-----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, NjEL8Ju79fGZJ6jjS1mxOKZU2xosuV6oROOCX9awIUGsV7xOrfmCZVF2A/oinVRJ IeB2RW/LqXCNs1bV5n4hFA== 0000800458-97-000019.txt : 19971104 0000800458-97-000019.hdr.sgml : 19971104 ACCESSION NUMBER: 0000800458-97-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971103 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENTRAK CORP CENTRAL INDEX KEY: 0000800458 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE DISTRIBUTION [7822] IRS NUMBER: 930780536 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15159 FILM NUMBER: 97706470 BUSINESS ADDRESS: STREET 1: ONE AIRPORT CTR STREET 2: 7700 N E AMBASSADOR PL CITY: PORTLAND STATE: OR ZIP: 97220 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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission file number: 0-15159 RENTRAK CORPORATION (Exact name of registrant as specified in its charter) OREGON 93-0780536 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification no.) 7700 NE Ambassador Place, Portland, Oregon 97220 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (503)284-7581 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( ) As of October 24, 1997, the Registrant had 11,116,428 shares of Common Stock outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1997 and March 31, 1997 Consolidated Statements of Income for the three month periods ended September 30, 1997 and September 30, 1996 Consolidated Statements of Income for the six month periods ended September 30, 1997 and September 30, 1996 Consolidated Statements of Cash Flows for the six month periods ended September 30, 1997 and September 30, 1996 Notes to Consolidated Financial Statements RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
UNAUDITED September 30, March 31, 1997 1997 CURRENT ASSETS: Cash and cash equivalents $ 7,599,915 $ 10,167,169 Accounts receivable, net of allowance for doubtful accounts of $215,389 and $409,313 16,434,079 16,434,566 Advances to program suppliers 2,664,687 492,844 Inventory 2,231,564 1,902,618 Deferred tax asset 708,956 1,365,064 Other current assets 4,491,424 2,901,964 Total current assets 34,130,625 33,264,225 PROPERTY AND EQUIPMENT, net 1,889,923 2,006,556 INTANGIBLES, net 331,214 171,509 OTHER INVESTMENTS, net 343,436 778,950 DEFERRED TAX ASSET 3,875,408 3,637,563 OTHER ASSETS 4,443,891 3,189,192 TOTAL ASSETS $ 45,014,497 $ 43,047,995 The accompanying notes are an integral part of these consolidated balance sheets.
RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
UNAUDITED September 30, March 31, 1997 1997 CURRENT LIABILITIES: Line of credit $ 5,000,000 $ 5,000,000 Accounts payable 21,383,503 17,160,492 Accrued liabilities 1,084,275 613,669 Accrued compensation 804,144 1,695,814 Deferred revenue 1,477,473 2,672,849 Net current liabilities of discontinued operations 4,585,373 4,633,114 Total current liabilities 34,334,768 31,775,938 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock $.001 par value; Authorized: 10,000,000 shares Common stock, $.001 par value; Authorized: 30,000,000 shares Issued and outstanding: 11,054,568 shares at September 30, 1997 and 11,847,441 at March 31, 1997 11,055 11,847 Capital in excess of par value 44,711,299 47,931,165 Net unrealized gain (loss) on investment securities (5,154) 184,932 Accumulated deficit (32,937,709) (35,452,729) Less - Deferred charge - warrants (1,099,762) (1,403,158) 10,679,729 11,272,057 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,014,497 $ 43,047,995 The accompanying notes are an integral part of these consolidated balance sheets.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) Three Months Ended September 30, 1997 1996 REVENUES: PPT $ 27,158,459 $ 29,962,381 Other 1,690,052 5,442,310 28,848,511 35,404,691 OPERATING COSTS AND EXPENSES: Cost of sales 23,802,293 25,446,970 Selling and administrative 3,156,183 3,683,032 26,958,476 29,130,002 INCOME FROM OPERATIONS 1,890,035 6,274,689 OTHER INCOME (EXPENSE): Interest income 128,325 112,054 Interest expense (62,035) Other 110,000 128,325 160,019 INCOME BEFORE INCOME TAX PROVISION 2,018,360 6,434,708 INCOME TAX PROVISION 814,472 2,458,775 NET INCOME $ 1,203,888 $ 3,975,933 FULLY DILUTED EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE $ 0.10 $ 0.26 SHARES USED IN PER SHARE CALCULATION 14,106,887 16,323,636 The accompanying notes are an integral part of these statements.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) Six Months Ended September 30, 1997 1996 REVENUES: PPT $56,169,975 $ 52,611,077 Other 3,293,087 6,556,724 59,463,062 59,167,801 OPERATING COSTS AND EXPENSES: Cost of sales 48,840,933 44,901,304 Selling and administrative 6,575,920 7,305,860 55,416,853 52,207,164 INCOME FROM OPERATIONS 4,046,209 6,960,637 OTHER INCOME (EXPENSE): Interest income 251,176 285,675 Interest expense (5,000) (181,950) Other 318,875 246,176 422,600 INCOME BEFORE INCOME TAX PROVISION 4,292,385 7,383,237 INCOME TAX PROVISION 1,777,363 2,831,008 NET INCOME $ 2,515,022 $ 4,552,229 FULLY DILUTED EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE $ 0.19 $ 0.31 SHARES USED IN PER SHARE CALCULATION 14,931,978 16,300,423 The accompanying notes are an integral part of these statements.
RENTRAK CORPORATION STATEMENT OF CASH FLOWS
(Unaudited) Six Months Ended September 30, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,515,022 $ 4,552,229 Adjustments to reconcile income to net cash provided (used) in operations Gain on investment / asset sales (318,875) Depreciation 373,382 506,755 Amortization of intangibles 45,849 82,462 Amortization of warrants 303,396 189,107 Provision for doubtful accounts (309,733) (88,633) Retailer financing program reserves (300,000) (344,911) Studio advance reserves (17,852) (112,612) Deferred income taxes 534,768 161,331 Change in specific accounts: Accounts receivable (389,780) (406,401) Advance to program suppliers (2,153,991) 184,336 Inventory (328,946) 244,712 Other current assets (589,460) 3,338,798 Accounts payable 4,223,011 (6,012,410) Accrued liabilities & compensation (421,064) 1,237,883 Deferred revenue (1,195,376) (567,989) Net current liabilities of discontinued operation (47,741) Net cash provided by operations 2,241,485 2,645,782 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (256,749) (76,120) (Investments) reduction in retailer financing program (750,000) 1,334,911 Proceeds from sale of investment / assets 544,864 (Purchase) reduction of other assets & intangibles (581,332) 435,696 Net cash provided (used) by investing activitie (1,588,081) 2,239,351 CASH FLOWS FROM FINANCING ACTIVITIES: Payments under line of credit, net (2,700,000) Repurchase of common stock (2,998,877) Repurchase of Warrants (250,000) Issuance of common stock 28,219 1,439 Net cash used by financing activities (3,220,658) (2,698,561) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,567,254) 2,186,572 CASH AND CASH EQUIVALENTS AT BEGINNING OF THIS PERIOD 10,167,169 2,683,128 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,599,915 $ 4,869,700 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for - Interest $ 5,000 $ 197,642 Income taxes, net of refunds 1,337,366 (314,228) NON-CASH TRANSACTIONS Increase (decrease) in net unrealized gain on investment securities (190,086) (521,734) Reduction of Warrants 496,913 Retailer Loan Program Investment through - conversion of accounts receivable 1,196,856 The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A: Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of RENTRAK CORPORATION (the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three month and six month periods ended September 30, 1997 are not necessarily indicative of the results to be expected for the entire fiscal year ended March 31, 1998. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included in the Company's 1997 Annual Report to Shareholders. The Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal and recurring adjustments) necessary to present fairly the Company's financial position and results of operations. The Condensed Consolidated Financial Statements include the accounts of the Company, its majority owned subsidiaries, and those subsidiaries in which the Company has a controlling interest after elimination of all intercompany accounts and transactions. Investments in affiliated companies owned 20 to 50 percent are accounted for by the equity method. NOTE B: Net Income Per Share For the three and six month periods ended September 30, 1997 and September 30, 1996, net income per share is computed using the "modified" treasury stock method. Under this method, the number of shares is based on the weighted average number of shares outstanding and the assumed exercise of common stock equivalent options and warrants regardless of whether the market price of the common stock exceeded the exercise price of the options and warrants. In addition, contingent warrants were assumed to have been exercised. The number of treasury shares assumed to be purchased with the proceeds from the exercise of stock options and warrants is limited to 20 percent of the outstanding shares at period end. Proceeds from exercise of the options and warrants in excess of those used to purchase treasury shares were assumed to have been invested in government securities with the resultant net interest income, adjusted for appropriate tax effects, added to net income for purposes of calculating earnings per share. NOTE C: Major Suppliers For the quarter ended September 30, 1997, the Company had one program supplier whose product generated 50 percent, a second that generated 21 percent, and a third that generated an additional 11 percent of Rentrak revenues. For the six month period ended September 30, 1997, the Company had one program supplier whose product generated 52 percent, a second that generated 19 percent, and a third that generated an additional 13 percent of Rentrak revenue. No other program supplier provided product which generated more than 10 percent of revenue for the three or six month periods ended September 30, 1997. For the quarter ended September 30, 1996, the Company had one program supplier whose product generated 31 percent, a second that generated 25 percent, and a third that generated an additional 18 percent of Rentrak revenues. For the six month period ended September 30, 1996, the Company had one program supplier whose product generated 35 percent, a second that generated 26 percent and a third that generated an additional 16 percent of Rentrak revenues. No other program supplier provided product which generated more than 10 percent of revenue for the three or six month periods ended September 30, 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements Information included in Management's Discussion and Analysis of Financial Conditions and Results of Operations regarding revenue growth, gross profit margin and liquidity constitute forward-looking statements that involve a number of risks and uncertainties. Forward looking statements can be identified by the uses of forward-looking words such as "may", "will", "expects", "intends", "anticipates", "estimates", or "continues" or the negative thereof or variations thereon or comparable terminology. The following factors are among the factors that could cause actual results to differ materially from the forward-looking statements: business conditions and growth in the video industry and general economics, both domestic and international; competitive factors, including increased competition, new technology, and the continued availability of Cassettes from Program Suppliers. Such factors are discussed in more detail in the Company's 1997 Annual Report to Shareholders. Results of Operations Total revenue includes the following: application fees generated when retailers are approved for participation in the Pay Per Transaction ("PPT") system; order processing fees generated when prerecorded videocassettes ("Cassettes") are ordered by and distributed to retailers; transaction fees generated when retailers rent Cassettes to consumers; sell- through fees generated when retailers sell Cassettes to consumers; buy out fees when retailers purchase Cassettes at the end of the lease term; royalty payments from Rentrak Japan; and sales of Cassettes. For the quarter ended September 30, 1997, total revenue decreased $6.6 million, or 18.5 percent to $28.8 million from $35.4 million in the quarter ended September 30, 1996. For the six month period ended September 30, 1997, total revenue increased $.3 million, or .5 percent, to $59.5 million from $59.2 million in the six month period ended September 30, 1996. During the quarter ended September 30, 1996, the Company received, and recognized in other revenue, $4.4 million in one-time royalty payments from Rentrak Japan. Excluding this one-time royalty payment in 1996, revenues for the quarter ended September 30, 1997 decreased $2.2 million from the same quarter of the previous year and revenues for the six month period ended September 30, 1997 increased $4.7 million from the same period in the prior year. In addition to the decrease in royalty revenue, the decrease in total revenue for the quarter ended September 30, 1997 and the decreases described in the following paragraph were primarily due to the decrease in the number and quality of titles released to the PPT System. During the six month period ended September 30, 1997, the increase in revenues was primarily due to the growth in (i) the number of retailers approved to lease Cassettes under the PPT System from the Company (the "Participating Retailers"); (ii) the quality of titles released to the PPT System; and (iii) the total number of Cassettes leased under the PPT System. Cost of sales for the quarter ended September 30, 1997 decreased to $23.8 million from $25.4 million the prior year, a decrease of $1.6 million, or 6.5 percent. Cost of sales for the six month period ended September 30, 1997 rose to $48.8 million from $44.9 million the prior year, an increase of $3.9 million or 9 percent. The gross profit margin decreased to 17.5 percent in the quarter ended September 30, 1997 from 18 percent the previous year, excluding the one-time