeds $1 million (the "Bonus Base"). Thereafter, for each subsequent year, the Bonus Base shall be adjusted to equal the. actual Employer's Pre-Tax Profits for the prior fiscal year plus 15%; or $1,000,000, whichever is greater. All income below the Bonus Base shall not qualify for or be used in determining the Annual Bonus. In subsequent fiscal years during the term of this Agreement, an Annual Bonus equal to 5% of the amount by which Employer's Pre-Tax Profits for the current fiscal year exceeds the Bonus Base shall be paid to Employee. The Annual Bonus shall be paid in cash to Employee on the earlier of (a) the date Employer files its annual report on Form 10-K with the Securities and Exchange Commission, or (b) the date that is one hundred twenty (120) days after the end of Employer's fiscal year. 3.3 Stock Option. In connection with and as a further inducement to Employee to enter into this Agreement, the Employer's Stock Option Committee has awarded to Employee certain stock options, copies of which are attached hereto as Exhibit A. 3.4 Additional Benefits. 3.4.1 Business Expenses. During the Term of this Agreement, Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Employee in the performance of his duties pursuant to this Agreement in accordance with the policies and procedures of Employer now or hereinafter in effect. During the Term of this Agreement, Employer shall furnish Employee with an automobile to be used by Employee in the performance of his duties hereunder and shall pay such expenses and other amounts with respect thereto as are customarily paid for senior executives in corporations substantially similar to Employer. Such automobile shall be of a price and class similar to that currently used by Employee. 3.4.2 Insurance. During the Term of this Agreement, Employer shall provide, at no expense to Employee, a term life insurance policy on the life of Employee and payable to Employee's designated beneficiary in accordance with the current policies and procedures of Employer in effect, and shall continue in force the disability insurance now in effect. Employer shall further provide Employee during the Term of this Agreement with group accident, medical, dental and hospital insurance coverage in accordance with the policies and procedures of Employer in effect from time to time and to the extent permissible by law, Employer shall extend medical and health insurance coverage to Employee's wife and child dependents. Further, Employer shall use its best efforts to provide Employee with Directors and Officers Liability Insurance appropriate to the nature of his responsibilities hereunder, provided that Employer is able to obtain such insurance coverage for all of its directors and officers at reasonable expense, as determined by the Board of Directors in its sole discretion. For five years following a Change of Control, Employer shall use its best efforts to continue to provide directors' and officers' liability insurance covering Employee (with respect to events occurring prior to termination of Employment) on terms no less favorable (in terms of coverage and amounts) than those of such insurance in effect immediately prior to the Change of Control. Following a Change of Control, Employer will indemnify and hold harmless Employee (and advance expenses) to the full extent provided in the Articles of Incorporation and Bylaws of Employer as in effect immediately prior to the Change of Control. 3.4.3 Vacation and Holidays. Employee shall be entitled to three (3) weeks paid vacation during each full year of employment. In addition to the above vacation, Employee shall be entitled to the number of paid holidays provided for under the current policies and procedures of Employer in effect from time to time. 3.4.4 Benefits Generally Offered. In addition to any other compensation or benefits to be received by Employee pursuant to the terms of this Agreement, Employee shall be entitled to participate in all employee benefits which Employer may from time to time provide its key officers. 4. RESTRICTIVE COVENANTS. 4.1 Non-Competition. (a) During the term of Employee's employment under this Agreement and for eighteen (18) months thereafter, Employee shall not own or have any interest directly in, or act as an officer, director, agent, employee or consultant of, or assist in any way or in any capacity, any person, firm, association, partnership, corporation, or other entity which is a wholesale distributor of home video cassettes or related media or is engaged in the specialty retail sports apparel business or is otherwise engaged in a business that is substantially similar to and/or competes with the business then engaged in by Employer (a "Competitive Entity") , in any geographical area where Employer engages in such business. The restrictions of this Section prohibiting ownership in a competitive business shall not apply to Employee's ownership of less than ten percent (10%) of the publicly traded securities of any Competitive Entity. (b) While the Employer and Employee acknowledge that the restrictions contained in this Section 4.1 are reasonable, in the unlikely event that any court should determine that any of the restrictive covenants contained in Section 4.1(a), or any part thereof, is unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. 4.2 Delivery of Records. Upon termination of Employee's employment with Employer, Employee shall deliver to Employer all books, records, lists, brochures and all other property belonging to Employer or developed by Employee in connection with the business of Employer. 