royalty payment of $4.4 million. The gross profit margin was 18 percent in both the six month periods ended September 30, 1997 and September 30, 1996, excluding the one-time royalty payment of $4.4 million. Inclusion of the one-time royalty payment of $4.4 million resulted in a gross profit margin of 28 percent and 24 percent in the three and six month periods ended September 30, 1996, respectively. Selling and administrative expenses were $3.2 million for the quarter ended September 30, 1997 compared to $3.7 million in the quarter ended September 30, 1996, a decrease of $.5 million, or 14 percent. Selling and administrative expenses were $6.6 million in the six month period ended September 30, 1997 compared to $7.3 million in the six month period ended September 30, 1996, a decrease of $0.7 million or 10 percent. These decreases were primarily due to the recovery of amounts which were loaned under the retailer loan program and which had been previously reserved. As a percentage of total revenue, selling and administrative expenses increased from 10 percent for the quarter ended September 30, 1996 to 11 percent for the quarter ended September 30, 1997. This increase is attributable to the one time royalty payment included in other revenue which had no impact on selling and administrative expenses. As a percentage of total revenue, selling and administrative expenses decreased from 12 percent for the six month period ended September 30, 1996 to 11 percent for the six month period ended September 30, 1997. Other income (expense) was $0.1 million for the quarter ended September 30, 1997 and $0.2 million for the quarter ended September 30, 1996. Other income was $0.2 million in the six month period ended September 30, 1997 and $0.4 million in the six month period ended September 30, 1996, a decrease of $0.2 million. Other income in the six month period ended September 30, 1996 includes a gain of $0.3 million on the sale of corporate securities which includes the sale of 60 shares of Rentrak Japan stock for $100,000. For the quarter ended September 30, 1997, the Company recorded a pre-tax profit of $2.0 million, or 7 percent of total revenue, compared to a pre-tax profit of $6.4 million, or 18 percent of total revenue in the quarter ended September 30, 1996. Excluding the one-time royalty payment from Rentrak Japan, the Company had a pre-tax profit of $1.9 million or 6 percent of total revenue for the quarter ended September 30, 1996. For the six month period ended September 30, 1997, the Company recorded a pre-tax profit of $4.3 million or 7 percent of total revenue, compared to a pre-tax profit of $7.4 million or 12 percent of total revenue for the six month period ended September 30, 1996. Excluding the one- time royalty payment from Rentrak Japan, the Company had a pre-tax profit of $2.9 million or 5 percent of total revenue for the six month period ended September 30, 1996. This increase, excluding the one-time royalty payment, is primarily due to a decrease in selling and administrative expenses and an increase in total revenue which resulted in increased gross margin dollars. Included in the amounts above are the results from Other Subsidiaries which are comprised of other video retail and other operations. For the quarter ended September 30, 1997, Other Subsidiaries recorded pre-tax income of $0.2 million compared to $0.1 million for the quarter ended September 30, 1996. For the six month period ended September 30, 1997, Other Subsidiaries recorded pre-tax income of $0.4 million compared to $0.1 million for the six month period ended September 30, 1996. Consolidated Balance Sheet At September 30, 1997, total assets were $45.0 million, an increase of $2.0 million from the $43.0 million at March 31, 1997. At September 30, 1997, cash decreased $2.6 million to $7.6 million from $10.2 million at March 31, 1997. The decrease is primarily due to the increase in other assets such as advances to program suppliers and other long term assets and the repurchase of the Company's stock as described below. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997, the Company had cash and other liquid investments of $7.6 million, compared to $10.2 million at March 31, 1997. At September 30, 1997, the Company's current ratio (current assets/current liabilities) decreased to .99 from 1.05 at March 31, 1997. The Company has an agreement for a line of credit with a financial institution in an amount not to exceed the lesser of $10 million or the sum of (a) 80 percent of the net amount of eligible accounts receivable as defined in the agreement. The line of credit expires on December 18, 1997. Interest is payable monthly at the bank's prime rate plus .5 percent (9.0 percent at September 30, 1997). The lender has an option to purchase 10,000 unregistered shares of common stock of the Company at $7 per share, which exceeded market value at the date of grant. The line is secured by substantially all of the Company's assets. The terms of the agreement require, among other things, a minimum amount of tangible net worth, minimum current ratio and minimum total liabilities to tangible net worth. The agreement also restricts the amount of net losses, loans and indebtedness and limits the payment of dividends on the Company's stock. The Company is in compliance with these covenants or has obtained waivers of noncompliance as of September 30, 1997. At March 31, 1997, the Company had $5.0 million outstanding borrowings which were paid under this agreement in April, 1997. As of September 30, 1997, the Company had $5.0 million outstanding borrowings under this agreement which were repaid in October, 1997. The Company has established a retailer financing program whereby the Company will provide, on a selective basis, financing to video retailers which the Company believes have the potential for substantial growth in the industry. In connection with these financings, the Company typically makes a loan to and/or an equity investment in the retailer. In some cases, a warrant to purchase stock may be obtained. As part of such financing, the retailer typically agrees to cause all of its current and future retail locations to participate in the PPT system for a designated period of time. Under these agreements, retailers are typically required to obtain some or all of their requirements of Cassettes offered under the PPT system or obtain a minimum amount of Cassettes based on a percentage of the retailer's revenues. Notwithstanding the long term nature of such agreements, both the Company and the retailer may, in some cases, retain the right to terminate such agreement upon 30- 90 days prior written notice. These financings are highly speculative in nature and involve a high degree of risk, and no assurance of a satisfactory return on investment can be given. The amounts the Company could ultimately receive could differ materially in the near term from the amounts assumed in establishing reserves. The Board of Directors has authorized up to $18 million to be used in connection with the Company's retailer financing program. As of September 30, 1997, the Company had invested or loaned approximately $13.2 million in various retailers, including BlowOut Entertainment, Inc. (BlowOut) as described below . The investments individually range from $0.2 million to $6.1 million. Interest rates on the various loans range from the prime rate plus 1 percent to the prime rate plus 2 percent. As the financings are made, and periodically throughout the terms of the agreements, the Company assesses the likelihood of recoverability of the amounts invested or loaned based on the financial position of each retailer. This assessment includes reviewing available financial statements and cash flow projections of the retailer and discussions with retailers' management. As of September 30, 1997, a total of approximately $8.5 million had been reserved by the Company in connection with the retailer loan program. As noted in the Company's 1997 Annual Report to Shareholders, the Company distributed to its Shareholders shares of common stock of BlowOut. The operations of BlowOut were reflected as discontinued operations in the March 31, 1996 consolidated financial statements. Net current liabilities of discontinued operations include management's best estimates of the anticipated losses from discontinued operations through the final resolution of all contingencies related to the disposition of BlowOut. The estimates are based on an analysis of the costs which may be incurred to dispose of the entity. The amounts the Company will ultimately incur could differ materially in the near term from the amounts assumed in arriving at the loss on disposal of the discontinued operations. BlowOut is essentially a start-up company requiring additional financing if it is to continue its expansion and to support operations of recently opened stores. The Company is the principal creditor to BlowOut. The Company has agreed to guarantee up to $7 million of indebtedness of BlowOut (Guarantee). The Guarantee expires for future borrowings on the earlier of (i) December 31, 1997 or (ii) such time as the total indebtedness of BlowOut subject to the Rentrak Guarantee is equal to $7 million. There can be no assurance that the Company will not have to pay out under these guarantees or provide other accommodations. During the term of the Rentrak Guarantee, and/or so long as any guarantee is thereunder outstanding, BlowOut has agreed to pay the Company a weekly fee at a rate equal to .02 percent per week of then-currently outstanding indebtedness subject to the Rentrak Guarantee. BlowOut has executed a $3 million note in favor of the Company which accrues interest at 9% per annum and is due in April 1999. At March 31, 1997, the total outstanding balance of the debt under such note, including accrued interest, was $3.5 million. BlowOut has a credit facility (the Credit Facility) in an aggregate principal amount of $2 million for a five- year term. Amounts outstanding under the Credit Facility bear interest at a fixed rate per annum equal to 13.98 percent. Pursuant to the terms of the Guarantee, the Company agreed to guarantee any amounts outstanding under the Credit Facility until the lender is satisfied, in its sole discretion, that BlowOut's financial condition is sufficient to justify the release of the Company's guarantee. As of September 30, 1997, BlowOut had borrowed approximately $1.5 million under the Credit Facility. BlowOut also has a revolving line of credit (Line of Credit) in a maximum principal amount at one time outstanding of $5 million. Under the Line of Credit, BlowOut may only draw up to 80% of the Orderly Liquidation Value (as defined in the Line of Credit) of eligible new and used Cassette inventory. Advances under the Line of Credit bear interest at a floating rate per annum equal to the Bank of America Reference Rate plus 2.75 percent (11.25 percent as of September 30, 1997). The term of the Line of Credit is three years. The Company has agreed, under certain circumstances in the event of default under the Line of Credit, to repurchase BlowOut's Cassette inventory at specified amounts. As of September 30, 1997, BlowOut had borrowed approximately $3.0 million under the Line of Credit. The Company's exposure related to adverse financial and operational developments at BlowOut is limited to its receivables from BlowOut [See Note 4 of the Notes to the Consolidated Financial Statements included in the Company's 1997 Annual Report to Shareholders] and the obligations under the Guarantee [See Note 9 of the Notes to the Consolidated Financial Statements included in the Company's 1997 Annual Report to Shareholders]. On November 26, 1996, the Board authorized the re- purchase of up to two million shares of Common Stock in open market and negotiated purchases. During the quarter ended September 30, 1997, the Company acquired 556,006 shares for an aggregate amount of approximately $2,236,000. During the six months ended September 30, 1997, the company acquired 813,600 shares for an aggregate amount of approximately $2,968,000. These purchases were funded through cash flows from operations. The Company's sources of liquidity include its cash balance, cash generated from operations and its available credit facility. These sources are expected to be sufficient to fund the Company's operations for the year ending March 31, 1998. PART II Item 1. Legal Proceedings. None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of matters to a Vote of Security Holders On August 11, 1997, the Company conducted its Annual Meeting of Shareholders. The matters voted on were as follows: 1. Voting for Directors was as follows: Nominees For: Percentage* Withheld Percentage Herbert Fischer 8,220,113 95.12% 421,537 4.87% James Jimirro 8,217,963 95.09% 423,687 4.90% Bill LeVine 8,202,313 94.91% 439,337 5.08% * Percentage of votes cast at the meeting or by Proxy. 2. Proposal to Approve the 1997 Equity Participation Plan of Rentrak Corporation: For: Against: Abstain: 7,667,302 881,565 92,783 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 10.1 - Employment Agreement of Marty Graham dated May 17, 1997. Exhibit 10.2 - Employment Agreement of Michael Lightbourne dated July 10, 1997. Exhibit 10.3 - Employment Agreement of Christopher Roberts dated October 27, 1997. Exhibit 10.4 - The 1997 Equity Participation Plan of Rentrak Corporation. (1) Exhibit 10.5 - The Amendment to the 1997 Non-Officer Employee Stock Option Plan of Rentrak Corporation. (2) Exhibit 10.6 - Rentrak Corporation Non-Qualified Stock Option Agreement. Exhibit 11 - Statement of Computation of per share earnings. Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - None (1) Incorporated by referenced to the Company's Proxy Statement dated June 25, 1997 for the Company's 1997 Annual Meeting of Shareholders. (2) Filed as Exhibit 4.1 to Form S-8 filed on October 29, 1997. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated this 31st day of October, 1997 RENTRAK CORPORATION: s/s Carolyn A .Pihl Carolyn A. Pihl Chief Accounting Officer Signing on behalf of the registrant EX-10.1 2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is made and entered into as of this 17th day of May, 1997 by and between RENTRAK CORPORATION, an Oregon corporation (hereinafter referred to as "Employer"), and MARTY GRAHAM (hereinafter referred to as "Employee"). W I T N E S S E T H: WHEREAS, Employer currently employs Employee in the capacity of Vice President, Product Development and Employee is one of the key executives of the Employer and desires to be so employed; WHEREAS, Employer and Employee have entered into an Employment Agreement effective June 1, 1995, as amended, (collectively the "Employment Agreement") and Employer and Employee desire to enter into a new Employment Agreement upon the terms and subject to the conditions of this Agreement; WHEREAS, the terms of this Agreement shall supersede in its entirety the terms of the Employment Agreement; WHEREAS, Employer considers it essential to the best interests of its shareholders to foster the continuous employment of Employee; WHEREAS, the Board of Directors of Employer (the "Board") recognizes that, as is the case with many publicly-held corporations, the possibility of a Change of Control (as defined below) may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of Employer and its shareholders; WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of Employer's management, including Employee, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of Change of Control; and WHEREAS, the Board has determined that it is in the best interests of Employer and its shareholders to clarify certain provisions of the Employment Agreement in order to more effectively carry out the purposes of Employment Agreement and avoid potential disputes in connection with the enforcement of the Employment Agreement following a Change of Control. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements herein contained, the recitals set forth hereinabove which by this reference are incorporated herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: 1. EMPLOYMENT 1.01. Duties and Place of Employment. (a) Employee shall be responsible for, and perform duties associated with his position as Vice President, Product Development, including title management so as to minimize risk and maximize profits, and other duties as may be directed by the Employer, from time to time. Employee shall: (i) devote his full business time during normal business hours to the business and affairs of Employer; (ii) use his best efforts to promote the interests of Employer; and (iii) perform faithfully and efficiently his responsibilities. Employee shall perform his duties at the Employer's principal executive offices which are currently located at One Airport Center, 7700 N.E. Ambassador Place,, Portland, Oregon 97220, or such other locations as may be directed by Employer from time to time. Subject to the terms of this Agreement, Employee shall comply promptly and faithfully with all of Employer's policies, instructions, directions, requests, rules and regulations. (b) After a Change of Control (as defined below), during the Term of this Agreement, Employee shall continue to serve Employer in the same capacity and have the same authority, responsibilities and status as he had as of the date immediately prior to the Change of Control. After a Change of Control, during the Term of this Agreement, Employee's services shall be performed at the location where Employee was employed as of the date immediately prior to the Change of Control, or at such other location as may be mutually agreed between Employer and Employee. (c) For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred upon the first fulfillment of the conditions set forth in any one of the following four paragraphs: (1) any "person" (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities under an employee benefit plan of Employer, is or becomes a beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Employer, representing twenty-five percent (25%) or more of the combined voting power of Employer's then outstanding securities; or (2) a majority of the directors elected at any annual or special meeting of stockholders are not individuals nominated by Employer's then incumbent Board; or (3) the shareholders of Employer approve a merger or consolidation of Employer with any other corporation, other than a merger or consolidation which would result in the voting securities of Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of Employer or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of Employer approve a plan of complete liquidation of Employer or an agreement for the sale or disposition by Employer of all or substantially all of its assets. 2. TERM AND TERMINATION 2.01. Stated Term. Employment commenced on April 15, 1997 and will end on April 15, 2002 (the "End Date") or until Employee's employment under this Agreement is terminated pursuant to this Section 2 ("Term"). 2.02. At Will Termination. Notwithstanding anything herein to the contrary, Employee's employment may be terminated by Employer at any time without cause upon thirty (30) days written notice to Employee. 2.03. For Cause Termination. Employee's employment may be terminated by Employer for "cause" without notice. Termination for "cause" is defined for purposes of this subsection as termination for: (i) material failure of Employee to substantially perform the reasonable and attainable instructions of Employer as to his duties hereunder; or (ii) an act or acts of misconduct by Employee which is determined by the Employer to be materially injurious to Employer monetarily or otherwise; or (iii) material violation by Employee of any provision of this Agreement. For purposes of this subsection, termination for "cause" shall not include any act or failure to act on Employee's part if done or omitted to be done by him in demonstrable good faith and with the reasonable belief that his act or omission was in the best interest of the Employer or pursuant to an express policy of Employer at the time of such act or omission. 2.04. Disability or Death. Employee's employment shall be terminable immediately upon Employee's death or disability. "Disability" is defined for purposes of this subsection as absence from Employee's full time duties with Employer as a result of Employee's incapacity due to physical or mental illness for ninety (90) days calculated on a cumulative basis during any one (1) year period during the Term of this Agreement. Nothing in this Section 2.04 is intended to violate any Oregon State law regarding parental or family leave policies or any other applicable law. 2.05. Termination by Employee for Good Reason. Employee's employment may be terminated by Employee at any time for "Good Reason" as that term is defined below. Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. "Good Reason" shall mean (i) a material breach by Employer of the terms of this Agreement; provided that Employee shall have no right to terminate this Agreement pursuant to this clause (i) unless Employer has had at least 15 days to cure such failure, or (ii) the occurrence (without Employee's express written consent), within two (2) years after any Change of Control of any one of the following acts by Employer, or failures by Employer to act: (a) the assignment to Employee of any duties inconsistent with Employee's status as an executive officer of Employer or a substantial adverse alteration in the nature or status of Employee's title, position, duties, functions, working conditions or responsibilities from those in effect immediately prior to the Change of Control other than any such alteration primarily attributable to the fact that Employer may no longer be a public company; (b) a reduction by Employer in Employee's annual Base Salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of Employer's principal executive offices to a location more than thirty-five miles from the location of such offices immediately prior to the Change of Control or Employer's requiring Employee to be based anywhere other than Employer's principal executive offices except for required travel on Employer's business to an extent substantially consistent with Employee's business travel obligations immediately prior to the Change of Control; (d) the failure by Employer, without Employee's consent, to pay to Employee any portion of Employee's current compensation; (e) the failure by Employer to continue in effect any compensation plan in which Employee participates immediately prior to the Change of Control which is material to Employee's total compensation unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by Employer to continue Employee's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the terms and conditions of such benefits, including, without limitation, the level of Employee's participation relative to other participants, as such relative level existed at the time of the Change of Control; (f) the failure by Employer to continue to provide Employee with benefits substantially similar to those enjoyed by Employee under any of Employer's pension, life insurance, medical, health and accident, or disability plans in which Employee was participating immediately prior to the Change of Control, the taking of any action by Employer which would directly or indirectly materially reduce any of such benefits or deprive Employee of any material fringe benefit enjoyed by Employee immediately prior to the Change of Control, or the failure by Employer to provide Employee with the number of paid vacation days to which Employee is entitled on the basis of years of service with Employer in accordance with Employer's normal vacation policy in effect immediately prior to the Change of Control; or (g) the failure of Employer to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 7.04. 2.06. Other Termination by Employee. Employee's employment may be terminated by Employee at any time without Good Reason upon thirty (30) days written notice to Employer. 3. COMPENSATION 3.01. Base Salary. Commencing April 15, 1997, Employee shall be paid an annual base salary in the amount of One Hundred Thirty Thousand Dollars ($130,000) ("Base Salary"). The Base Salary shall be paid to Employee in equal semi-monthly installments in arrears on the seventh (7th) and twenty-second (22nd) day of each month, commencing as of the first semi-monthly pay period following the effective date of this Agreement. Should the seventh (7th) or the twenty-second (22nd) day of any month not be a business day, Employee's semi-monthly installment of the Base Salary otherwise due on such date shall be paid to Employee on the business day closest to the date such semimonthly installment is due (i.e., if the seventh (7th) day of the month falls on a Saturday, the semi- monthly installment shall be paid on the preceding business day or if the seventh (7th) day of the month falls on a Sunday, the semi-monthly installment shall be paid on the next following business day). Employee's Base Salary shall be increased during the Term of this Agreement by Ten Thousand Dollars ($10,000) per annum, said increase to be effective as of April 15 of each year during the Term of this Agreement. 3.02. Bonus Compensation. Employee shall be entitled to participate in whatever bonus plan is adopted by Employer, including any cash bonus pools established from time to time by Employer, for Corporate Officers. Additionally, Employee shall be entitled to a performance bonus in the amounts set forth below upon achievement of the specified objectives: (a) For the establishment of PPT operations, defined as shipment of the first cassette, in a non-Asian foreign territory, Fifteen Thousand Dollars ($15,000); (b) For obtaining a fulfillment agreement no less than one (1) year in duration with any retailer with One Hundred (100) or more stores for all product of either Warner, Paramount, Sony, Fox, Universal or Disney, Fifteen Thousand Dollars ($15,000); and (c) For obtaining a fulfillment agreement no less than one (1) year in duration with any retailer with One Hundred (100) or more stores for all product of either Orion, LIVE, MGM, Polygram, NewLine or Trimark, Seven Thousand Five Hundred Dollars ($7,500). 3.03. Benefits. (a) Vacation and Holiday Pay. As of the effective date of this Agreement, Employee will be entitled to: (i) accrue vacation time at the rate of one hundred sixty (160) hours of paid vacation during each year of employment; and (ii) will be eligible to receive pay for Employer-paid holidays. (b) Insurance. Employee shall be entitled to medical, life, worker's compensation, social security and state unemployment insurance benefits as provided under Employer's then current terms, policies and procedures. Employee shall also be entitled to officers' disability insurance benefits. For five years following a Change of Control, Employer shall use its best efforts to continue to provide directors' and officers' liability insurance covering Employee (with respect to events occurring prior to termination of Employment) on terms no less favorable (in terms of coverage and amounts) than those of such insurance in effect immediately prior to the Change of Control. Following a Change of Control, Employer will indemnify and hold harmless Employee (and advance expenses) to the full extent provided in the Articles of Incorporation and Bylaws of Employer as in effect immediately prior to the Change of Control. (c) Tuition Reimbursement. Employee shall be entitled to reimbursement for all tuition, enrollment fees, and books pursuant to Employer's education assistance program. Employee shall comply with all Employer's terms, policies and procedures regarding its education assistance program. (d) Business Expenses. During the Term of this Agreement, Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Employee in the performance of his duties pursuant to this Agreement in accordance with the policies and procedures of Employer now or hereinafter in effect. (e) Miscellaneous Benefits. In addition to any other compensation or benefits to be received by Employee pursuant to the terms of this Agreement, Employee shall be entitled to participate in any employee or officer(s) benefits which Employer may from time to time provide its employees or officer(s) generally. 