4.3 Confidentiality. Except in connection with the performance of his duties hereunder, Employee shall not at any time during or after his employment with Employer, reveal, divulge or make known to any person, firm or corporation any confidential knowledge or information which is treated as confidential and secret by Employer and which relates to Employer's business (the "Confidential Information"), including, but not limited to, any confidential facts concerning any suppliers, purchasers, methods, processes, developments, schedules, lists or loans of or relating to the business of Employer and Employee will retain all Confidential Information which he has acquired or which he will acquire during his employment; provided, however, that this restriction shall not apply to any knowledge, information or fact held by or known to Employee that is generally known to the trade through no fault of Employee or which was acquired by Employee other than in his capacity as Employee; provided, further, that this restriction shall not apply to any knowledge, information or fact that, in the unqualified opinion of Employee's counsel, Employee is required to reveal or disclose as a result of court order, subpoena or similar legal duress or if disclosure is otherwise required by law. Employee shall give Employer prompt written notice of Employee's intention to disclose such information along with a copy of any such order or subpoena, and Employee shall give Employer a reasonable opportunity (under the circumstances) prior to disclosure to seek a protective order. Employee shall not be required to seek any protective order or commence any process to do so. 4.4 Survival. The provisions of this Section 4 shall survive the termination of this Agreement and shall inure to the benefit of Employer, its successors and assigns. 5. TERMINATION. 5.1 Termination for Cause. Employee's employment may be terminated by Employer immediately for "Cause" as that term is defined in Section 6.2.1. 5.2 Termination for Death or Disability. Employee's employment may be terminated by Employer immediately upon Employee's "Disability" as that term is defined in Section 6.2.2 or death. 5.3 [Intentionally Omitted] 5.4 Termination for Good Reason or by Employer. (a) Employee's employment may be terminated by Employee (i) within 120 days after a Change of Control or (ii) at any time for "Good Reason" as that term is defined in Section 6.2.3. Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (b) Employee's employment under the terms of Agreement may be terminated by Employer in the exercise of its sole discretion at any time upon written notice to Employee. 6. PAYMENTS UPON TERMINATION OF EMPLOYMENT. 6.1 Payments. (a) In the event of the termination of Employee's employment by Employer pursuant to Section 5.1 for Cause, within ten days of termination Employer shall pay to Employee the full amount of base salary accrued through the date of termination pursuant to Section 3.1 and the amount of bonus, if any, accrued through the date of termination pursuant to Section 3.2. No other compensation shall be due or payable under this Agreement in the event of a termination for Cause. (b) In the event of the termination of Employee's employment by Employer pursuant to Section 5.2 due to the death or Disability of Employee, within ten days of termination Employer shall pay to Employee or his estate or legal representative, in a lump sum, the amount of base salary and bonus accrued through the date of termination pursuant to Sections 3.1 and 3.2 plus an additional amount equal to one year's base salary pursuant to Section 3.1. During the period of Employee's disability, but prior to Employee's termination of Employment, Employee shall be entitled to receive all compensation as set forth in this Agreement. (c) In the event of the termination of Employee's employment by Employee pursuant to Section 5.4(a) or following a Change of Control or Potential Change of Control, the termination of Employee's employment by Employer pursuant to Section 5.4(b), within ten days of termination Employer shall pay to Employee, in a lump sum, the greater of (i) all base salary and bonus which Employer is obligated to pay to Employee pursuant to Sections 3.1 and 3.2 for the remainder of the Term of this Agreement (with bonus being calculated as the greater of the bonus amount paid with respect to the immediately preceding fiscal year or the average of the bonus amounts paid for the three immediately preceding fiscal years), or (ii) three times the sum of (A) the base salary which Employer is obligated to pay to Employee pursuant to Section 3.1 during the current fiscal year plus (B) the greater of the bonus amount which Employer paid with respect to the immediately preceding fiscal year or the average of the bonus amounts which Employer paid for the three immediately preceding fiscal years. (d) In the event of the termination of Employee's employment by Employer pursuant to Section 5.4(b) (prior to a Change of Control or Potential Change of Control), Employer shall pay to Employee all base salary and bonus which Employer is obligated to pay to Employee pursuant to Sections 3.1 and 3.2 for the remainder of the Term of this Agreement, when and at such times as such compensation would otherwise have been earned and paid to Employee pursuant to the terms of this Agreement, as if Employee had remained in the employ of Employer through the entire term of this Agreement. (e) In the event of a termination of Employee's employment, all stock options held by Employee as described in Section 3.3 of this Agreement shall be treated in the manner described in the stock option agreements entered into between Employer and Employee. (f) Employee is entitled to elect to continue the insurance described in Section 3.4.2 of this Agreement during a period of two (2) years following an event of termination described in subsections (c) and (d) of this Section 6.1. If Employee elects to continue such coverage, Employer shall reimburse Employee for the premiums paid by Employee for such insurance as such premiums are paid until such time as the continued insurance terminates or Employee obtains replacement full-time employment and is covered by such new employer's group medical health and life insurance plan with benefits substantially similar to those provided by Employer's insurance plan and without any pre-existing conditions, exclusions, limitations or restrictions, whichever occurs first. Such reimbursement shall be reduced for an amount equivalent to the amounts charged Employee for health coverage immediately prior to the occurrence of the Change of Control. (g) Employee, in his sole and absolute discretion, shall have the right to decline all or a portion of any payments under this Agreement. 6.2 Definitions. 