3.04. Stock Options. Upon the commencement of the Term of this Agreement, all options previously granted to Employee shall fully vest. Also upon commencement of the Term of this Agreement, Employer shall grant Employee Twenty-Five Thousand (25,000) shares of Employer's stock at the market rate as set forth in Employer's Stock Option Plan on the date of execution of this Agreement. Said options shall vest at a rate of Twenty percent (20%) per year (i.e., 5,000 options shall vest at the end of each full year of Employee's employment during the five-year Term of this Agreement). Said options shall remain exercisable for a period of Ten (10) years from the issue date. In addition to the aforementioned options, Employee shall be granted additional options for Five Thousand (5,000) shares per grant during each year that this Agreement remains in effect, commencing on the anniversary date of execution of this Agreement in 1998. Said options shall be at a price to be set by the Board of Directors of Employer and shall be the same price at which options are offered to all other employees during the year in which the options are granted. Said options shall vest at a rate of Twenty percent (20%) per year (i.e., 1,000 options shall vest at the end of each full year of Employee's employment) and shall remain exercisable for a period of Ten (10) years from the issue date. 3.05. Loan. Employer has advanced to Employee Thirty-Five Thousand Dollars ($35,000) (the "Loan"). The Loan is to be repaid in full, with interest at the rate of Eight-and-a-half percent (8.5%); provided however, that if Employee is still employed by Employer on the anniversary date of the execution of this Agreement in 2002, the Loan shall be forgiven. All interest will accrue to the fifth anniversary of this Agreement. In the event of termination of Employee's employment by Employer for reason other than cause, or by Employee for good reason, or by Employee's death or disability, the Loan shall be forgiven. If Employee resigns other than for good reason or his employment is terminated for cause by Employer, then the loan shall be repaid on the last date of Employee's employment. 4. PAYMENTS UPON TERMINATION OF EMPLOYMENT 4.01. Termination for Cause. In the event of the termination of Employee's employment by Employer for cause pursuant to Section 2.03 within ten days of termination Employer shall pay to Employee only the Base Salary accrued pursuant to Section 3.01 through and including the date of termination. No other compensation shall be due or payable under this Agreement in the event of a termination for Cause. 4.02. Termination for Death or Disability. (a) Termination for Death. In the event of the termination of Employee's employment pursuant to Section 2.04 due to his death, within ten days of termination Employer shall pay to Employee's estate or legal representative, as the case may be, in a lump sum, the Base Salary accrued pursuant to Section 3.01 through and including the date of termination plus a lump sum severance of Ninety (90) days Base Salary at the rate in effect on the date of Employee's death. Employer shall also convey to Employee's estate or legal representative all options granted to Employee during his employment, regardless of whether or not said options vested prior to Employee's death. Said options shall remain exercisable for a period of One (1) year from the date of death. No other compensation shall be due or payable under this Agreement in the event of a termination due to the Employee's death. (b) Termination for Disability. In the event of the termination of Employee's employment pursuant to Section 2.04 due to his disability, within ten days of termination Employer shall pay to Employee or his legal representative, as the case may be, in a lump sum, the Base Salary accrued pursuant to Section 3.01 through and including the date of termination. During the period of Employee's disability, but prior to Employee's termination of Employment, Employee shall be entitled to receive all compensation as set forth in this Agreement. No other compensation shall be due or payable under this Agreement in the event of a termination due to the Employee's disability. 4.03. Termination by Employer Without Cause After Change of Control or by Employee for Good Reason. In the event of the termination of Employee's employment by Employer pursuant to Section 2.02 within two years after a Change of Control or by Employee pursuant to Section 2.05, within ten days of termination Employer shall pay to Employee, in a lump sum, the lesser of (i) all Base Salary which Employer is obligated to pay to Employee pursuant to Section 3.01 through the End Date or (ii) one year of Base Salary which Employer is obligated to pay to Employee pursuant to Section 3.01 during the current fiscal year. 4.04. Other Termination by Employer. In the event of termination of Employee's employment by Employer pursuant to Section 2.02 prior to a Change of Control or more than two years after a Change of Control, Employer shall pay Employee the Base Salary accrued pursuant to Section 3.01 as of the date of termination plus severance payments in an amount equal to six months' Base Salary at the rate at which Employer is obligated to pay to Employee pursuant to Section 3.01 during the current fiscal year, payable in installments as if still employed; provided, however, that during the period that Employer is making severance payments pursuant to this Section 4.04, Employer shall have the right to request Employee to provide reasonable evidence that he is using his best efforts to obtain other employment of comparable status in the Portland metropolitan area, and in the event that Employee fails to provide such reasonable evidence, then Employer shall not be obligated to pay any severance payments; and provided further that if Employee is successful in obtaining such employment, the amount of severance payments that would have been payable after the time that Employee obtains such employment shall be reduced by the amount of any remuneration received from such employment. For the purposes of this Agreement, "remuneration" shall be defined to include cash payments, the face value of any promissory notes issued to Employee regardless of the terms of payment or whether payments are ever received, stock or stock options valued as of the day granted, or any other compensation given in any form whatsoever. 4.05. Other Termination by Employee. In the event of the termination of Employee's employment by Employee pursuant to Section 2.06, within ten days of termination Employer shall pay to Employee only the amount of Base Salary accrued pursuant to Section 3.01 through and including the date of termination. No other compensation shall be due or payable under this Agreement in the event of a such a termination. 4.06. Insurance Benefits. Employee is entitled to elect to continue the insurance described in Section 3.04B during a period of two (2) years following an event of termination described in Section 2.05 and a period of six (6) months following an event of termination described in Section 2.02. If Employee elects to continue such coverage, Employer shall reimburse Employee for the premiums paid by Employee for such insurance as such premiums are paid until such time as the continued insurance terminates or Employee obtains replacement full-time employment and is covered by such new employer's group medical health and life insurance plan with benefits substantially similar to those provided by Employer's insurance plan and without any pre-existing conditions, exclusions, limitations or restrictions, whichever occurs first. Such reimbursement shall be reduced for an amount equivalent to the amounts charged Employee for health coverage immediately prior to the occurrence of the Change of Control. 4.07. Other Compensation. Except as set forth in this Section 4, no other compensation shall be due or payable to Employee upon termination of his employment. 4.08. Right to Decline Payments. Employee, in his sole and absolute discretion, shall have the right to decline all or a portion of any payments under this Agreement. 5. PERSONAL NATURE This Agreement is personal, and is being entered into based upon the singular skill, qualifications and experience of Employee. Employee shall not assign this Agreement or any rights hereunder without the express written consent of Employer which may be withheld with or without reason. Employee hereby grants to Employer the right to use Employee's name, likeness and/or biography in connection with the services performed by Employee hereunder and in connection with the advertising or exploitation of any project with respect to which Employee performs services hereunder. 6. NOTICES Any and all notices or other communications required or permitted by this Agreement or by law shall be deemed duly served and given when personally delivered to the party to whom such notice or communication is directed or, in lieu of such personal service, when deposited in the United States mail, certified, return receipt requested, first class postage prepaid, addressed as follows: EMPLOYER: Rentrak Corporation One Airport Center 7700 N.E. Ambassador Place Portland, Oregon 97220 Attn: Ron Berger EMPLOYEE: Marty Graham 1914 N.E. 213th Avenue Troutdale, Oregon 97060 Each party may change its address for purposes of this Section by giving written notice of such change in the manner provided for in this Section. 7. MISCELLANEOUS PROVISIONS. 7.01. Attorneys' Fees; Disputes Concerning Termination. (a) Subject to Section 7.01(b), in the event that it should be become necessary for any party to bring an action, including arbitration, either at law or in equity, to enforce or interpret the terms of this Agreement, each party shall pay its own attorneys' fees including those incurred in resolving the dispute prior to initiation of any litigation and at trial and on any appeal. (b) If within fifteen (15) days after any notice of termination for Good Reason is given by Employee pursuant to Section 2.05, Employer notifies Employee that a dispute exists concerning the termination, the date of termination of this Agreement shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties or by a final determination; provided further that the date of termination shall be extended by a notice of dispute from Employer only if such notice is given in good faith and Employer pursues the resolution of such dispute with reasonable diligence. Following a Change of Control, Employer shall provide all witnesses and evidence reasonably required by Employee to present Employee's case. If a purported termination by Employer within two years after a Change of Control or by Employee for Good Reason occurs and such termination is disputed, Employer shall pay to Employee all reasonable expenses and legal fees incurred by Employee as a result of a termination in seeking to obtain or enforce any right or benefit provided by this Agreement (whether or not Employee is successful in obtaining or enforcing such right or benefit). (c) If a purported termination by Employer within two years after a Change of Control or by Employee for Good Reason occurs and such termination is disputed, Employer shall do either of the following. (1) So long as Employee continues to provide services, Employer shall continue to pay Employee the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary and estimated bonus) and continue Employee as a participant in all compensation, benefit and insurance plans in which Employee was a participant when the notice giving rise to the dispute was given, until the dispute is finally resolved; provided that Employee's right to continue to provide such services is solely within the discretion of Employer, and nothing herein shall prohibit Employer from terminating such services. (2) If Employee is no longer providing services, Employer shall pay Employee fifty percent (50%) of the amount specified in Sections 4.03 and Employer will provide Employee with the other benefits provided in Section 4.06, if, but only if, Employee agrees in writing that if the dispute is resolved against Employee, Employee will promptly refund to Employer all payments specified in Section 4.03 that Employee receives under this paragraph (c) plus interest at the rate provided in Section 1274(d) of the Internal Revenue Code of 1986, as amended (the "Code"), compounded quarterly. If the dispute is resolved in Employee's favor, promptly after resolution of the dispute Employer will pay Employee the sum which was withheld during the period of the dispute plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly. Amounts paid under this paragraph (c) shall offset against and reduce other amounts due under this Agreement. If the dispute is resolved by a determination that Employee did not have Good Reason, this Agreement, in accordance with its terms, will continue to apply to the circumstances of Employee's employment by Employer and any termination thereof. 7.02. Applicable Law and Venue. This Agreement is executed and intended to be performed in the State of Oregon and the laws of such State shall govern its interpretation and effect. If suit is instituted by any party hereto or by any other party for any cause or matter arising from or in connection with the respective rights or obligations of the parties hereunder, the sole jurisdiction and venue for such action shall be the Circuit Court of the State of Oregon in and for the County of Multnomah. 7.03. Integration. Employee has executed an Employee Confidentiality and Noncompetition Agreement (a copy of which is attached hereto as Exhibit A) which remains in effect and is incorporated into the terms and conditions of employment under this Agreement. Except as set forth in the preceding sentence, this Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreements, negotiations, or understandings, whether oral or written, between the parties with respect thereto. 