6.2.1 Cause. "Cause" shall mean (i) an act or acts of personal dishonesty taken by Employee and intended to result in substantial personal enrichment of Employee at the expense of Employer, or (ii) the conviction of Employee of a felony. 6.2.2 Disability. "Disability" shall mean Employee's inability due to incapacity due to physical or mental illness to perform Employee's duties for a consecutive period of at least 90 days or for at least 180 days in a twelve-month period. 6.2.3 Good Reason. "Good Reason" shall mean (i) the failure of Employer to comply with the terms of this Agreement, or (ii) the occurrence (without Employee's express written consent), within two (2) years after any Change of Control, or after any Potential Change of Control (treating all references in subsections (a) through (g) below to a "Change of Control" as references to a "Potential Change of Control"), of any one of the following acts by Employer, or failures by Employer to act: (a) the assignment to Employee of any duties inconsistent with Employee's status as an executive officer of Employer or a substantial adverse alteration in the nature or status of Employee's title, position, duties, functions, working conditions or responsibilities from those in effect immediately prior to the Change of Control other than any such alteration primarily attributable to the fact that Employer may no longer be a public company, including, among other things, removal or failure to nominate Employee as a member of the Board if Employee is serving as such a member immediately prior to the occurrence of a Change of Control; (b) a reduction by Employer in Employee's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of Employer's principal executive offices to a location more than thirty-five miles from the location of such offices immediately prior to the Change of Control or Employer's requiring Employee to be based anywhere other than Employer's principal executive offices except for required travel on Employer's business to an extent substantially consistent with Employee's business travel obligations immediately prior to the Change of Control; (d) the failure by Employer, without Employee's consent, to pay to Employee any portion of Employee's current compensation; (e) the failure by Employer to continue in effect any compensation plan in which Employee participates immediately prior to the Change of Control which is material to Employee's total compensation unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by Employer to continue Employee's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the terms and conditions of such benefits, including, without limitation, the level of Employee's participation relative to other participants, as such relative level existed at the time of the Change of Control; (f) the failure by Employer to continue to provide Employee with benefits substantially similar to those enjoyed by Employee under any of Employer's pension, life insurance, medical, health and accident, or disability plans in which Employee was participating immediately prior to the Change of Control, the taking of any action by Employer which would directly or indirectly materially reduce any of such benefits or deprive Employee of any material fringe benefit enjoyed by Employee immediately prior to the Change of Control, or the failure by Employer to provide Employee with the number of paid vacation days to which Employee is entitled on the basis of years of service with Employer in accordance with Employer's normal vacation policy in effect immediately prior to the Change of Control; or (g) the failure of Employer to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 13 hereof. 6.2.4 Potential Change of Control. A "Potential Change of Control" shall mean a potential change of control of Employer, which shall be deemed to have occurred if the conditions set forth in any one of the following three events shall occur: (i) Employer enters into an agreement, the consummation of which would result in the occurrence of a Change of Control; (ii) any person (including Employer) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change of Control; or (iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change of Control has occurred. 6.3 Disputes Concerning Termination (a) If within fifteen (15) days after any notice of termination for Good Reason is given by Employee pursuant to Section 5.4(a), Employer notifies Employee that a dispute exists concerning the termination, the date of termination of this Agreement shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties or by a final determination; provided further that the date of termination shall be extended by a notice of dispute from Employer only if such notice is given in good faith and Employer pursues the resolution of such dispute with reasonable diligence. Employee shall have the right to notify Employer that a dispute exists within fifteen (15) days after any notice of termination is given by Employer, and shall have the right to dispute any denial of the payments and benefits described in this Agreement and to dispute the amount of such payments and benefits. Following a Change of Control, a Employer shall provide all witnesses and evidence reasonably required by Employee to present Employee's case. Employer shall pay to Employee all reasonable expenses and legal fees incurred by Employee as a result of a termination in seeking to obtain or enforce any right or benefit provided by this Agreement (whether or not Employee is successful in obtaining or enforcing such right or benefit). (b) If a purported termination by Employee for Good Reason occurs and such termination is disputed, Employer shall do either of the following. (1) If Employee continues to provide services, Employer shall continue to pay Employee the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary and estimated bonus) and continue Employee as a participant in all compensation, benefit and insurance plans in which Employee was a participant when the notice giving rise to the dispute was given, until the dispute is finally resolved; or (2) If Employee is no longer providing services, Employer shall pay Employee fifty percent (50%) of the