7.04. Heirs and Assigns. Subject to any restriction on assignment contained herein, this Agreement shall be binding upon and shall inure to the benefit of the respective party's heirs, successors and assigns. Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of Employer, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place. This Agreement shall not be terminated by Employer's voluntary or involuntary dissolution or by any merger or consolidation in which Employer is not the surviving or resulting corporation, or on any transfer of all or substantially all of the assets of Employer. In the event of any such merger, consolidation, or transfer of assets, the provisions of this Agreement shall be binding on and inure the benefit of the surviving business entity or the business entity to which such assets shall be transferred. 7.05. Severability. Any provision in this Agreement which is, by competent judicial authority, declared illegal, invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without invalidating the remaining provisions hereof or affecting the legality, validity or enforceability or such provision in any other jurisdiction. The parties hereto agree to negotiate in good faith to replace any illegal, invalid or unenforceable provision that, to the extent possible, will preserve the economic bargain of this Agreement, or otherwise to amend this Agreement. 7.06. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and the counterparts shall together constitute one and the same agreement, notwithstanding that all of the parties are not signatory to the original or the same counterpart. 7.07. Captions. The headings and captions herein are inserted solely for the purpose of convenience of reference and are not intended to govern, limit, or aid in the construction of any term or provision hereof. 7.08. Execution. Each of the parties hereto shall execute, acknowledge and deliver any instrument necessary to carry out the provisions of this Agreement. 7.09. Construction. This Agreement has been prepared by legal counsel for Employer. Employee has been advised and by his execution hereof acknowledges, that he has the right to and should have this Agreement reviewed by his own separate legal counsel. This Agreement has been negotiated at arms' length with the benefit of or opportunity to seek legal counsel and, accordingly, shall not be construed against any of the parties. 7.10. No Disparagement or Breach of Confidentiality and Noncompetition Agreement. In the event that Employee's employment terminates under this Agreement in any manner whatsoever, Employee agrees that, except under compulsion of legal process, he will make no oral or written comments about Employer or its business for a period of one year following termination of his employment. In the event that Employee breaches this provision of this Agreement, or violates the terms of the Employee Confidentiality and Noncompetition Agreement executed by him, then all severance obligations which Employer may then have under this Agreement shallimmediately cease and Employee shall be owed nothing under this Agreement other than wages and benefits earned through the date of the termination of his employment. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. EMPLOYER: RENTRAK CORPORATION, an Oregon corporation By: s/s Ron Berger Ron Berger, President I acknowledge that I have read and agree to the foregoing Agreement, including, without limitation, the provision allowing termination of my employment "at will" by Employer in Section 2.02. s/s Marty Graham Marty Graham |SF_DOCS\64219.1| EX-10.2 3 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is made and entered into as of this 10th day of July, 1997 by and between RENTRAK CORPORATION, an Oregon corporation (hereinafter referred to as "Employer"), and MICHAEL R. LIGHTBOURNE (hereinafter referred to as "Employee"). W I T N E S S E T H: WHEREAS, Employer wishes to engage Employee as Executive Vice President of Employer; and WHEREAS, Employee is willing to accept employment with Employer on the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements herein contained, the recitals set forth hereinabove which by this reference are incorporated herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: SECTION 1. EMPLOYMENT 1.01 Position and Title. Employer shall employ and engage the services of Employee, in the position of Executive Vice President for the Term of this Agreement as defined in Section 2, pursuant to the terms and conditions set forth in this Agreement. 1.02 Duties and Place of Employment. Employee shall manage customer service and supervise communications with retail customers of Employer except for the Retailer Financing Program, unless requested to do so, function as a resource for the Sales Department as requested, and perform all other duties as may be directed by the Chief Executive Officer, President or Chief Operating Officer of Employer, including, without limitation, travel as reasonably requested. Employee shall: (i) devote his full business time during normal business hours to the business and affairs of Employer; (ii) use his best efforts to promote the interests of Employer; and (iii) perform faithfully and efficiently his responsibilities. Employee shall perform his duties at the Employer's principal executive offices which are currently located at Portland, Oregon. Subject to the terms of this Agreement, Employee shall comply promptly and faithfully with all of Employer's policies, instructions, directions, requests, rules and regulations. SECTION 2. TERM and TERMINATION 2.01 Stated Term. Employment shall commence on July 10, 1997 and shall end on July 9, 2002 (the "End Date") or until Employee's employment under this Agreement is terminated pursuant to this Section 2 ("Term"). 2.02 At Will Termination. Notwithstanding anything herein to the contrary, Employee's employment may be terminated at any time with or without reason, by Employer upon thirty (30) days written notice to Employee, or by Employee upon thirty (30) days written notice to Employer. 2.03 For Cause Termination. Employee's employment may be terminated by Employer for "cause" without notice. Termination for "cause" is defined for purposes of this subsection as termination for: (i) the final conviction of Employee for a felony involving willful conduct materially injurious, harmful or detrimental to Employer; or (ii) the final adjudication of Employee in a civil proceeding for acts of omissions to act involving willful conduct materially injurious, harmful or detrimental to Employer. For the purposes of this subsection, "final conviction" and "final adjudication" shall be and mean a conviction or an adjudication, as the case may be, that is no longer appealable due to the passage of time or otherwise, and with respect to which a final judgment has been entered on the judgment roles of the court in which the action was commenced. Further, for the purposes of this subsection, no act or omission to act on Employee's part shall be considered "willful" unless done, or omitted to be done, by Employee in bad faith and without reasonable belief that employee's act or omission was in the best interest of Employer. 2.04 Disability or Death. Employee's employment shall be terminable immediately upon Employee's death or disability. "Disability" is defined for purposes of this subsection as absence from Employee's full time duties with Employer as a result of Employee's incapacity due to physical or mental illness, such as will entitle Employee to disability benefits pursuant to the terms of the disability insurance policy referred to in Section 3.04E below. Nothing in this Section 2.04 is intended to violate any federal or Oregon State law regarding parental or family leave policies or any other applicable law. 2.05 Termination by Employee for Good Reason. Employee's employment may be terminated by Employee at any time for "Good Reason" as that term is defined below. Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. "Good Reason" shall mean a material breach by Employer of the terms of this Agreement; provided that Employee shall have no right to terminate this Agreement pursuant to this clause unless Employer has had at least 15 days to cure such failure. SECTION 3. COMPENSATION 3.01 Base Salary. Commencing July 10, 1997, Employee shall be paid an annual base salary in the amount of One Hundred Seventy Thousand dollars ($170,000) ("Base Salary"). The Base Salary shall be paid to Employee in equal semi-monthly installments in arrears on the seventh (7th) and twenty-second (22nd) day of each month, commencing as of the first semi-monthly pay period following the effective date of this Agreement. Should the seventh (7th) or the twenty-second (22nd) day of any month not be a business day, Employee's semi-monthly installment of the Base Salary otherwise due on such date shall be paid to Employee on the business day closest to the date such semimonthly installment is due (i.e., if the seventh (7th) day of the month falls on a Saturday, the semi-monthly installment shall be paid on the preceding business day or if the seventh (7th) day of the month falls on a Sunday, the semi-monthly installment shall be paid on the next following business day). Employee's Base Salary shall be increased annually by the greater of five percent (5%) or the change in the national Consumer Price Index, the CPI-U, for the calendar year just ended, rather than the CPI-U for the previous calendar year. 3.02 Bonus Compensation. Employee shall receive a sign-on bonus upon execution of this Agreement in the amount of Seventy- Five Thousand Dollars ($75,000). Employee shall receive an additional bonus of Seventy-Five Thousand ($75,000) (the "Ending Bonus") on July 9, 2002 if he is still employed by Employer on that date. After the 30th month of Employee's employment pursuant to this Agreement, the Ending Bonus shall vest at the rate of 1/30 ($2,500) per month. Nothing herein shall preclude the Employer from authorizing the payment of additional compensation to Employee over and above the Base Salary at any time payable to him under this Agreement, whether as a bonus or otherwise. The payment of such additional compensation shall not operate as an amendment obligating Employer to make any similar payment or to pay additional compensation at any future time or for any future period, or be deemed to affect Employee's Base Salary in any manner. Employee will participate in whatever bonus plan is adopted by Employer including any cash bonus pools established from time to time by Employer for Corporate Executives. 3.03 Stock options. Upon the commencement of the Term of this Agreement, Employer shall grant Employee an option to purchase One Hundred Fifty Thousand (150,000) shares of Employer's stock at the market rate as set forth in Employer's Stock Option Plan on the date of execution of this Agreement. Said options shall vest at a rate of Twenty percent (20%) per year (i.e., 30,000 options shall vest at the end of each full year of Employee's employment during the five-year Term of this Agreement). Said options shall remain exercisable until July 9, 2007. In addition to the aforementioned options, Employee shall be granted additional options for 10,000 shares per grant during each year that this Agreement remains in effect. The first 10,000 options shall be granted on the earliest date that such option shares are available at the lesser of the price then available or the price as of June 15, 1997. All subsequent grants of options pursuant to this paragraph shall be at a price to be set by the Board of Directors of Employer and shall be the same price at which options are offered to most other employees during the year in which the options are granted. Said options shall vest at a rate of Twenty percent (20%) per year (i.e., 2,000 options shall vest at the end of each full year of Employee's employment) and shall remain exercisable for a period of ten (10) years from the issue date. Should Employee's employment be terminated by Employer other than for cause prior to the expiration of this Agreement, all options granted through the date of termination will vest immediately and all annual options granted for each year of employment shall vest upon the day of such grant as if the termination had not occurred. Should Employee be terminated for cause, he shall be entitled only to those options which vested through the date of termination. 3.04 Benefits. 3.04A Vacation and Holiday Pay. As of the effective date of this Agreement, Employee will be entitled to: (i) accrue vacation time at the rate of four (4) weeks of paid vacation during each year of employment; and (ii) will be eligible to receive pay for Employer-paid holidays. In addition to vacation set forth above, Employee shall have forty-five (45) days (equivalent to nine weeks) of paid vacation on the date that his employment pursuant to this Agreement commences. Said forty-five (45) days of vacation may be booked into a vacation bank or, at Employer's option, paid to Employee in cash at Employee's Base Salary rate within 30 days of execution of this Agreement. 3.04B Insurance. Employee shall be entitled to life, medical, worker's compensation, social security and state unemployment insurance benefits as provided under Employer's then current terms, policies and procedures. Employer shall reimburse Employee for the cost of continued health coverage under COBRA for the first 90 days of Employee's employment. Employer shall provide directors' and officers' liability insurance covering Employee and will indemnify and hold harmless Employee (and advance expenses) to the full extent provided in the Articles of Incorporation and Bylaws of Employer. If the directors' and officers' liability insurance coverage levels are reduced during the Term of this Agreement by Employer, then Employee may seek additional coverage and Employer shall pay up to Fifteen Thousand Dollars ($15,000) per year to reimburse Employee for such additional coverage. 3.04C Tuition Reimbursement. Employee shall be entitled to reimbursement for all tuition, enrollment fees, and books pursuant to Employer's education assistance program. Employee shall comply with all Employer's terms, policies and procedures regarding its education assistance program. 3.04D Business Expenses. During the Term of this Agreement, Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Employee in the performance of his duties pursuant to this Agreement in accordance with the policies and procedures of Employer now or hereinafter in effect. 3.04E Disability Insurance. Employer shall purchase a disability insurance policy from Northwest Mutual Life Insurance Company, naming Employee as the beneficiary, and providing maximum benefits available to Employee in the event of Employee's partial or total disability. Employer shall not terminate the disability policy or allow its benefits to lapse for any reason during the Term of this Agreement. Employer shall pay all premiums due under the disability policy referred to above until the End Date. 3.04F Miscellaneous Benefits. In addition to any other compensation or benefits to be received by Employee pursuant to the terms of this Agreement, Employee shall be entitled to receive all employee benefits which Employer now provides or may from time to time provide other executives (excluding the President/CEO) at comparable or lower level positions, except that Employee shall not be entitled to stock option grants issued to other executives in comparable or lower level positions unless grants in excess of 10,000 options are issued to such executives. In the latter case, the Employee shall be entitled to an additional grant of options in the incremental amount in excess of 10,000. For example, if executives in comparable or lower level positions are given options for 15,000 shares of stock in any year during the Term of this Agreement, then Employee would be entitled to an additional grant of 5,000 options. Employer shall also contribute to Employee's 401K Plan consistent with Employer's contributions to the 401K Plans of employees of comparable level. SECTION 4. PAYMENTS UPON TERMINATION OF EMPLOYMENT 4.01 Termination for Cause. In the event of the termination of Employee's employment by Employer for cause pursuant to Section 2.02 within ten days of termination Employer shall pay to Employee only the Base Salary, vacation and bonuses accrued and vested stock options pursuant to Section 3 through and including the date of termination. No other compensation shall be due or payable under this Agreement in the event of a termination for Cause. 4.02 Termination for Death or Disability. In the event of the termination of Employee's employment pursuant to Section 2.03 due to his death or disability, within ten days of termination Employer shall pay to Employee or Employee's estate or legal representative, in a lump sum, the total value of all compensation which would otherwise have been paid to Employee pursuant to Section 3, including Base Salary, bonuses, stock options and fringe benefits, less any amounts paid to Employee under the terms of the disability policy purchased by Employer pursuant to Section 3.04E and any life insurance policy purchased by Employer for the benefits of Employee's dependents. Employer shall convey to Employee or Employee's estate or legal representative all options granted to Employee during his employment, regardless of whether or not said options vested prior to Employee's death. Said options shall vest immediately and remain exercisable for a period of One (1) year from the date of death. During the period of Employee's disability, but prior to Employee's termination of Employment, Employee shall be entitled to receive all compensation as set forth in this Agreement. No other compensation shall be due or payable under this Agreement in the event of a termination due to the Employee's death. 4.03 Other Termination by Employer. In the event of termination of Employee's employment by Employer for any reason other than a termination for cause or termination for death or disability pursuant to Sections 2.03 and 2.04, or in the event of a termination by Employee for good reason pursuant to Section 2.05, Employer shall pay to Employee the Base Salary accrued pursuant to Section 3.01 as of the date of termination plus severance payments in an amount equal to Employee's Base Salary and bonsues, payable in installments as if still employed, through the end of this Agreement (the "Severance Period"), provided, however, that Employer's obligation shall be reduced by the amount of Remuneration received by Employee from all other employment during the Severance Period. Employee shall continue to receive stock options, to vest in issued options and to receive other fringe benefits through the end of this Agreement. For the purposes of this Agreement, "Remuneration" shall be defined to include cash payments, the face value of any promissory notes issued to Employee, regardless of the terms of payment or whether payment is ever received, stock or stock options valued as of the day granted, or any other compensation given in any form whatsoever. 4.04 Other Termination by Employee. In the event of the termination of Employee's employment by Employee other than for good reason pursuant to Section 2.05, within ten days of termination Employer shall pay to Employee only the amount of Base Salary accrued pursuant to Section 3.01 through and including the date of termination. No other compensation shall be due or payable under this Agreement in the event of a such a termination. 4.05 Severance/Renewal. Employer and Employee will negotiate a new five-year agreement in good faith prior to July 10, 2001. Alternatively, Employer may notify Employee prior to such date that Employer does not intend to extend Employee's employment. In the event of non-renewal or termination of this Agreement for any reason other than for cause as defined in 2.03, Employee shall receive one year's salary continuance at the Base rate following expiration of this Agreement in addition to any compensation payable under 4.03. 4.06 Except as set forth in this Section 4, no other compensation shall be due or payable to Employee upon termination of his employment. 4.07 Right to Decline Payments. Employee, in his sole and absolute discretion, shall have the right to decline all or a portion of any payments under this Agreement. SECTION 5. PERSONAL NATURE This Agreement is personal, and is being entered into based upon the singular skill, qualifications and experience of Employee. Employee shall not assign this Agreement or any rights hereunder without the express written consent of Employer which may be withheld with or without reason. Employee hereby grants to Employer the right to use Employee's name, likeness and/or biography in connection with the services performed by Employee hereunder and in connection with the advertising or exploitation of any project with respect to which Employee performs services hereunder. SECTION 6. NOTICES Any and all notices or other communications required or permitted by this Agreement or by law shall be deemed duly served and given when personally delivered to the party to whom such notice or communication is directed or, in lieu of such personal service, when deposited in the United States mail, certified, return receipt requested, first class postage prepaid, addressed as follows: EMPLOYER: Rentrak Corporation One Airport Center 7700 N.E. Ambassador Place Portland, Oregon 97220 Attn: Ron Berger EMPLOYEE: Michael R. Lightbourne P.O. Box 510 Gresham, Oregon 97030 Each party may change its address for purposes of this Section by giving written notice of such change in the manner provided for in this Section. SECTION 7. MISCELLANEOUS PROVISIONS. 7.01 Attorneys' Fees; Disputes Concerning Termination. Should it become necessary for any party to bring an action, including arbitration, either at law or in equity, to enforce or interpret the terms of this Agreement, each party shall pay its own attorneys' fees including those incurred in resolving the dispute prior to initiation of any litigation and at trial and on any appeal. 7.02 Applicable Law and Venue. This Agreement is executed and intended to be performed in the State of Oregon and the laws of such State shall govern its interpretation and effect. If suit is instituted by any party hereto or by any other party for any cause or matter arising from or in connection with the respective rights or obligations of the parties hereunder, the sole jurisdiction and venue for such action shall be the Circuit Court of the State of Oregon in and for the County of Multnomah. 7.03 Integration. Employee has executed an Incentive Stock Option Agreement (a copy of which is attached hereto as Exhibit A), and an Employee Confidentiality and Noncompetition Agreement (a copy of which is attached hereto as Exhibit B) which remain in effect and are incorporated into the terms and conditions of employment under this Agreement. Except as set forth in the preceding sentence, this Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreements, negotiations, or understandings, whether oral or written, between the parties with respect thereto. 7.04 Heirs and Assigns. Subject to any restriction on assignment contained herein, this Agreement shall be binding upon and shall inure to the benefit of the respective party's heirs, successors and assigns. Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of Employer, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place. This Agreement shall not be terminated by Employer's voluntary or involuntary dissolution or by any merger or consolidation in which Employer is not the surviving or resulting corporation, or on any transfer of all or substantially all of the assets of Employer. In the event of any such merger, consolidation, or transfer of assets, the provisions of this Agreement shall be binding on and inure the benefit of the surviving business entity or the business entity to which such assets shall be transferred. 7.05 Severability. Any provision in this Agreement which is, by competent judicial authority, declared illegal, invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without invalidating the remaining provisions hereof or affecting the legality, validity or enforceability or such provision in any other jurisdiction. The parties hereto agree to negotiate in good faith to replace any illegal, invalid or unenforceable provision that, to the extent possible, will preserve the economic bargain of this Agreement, or otherwise to amend this Agreement. 7.06 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and the counterparts shall together constitute one and the same agreement, notwithstanding that all of the parties are not signatory to the original or the same counterpart. 7.07 Captions. The headings and captions herein are inserted solely for the purpose of convenience of reference and are not intended to govern, limit, or aid in the construction of any term or provision hereof. 7.08 Execution. Each of the parties hereto shall execute, acknowledge and deliver any instrument necessary to carry out the provisions of this Agreement. 7.09 Construction. This Agreement has been prepared by legal counsel for Employer. Employee has been advised of and by his execution hereof acknowledges, that he has exercised the right to have this Agreement reviewed by his own separate legal counsel. This Agreement has been negotiated at arms' length and Employee has had the benefit of legal counsel and, accordingly, this Agreement shall not be construed against either of the parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. EMPLOYER: RENTRAK CORPORATION, an Oregon corporation By: s/s Ron Berger Ron Berger, President I acknowledge that I have read and agree to the foregoing Agreement. EMPLOYEE s/s Michael R. Lightbourne Michael R. Lightbourne EX-10.3 4 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is made and entered into as of this 27th day of October, 1997 by and between RENTRAK CORPORATION, an Oregon corporation (hereinafter referred to as "Employer"), and CHRISTOPHER E. ROBERTS (hereinafter referred to as "Employee"). W I T N E S S E T H: WHEREAS, Employer currently employs Employee in the capacity of Vice President, Sales and Employee is one of the key executives of the Employer and desires to be so employed; WHEREAS, Employer and Employee desire to enter into an Employment Agreement memorializing the terms and conditions of the employment relationship; WHEREAS, Employer considers it essential to the best interests of its shareholders to foster the continuous employment of Employee; WHEREAS, the Board of Directors of Employer (the "Board") recognizes that, as is the case with many publicly-held corporations, the possibility of a Change of Control (as defined below) may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of Employer and its shareholders; WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of Employer's management, including Employee, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of Change of Control; and WHEREAS, the Board has determined that it is in the best interests of Employer and its shareholders to clarify certain provisions of the Employment Agreement in order to more effectively carry out the purposes of Employment Agreement and avoid potential disputes in connection with the enforcement of the Employment Agreement following a Change of Control. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements herein contained, the recitals set forth hereinabove which by this reference are incorporated herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: 1. EMPLOYMENT 1.01. Duties and Place of Employment. (a) Employee shall be responsible for, and perform duties associated with his position as Vice President, Sales, and other duties as may be directed by the Employer, from time to time. Employee shall: (i) devote his full business time during normal business hours to the business and affairs of Employer; (ii) use his best efforts to promote the interests of Employer; and (iii) perform faithfully and efficiently his responsibilities. Employee shall perform his duties at the Employer's principal executive offices which are currently located at One Airport Center, 7700 N.E. Ambassador Place,, Portland, Oregon 97220, or such other locations as may be directed by Employer from time to time. Subject to the terms of this Agreement, Employee shall comply promptly and faithfully with all of Employer's policies, instructions, directions, requests, rules and regulations. (b) After a Change of Control (as defined below), during the Term of this Agreement, Employee shall continue to serve Employer in the same capacity and have the same authority, responsibilities and status as he had as of the date immediately prior to the Change of Control. After a Change of Control, during the Term of this Agreement, Employee's services shall be performed at the location where Employee was employed as of the date immediately prior to the Change of Control, or at such other location as may be mutually agreed between Employer and Employee. (c) For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred upon the first fulfillment of the conditions set forth in any one of the following four paragraphs: (1) any "person" (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities under an employee benefit plan of Employer, is or becomes a beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Employer, representing twenty-five percent (25%) or more of the combined voting power of Employer's then outstanding securities; or (2) a majority of the directors elected at any annual or special meeting of stockholders are not individuals nominated by Employer's then incumbent Board; or (3) the shareholders of Employer approve a merger or consolidation of Employer with any other corporation, other than a merger or consolidation which would result in the voting securities of Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of Employer or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of Employer approve a plan of complete liquidation of Employer or an agreement for the sale or disposition by Employer of all or substantially all of its assets. 2. TERM AND TERMINATION 2.01. Stated Term. Employment commenced on November 1, 1997 and will end on November, 2002 (the "End Date") or until Employee's employment under this Agreement is terminated pursuant to this Section 2 ("Term"). 2.02. At Will Termination. Notwithstanding anything herein to the contrary, Employee's employment may be terminated by Employer at any time without cause upon thirty (30) days written notice to Employee. 2.03. For Cause Termination. Employee's employment may be terminated by Employer for "cause" without notice. Termination for "cause" is defined for purposes of this subsection as termination for: (i) material failure of Employee to substantially perform the reasonable and attainable instructions of Employer as to his duties hereunder; or (ii) an act or acts of misconduct by Employee which is determined by the Employer to be materially injurious to Employer monetarily or otherwise; or (iii) material violation by Employee of any provision of this Agreement. For purposes of this subsection, termination for "cause" shall not include any act or failure to act on Employee's part if done or omitted to be done by him in demonstrable good faith and with the reasonable belief that his act or omission was in the best interest of the Employer or pursuant to an express policy of Employer at the time of such act or omission. 2.04. Disability or Death. Employee's employment shall be terminable immediately upon Employee's death or disability. "Disability" is defined for purposes of this subsection as absence from Employee's full time duties with Employer as a result of Employee's incapacity due to physical or mental illness for ninety (90) days calculated on a cumulative basis during any one (1) year period during the Term of this Agreement. Nothing in this Section 2.04 is intended to violate any Oregon State law regarding parental or family leave policies or any other applicable law. 2.05. Termination by Employee for Good Reason. Employee's employment may be terminated by Employee at any time for "Good Reason" as that term is defined below. Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. "Good Reason" shall mean (i) a material breach by Employer of the terms of this Agreement; provided that Employee shall have no right to terminate this Agreement pursuant to this clause (i) unless Employer has had at least 15 days to cure such failure, or (ii) the occurrence (without Employee's express written consent), within two (2) years after any Change of Control of any one of the following acts by Employer, or failures by Employer to act: (a) the assignment to Employee of any duties inconsistent with Employee's status as an executive officer of Employer or a substantial adverse alteration in the nature or status of Employee's title, position, duties, functions, working conditions or responsibilities from those in effect immediately prior to the Change of Control other than any such alteration primarily attributable to the fact that Employer may no longer be a public company; (b) a reduction by Employer in Employee's annual Base Salary as in effect on the date hereof or as the same may be increased from time to time; (c) the relocation of Employer's principal executive offices to a location more than thirty-five miles from the location of such offices immediately prior to the Change of Control or Employer's requiring Employee to be based anywhere other than Employer's principal executive offices except for required travel on Employer's business to an extent substantially consistent with Employee's business travel obligations immediately prior to the Change of Control; (d) the failure by Employer, without Employee's consent, to pay to Employee any portion of Employee's current compensation; (e) the failure by Employer to continue in effect any compensation plan in which Employee participates immediately prior to the Change of Control which is material to Employee's total compensation unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by Employer to continue Employee's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the terms and conditions of such benefits, including, without limitation, the level of Employee's participation relative to other participants, as such relative level existed at the time of the Change of Control; (f) the failure by Employer to continue to provide Employee with benefits substantially similar to those enjoyed by Employee under any of Employer's pension, life insurance, medical, health and accident, or disability plans in which Employee was participating immediately prior to the Change of Control, the taking of any action by Employer which would directly or indirectly materially reduce any of such benefits or deprive Employee of any material fringe benefit enjoyed by Employee immediately prior to the Change of Control, or the failure by Employer to provide Employee with the number of paid vacation days to which Employee is entitled on the basis of years of service with Employer in accordance with Employer's normal vacation policy in effect immediately prior to the Change of Control; or (g) the failure of Employer to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 7.04. 2.06. Other Termination by Employee. Employee's employment may be terminated by Employee at any time without Good Reason upon thirty (30) days written notice to Employer. 3. COMPENSATION 3.01. Base Salary. Commencing November 1, 1997, Employee shall be paid an annual base salary in the amount of One Hundred Thirty Thousand Dollars ($130,000) ("Base Salary"). The Base Salary shall be paid to Employee in equal semi-monthly installments in arrears on the seventh (7th) and twenty-second (22nd) day of each month, commencing as of the first semi-monthly pay period following the effective date of this Agreement. Should the seventh (7th) or the twenty-second (22nd) day of any month not be a business day, Employee's semi-monthly installment of the Base Salary otherwise due on such date shall be paid to Employee on the business day closest to the date such semimonthly installment is due (i.e., if the seventh (7th) day of the month falls on a Saturday, the semi- monthly installment shall be paid on the preceding business day or if the seventh (7th) day of the month falls on a Sunday, the semi-monthly installment shall be paid on the next following business day). Employee's Base Salary shall be increased during the Term of this Agreement by Five Thousand Dollars ($5,000) per annum, said increase to be effective as of April 15 of each year during the Term of this Agreement. 3.02. Bonus Compensation. Employee shall be entitled to participate in whatever bonus plan is adopted by Employer, including any cash bonus pools established from time to time by Employer, for Corporate Officers. Additionally, Employee shall be entitled to a performance bonus in the amounts set forth below upon achievement of the specified objectives: (a) For achieving the fiscal year sales goals for applications received - $10,000; and (b) For obtaining the participation in PPT (defined as execution of agreement for substantially all of a retailer's stores and the chain ordering - or stating its intent to order - Product equal to not less than 8% of its gross rental revenues, from Rentrak) of the retailers below: West Coast Video (600) $20,000 Rogers (180) $15,000 Tower Records (105) $5,000 Pic A Flick ( 41) $5,000 Family Video ( 92) $7,000 V. Warehouse (IA) ( 26) $3,000 Videoland (OR) ( 45) $5,000 VideoRun ( 70) $7,000 Video Station ( 25) $3,000 Kroger/Perkins Dillon/Hutch (700) $5,000 (Per KMA) Giant Eagle (118) $10,000 Pathmark (144) $10,000 Smiths FoodKing (152) $10,000 Dierbergs ( 20) $3,000 HannaFord Bros. (114) $10,000 Wegmans ( 53) $5,000 Hy'vee Food Stores (135) $10,000 Schnucks ( 82) $7,000 3.03. Benefits (a) Vacation and Holiday Pay. As of the effective date of this Agreement, Employee will be entitled to: (i) accrue vacation time at the rate of one hundred sixty (160) hours of paid vacation during each year of employment; and (ii) will be eligible to receive pay for Employer-paid holidays. (b) Insurance. Employee shall be entitled to medical, life, worker's compensation, social security and state unemployment insurance benefits as provided under Employer's then current terms, policies and procedures. Employee shall also be entitled to officers' disability insurance benefits. For five years following a Change of Control, Employer shall use its best efforts to continue to provide directors' and officers' liability insurance covering Employee (with respect to events occurring prior to termination of Employment) on terms no less favorable (in terms of coverage and amounts) than those of such insurance in effect immediately prior to the Change of Control. Following a Change of Control, Employer will indemnify and hold harmless Employee (and advance expenses) to the full extent provided in the Articles of Incorporation and Bylaws of Employer as in effect immediately prior to the Change of Control. (c) Tuition Reimbursement. Employee shall be entitled to reimbursement for all tuition, enrollment fees, and books pursuant to Employer's education assistance program. Employee shall comply with all Employer's terms, policies and procedures regarding its education assistance program. (d) Business Expenses. During the Term of this Agreement, Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Employee in the performance of his duties pursuant to this Agreement in accordance with the policies and procedures of Employer now or hereinafter in effect. (e) Miscellaneous Benefits. In addition to any other compensation or benefits to be received by Employee pursuant to the terms of this Agreement, Employee shall be entitled to participate in any employee or officer(s) benefits which Employer may from time to time provide its employees or officer(s) generally. 3.03. Stock Options. Upon commencement of the Term of this Agreement, Employer shall grant Employee Twenty-Five Thousand (25,000) shares of Employer's stock at the market rate as set forth in Employer's Stock Option Plan on the date of execution of this Agreement. Said options shall vest at a rate of Twenty percent (20%) per year (i.e., 5,000 options shall vest at the end of each full year of Employee's employment during the five-year Term of this Agreement). Said options shall remain exercisable for a period of Ten (10) years from the issue date. In addition to the aforementioned options, Employee shall be granted additional options for Five Thousand (5,000) shares per grant during each year that this Agreement remains in effect, commencing on the earlier of the date all employee options are issued by Rentrak in 1998 or the anniversary date of execution of this Agreement in 1998, or the higher of options that would have been granted regardless of this Agreement. Said options shall be at a price to be set by the Board of Directors of Employer and shall be the same price at which options are offered to all other employees during the year in which the options are granted. Said options shall vest at a rate of Twenty percent (20%) per year (i.e., 1,000 options shall vest at the end of each full year of Employee's employment) and shall remain exercisable for a period of Ten (10) years from the issue date. 4. PAYMENTS UPON TERMINATION OF EMPLOYMENT 4.01. Termination for Cause. In the event of the termination of Employee's employment by Employer for cause pursuant to Section 2.03 within ten days of termination Employer shall pay to Employee only the Base Salary accrued pursuant to Section 3.01 through and including the date of termination. No other compensation shall be due or payable under this Agreement in the event of a termination for Cause. 