amount specified in Sections 6.1(a), (b), (c) and (d), and Employer will provide Employee with the other benefits provided in Section 6, if, but only if, Employee agrees in writing that if the dispute is resolved against Employee, Employee will promptly refund to Employer all payments Employee receives under this paragraph (b) plus interest at the rate provided in Section 1274(d) of the Internal Revenue Code of 1986, as amended (the "Code"), compounded quarterly. If the dispute is resolved in Employee's favor, promptly after resolution of the dispute Employer will pay Employee the sum which was withheld during the period of the dispute plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly. Amounts paid under this paragraph (b) shall offset against and reduce other amounts due under this Agreement. If the dispute is resolved by a determination that Employee did not have Good Reason, this Agreement, in accordance with its terms, will continue to apply to the circumstances of Employee's employment by Employer and any termination thereof. (c) If there is a termination by Employer followed by a dispute as to whether Employee is entitled to the payments and other benefits provided under this Agreement, then, during the period of that dispute Employer will pay Employee fifty percent (50%) of the amount specified in Sections 6.1(a), (b), (c) and (d), and Employer will provide Employee with the other benefits provided in Section 6, if, but only if, Employee agrees in writing that if the dispute is resolved against Employee, Employee will promptly refund to Employer all payments Employee receives under this paragraph (c) plus interest at the rate provided in Section 1274(d) of the Internal Revenue Code of 1986, as amended (the "Code"), compounded quarterly. If the dispute is resolved in Employee's favor, promptly after resolution of the dispute Employer will pay Employee the sum which was withheld during the period of the dispute plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly. 7. PERSONAL NATURE. This Agreement is personal, and is being entered into based upon the singular skill, qualifications and experience of Employee. Employee shall not assign this Agreement or any rights hereunder without the express written consent of Employer. Employee hereby grants to Employer the right to use Employee's name, likeness and/or biography in connection with the services performed by Employee hereunder and in connection with the advertising or exploitation of any project with respect to which Employee performs services hereunder. 8. NOTICES. Any and all notices or other communications required or permitted by this Agreement or by law shall be deemed duly served and given when personally delivered to the party to whom such notice or communication is directed or, in lieu of such personal service, when deposited in the United States mail, certified, return receipt requested, first class postage prepaid, addressed as follows: EMPLOYER: RENTRAK CORPORATION 7227 N.E. 55th Avenue P.O. Box 18888 Portland, Oregon 97218 EMPLOYEE: RON BERGER P.O. Box 2190 Gresham, Oregon 97030 Each party may change its address for purposes of this Section by giving written notice of such change in the manner provided for in this Section. 9. GOOD FAITH. All approvals required to be given by any party shall be given or denied in good faith and may not be unreasonably denied. Each party shall use due diligence in its attempt to accomplish any act to be accomplished by that party. 10. ATTORNEY FEES. Except as provided in Section 6.3, in the event that it should become necessary for any party to bring an action, including arbitration, either at law or in equity, to enforce or interpret the terms of this Agreement, each party shall pay its own legal fees in connection with such action. 11. APPLICABLE LAW/VENUE. This Agreement is executed and intended to be performed in the State of Oregon and the laws of such State shall govern its interpretation and effect. If suit is instituted by any party hereto by any other party hereto for any cause or matter arising from or in connection with the respective rights or obligations of the parties hereunder, the sole jurisdiction and venue for such action shall be the Superior Court of the State of Oregon in and for the County of Multnomah. 12. INTEGRATED AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreement between the parties with respect thereto. 13. HEIRS AND ASSIGNS. Subject to any restriction on assignment contained herein, this Agreement shall be binding upon and shall inure to the benefit of the respective party's heirs, successors and assigns. Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of Employer, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place. This Agreement shall not be terminated by Employer's voluntary or involuntary dissolution or by any merger or consolidation in which Employer is not the surviving or resulting corporation, or on any transfer of all or substantially all of the assets of Employer. In the event of any such merger, consolidation, or transfer of assets, the provisions of this Agreement shall be binding on and inure the benefit of the surviving business entity or the business entity to which such assets shall be transferred. 14. SEVERABILITY. Any provision in this Agreement which is, by competent judicial authority, declared illegal, invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without invalidating the remaining provisions hereof or affecting the legality, validity or enforceability of such provision in any other jurisdiction. The parties hereto agree to negotiate in good faith to replace any illegal, invalid or unenforceable provision of this Agreement with a legal, valid and enforceable provision that, to the extent possible, will preserve the economic bargain of this Agreement, or otherwise to amend this Agreement, including the provision relating to choice of law, to achieve such result. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. EMPLOYER: EMPLOYEE: RENTRAK CORPORATION, an Oregon Corporation BY: F. KIM COX RON BERGER Executive Vice President BY: STEVE ROBERTS Chairman, Compensation Committee, Board of Directors -----END PRIVACY-ENHANCED MESSAGE-----