4.02. Termination for Death or Disability. (a) Termination for Death. In the event of the termination of Employee's employment pursuant to Section 2.04 due to his death, within ten days of termination Employer shall pay to Employee's estate or legal representative, as the case may be, in a lump sum, the Base Salary accrued pursuant to Section 3.01 through and including the date of termination plus a lump sum severance of Ninety (90) days Base Salary at the rate in effect on the date of Employee's death. Employer shall also convey to Employee's estate or legal representative all options granted to Employee during his employment, regardless of whether or not said options vested prior to Employee's death. Said options shall remain exercisable for a period of One (1) year from the date of death. No other compensation shall be due or payable under this Agreement in the event of a termination due to the Employee's death. (b) Termination for Disability. In the event of the termination of Employee's employment pursuant to Section 2.04 due to his disability, within ten days of termination Employer shall pay to Employee or his legal representative, as the case may be, in a lump sum, the Base Salary accrued pursuant to Section 3.01 through and including the date of termination. During the period of Employee's disability, but prior to Employee's termination of Employment, Employee shall be entitled to receive all compensation as set forth in this Agreement. No other compensation shall be due or payable under this Agreement in the event of a termination due to the Employee's disability. 4.03. Termination by Employer Without Cause After Change of Control or by Employee for Good Reason. In the event of the termination of Employee's employment by Employer pursuant to Section 2.02 within two years after a Change of Control or by Employee pursuant to Section 2.05, within ten days of termination Employer shall pay to Employee, in a lump sum, the lesser of (i) all Base Salary which Employer is obligated to pay to Employee pursuant to Section 3.01 through the End Date or (ii) one year of Base Salary which Employer is obligated to pay to Employee pursuant to Section 3.01 during the current fiscal year. 4.04. Other Termination by Employer. In the event of termination of Employee's employment by Employer pursuant to Section 2.02 prior to a Change of Control or more than two years after a Change of Control, Employer shall pay Employee the Base Salary accrued pursuant to Section 3.01 as of the date of termination plus severance payments in an amount equal to six months' Base Salary at the rate at which Employer is obligated to pay to Employee pursuant to Section 3.01 during the current fiscal year, payable in installments as if still employed; provided, however, that during the period that Employer is making severance payments pursuant to this Section 4.04, Employer shall have the right to request Employee to provide reasonable evidence that he is using his best efforts to obtain other employment of comparable status in the Portland metropolitan area, and in the event that Employee fails to provide such reasonable evidence, then Employer shall not be obligated to pay any severance payments; and provided further that if Employee is successful in obtaining such employment, the amount of severance payments that would have been payable after the time that Employee obtains such employment shall be reduced by the amount of any remuneration received from such employment. For the purposes of this Agreement, "remuneration" shall be defined to include cash payments, the face value of any promissory notes issued to Employee regardless of the terms of payment or whether payments are ever received, stock or stock options valued as of the day granted, or any other compensation given in any form whatsoever. 4.05. Other Termination by Employee. In the event of the termination of Employee's employment by Employee pursuant to Section 2.06, within ten days of termination Employer shall pay to Employee only the amount of Base Salary accrued pursuant to Section 3.01 through and including the date of termination. No other compensation shall be due or payable under this Agreement in the event of a such a termination. 4.06. Insurance Benefits. Employee is entitled to elect to continue the insurance described in Section 3.03B during a period of two (2) years following an event of termination described in Section 2.05 and a period of six (6) months following an event of termination described in Section 2.02. If Employee elects to continue such coverage, Employer shall reimburse Employee for the premiums paid by Employee for such insurance as such premiums are paid until such time as the continued insurance terminates or Employee obtains replacement full-time employment and is covered by such new employer's group medical health and life insurance plan with benefits substantially similar to those provided by Employer's insurance plan and without any pre-existing conditions, exclusions, limitations or restrictions, whichever occurs first. Such reimbursement shall be reduced for an amount equivalent to the amounts charged Employee for health coverage immediately prior to the occurrence of the Change of Control. 4.07. Other Compensation. Except as set forth in this Section 4, no other compensation shall be due or payable to Employee upon termination of his employment. 4.08. Right to Decline Payments. Employee, in his sole and absolute discretion, shall have the right to decline all or a portion of any payments under this Agreement. 5. PERSONAL NATURE This Agreement is personal, and is being entered into based upon the singular skill, qualifications and experience of Employee. Employee shall not assign this Agreement or any rights hereunder without the express written consent of Employer which may be withheld with or without reason. Employee hereby grants to Employer the right to use Employee's name, likeness and/or biography in connection with the services performed by Employee hereunder and in connection with the advertising or exploitation of any project with respect to which Employee performs services hereunder. 6. NOTICES Any and all notices or other communications required or permitted by this Agreement or by law shall be deemed duly served and given when personally delivered to the party to whom such notice or communication is directed or, in lieu of such personal service, when deposited in the United States mail, certified, return receipt requested, first class postage prepaid, addressed as follows: EMPLOYER: Rentrak Corporation One Airport Center 7700 N.E. Ambassador Place Portland, Oregon 97220 Attn: Ron Berger EMPLOYEE: Christopher E. Roberts 1915 SW Myers Pl. Gresham, Oregon 97080 Each party may change its address for purposes of this Section by giving written notice of such change in the manner provided for in this Section. 7. MISCELLANEOUS PROVISIONS. 7.01. Attorneys' Fees; Disputes Concerning Termination. (a) Subject to Section 7.01(b), in the event that it should be become necessary for any party to bring an action, including arbitration, either at law or in equity, to enforce or interpret the terms of this Agreement, each party shall pay its own attorneys' fees including those incurred in resolving the dispute prior to initiation of any litigation and at trial and on any appeal. (b) If within fifteen (15) days after any notice of termination for Good Reason is given by Employee pursuant to Section 2.05, Employer notifies Employee that a dispute exists concerning the termination, the date of termination of this Agreement shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties or by a final determination; provided further that the date of termination shall be extended by a notice of dispute from Employer only if such notice is given in good faith and Employer pursues the resolution of such dispute with reasonable diligence. Following a Change of Control, Employer shall provide all witnesses and evidence reasonably required by Employee to present Employee's case. If a purported termination by Employer within two years after a Change of Control or by Employee for Good Reason occurs and such termination is disputed, Employer shall pay to Employee all reasonable expenses and legal fees incurred by Employee as a result of a termination in seeking to obtain or enforce any right or benefit provided by this Agreement (whether or not Employee is successful in obtaining or enforcing such right or benefit). (c) If a purported termination by Employer within two years after a Change of Control or by Employee for Good Reason occurs and such termination is disputed, Employer shall do either of the following. (1) So long as Employee continues to provide services, Employer shall continue to pay Employee the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary and estimated bonus) and continue Employee as a participant in all compensation, benefit and insurance plans in which Employee was a participant when the notice giving rise to the dispute was given, until the dispute is finally resolved; provided that Employee's right to continue to provide such services is solely within the discretion of Employer, and nothing herein shall prohibit Employer from terminating such services. (2) If Employee is no longer providing services, Employer shall pay Employee fifty percent (50%) of the amount specified in Sections 4.03 and Employer will provide Employee with the other benefits provided in Section 4.06, if, but only if, Employee agrees in writing that if the dispute is resolved against Employee, Employee will promptly refund to Employer all payments specified in Section 4.03 that Employee receives under this paragraph (c) plus interest at the rate provided in Section 1274(d) of the Internal Revenue Code of 1986, as amended (the "Code"), compounded quarterly. If the dispute is resolved in Employee's favor, promptly after resolution of the dispute Employer will pay Employee the sum which was withheld during the period of the dispute plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly. Amounts paid under this paragraph (c) shall offset against and reduce other amounts due under this Agreement. If the dispute is resolved by a determination that Employee did not have Good Reason, this Agreement, in accordance with its terms, will continue to apply to the circumstances of Employee's employment by Employer and any termination thereof. 7.02. Applicable Law and Venue. This Agreement is executed and intended to be performed in the State of Oregon and the laws of such State shall govern its interpretation and effect. If suit is instituted by any party hereto or by any other party for any cause or matter arising from or in connection with the respective rights or obligations of the parties hereunder, the sole jurisdiction and venue for such action shall be the Circuit Court of the State of Oregon in and for the County of Multnomah. 7.03. Integration. Employee has executed an Employee Confidentiality and Noncompetition Agreement (a copy of which is attached hereto as Exhibit A) which remains in effect and is incorporated into the terms and conditions of employment under this Agreement. Except as set forth in the preceding sentence, this Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreements, negotiations, or understandings, whether oral or written, between the parties with respect thereto. 7.04. Heirs and Assigns. Subject to any restriction on assignment contained herein, this Agreement shall be binding upon and shall inure to the benefit of the respective party's heirs, successors and assigns. Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of Employer, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place. This Agreement shall not be terminated by Employer's voluntary or involuntary dissolution or by any merger or consolidation in which Employer is not the surviving or resulting corporation, or on any transfer of all or substantially all of the assets of Employer. In the event of any such merger, consolidation, or transfer of assets, the provisions of this Agreement shall be binding on and inure the benefit of the surviving business entity or the business entity to which such assets shall be transferred. 7.05. Severability. Any provision in this Agreement which is, by competent judicial authority, declared illegal, invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without invalidating the remaining provisions hereof or affecting the legality, validity or enforceability or such provision in any other jurisdiction. The parties hereto agree to negotiate in good faith to replace any illegal, invalid or unenforceable provision that, to the extent possible, will preserve the economic bargain of this Agreement, or otherwise to amend this Agreement. 7.06. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and the counterparts shall together constitute one and the same agreement, notwithstanding that all of the parties are not signatory to the original or the same counterpart. 7.07. Captions. The headings and captions herein are inserted solely for the purpose of convenience of reference and are not intended to govern, limit, or aid in the construction of any term or provision hereof. 7.08. Execution. Each of the parties hereto shall execute, acknowledge and deliver any instrument necessary to carry out the provisions of this Agreement. 7.09. Construction. This Agreement has been prepared by legal counsel for Employer. Employee has been advised and by his execution hereof acknowledges, that he has the right to and should have this Agreement reviewed by his own separate legal counsel. This Agreement has been negotiated at arms' length with the benefit of or opportunity to seek legal counsel and, accordingly, shall not be construed against any of the parties. 7.10. No Disparagement or Breach of Confidentiality and Noncompetition Agreement. In the event that Employee's employment terminates under this Agreement in any manner whatsoever, Employee agrees that, except under compulsion of legal process, he will make no oral or written comments about Employer or its business for a period of one year following termination of his employment. In the event that Employee breaches this provision of this Agreement, or violates the terms of the Employee Confidentiality and Noncompetition Agreement executed by him, then all severance obligations which Employer may then have under this Agreement shall immediately cease and Employee shall be owed nothing under this Agreement other than wages and benefits earned through the date of the termination of his employment. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. EMPLOYER: RENTRAK CORPORATION, an Oregon corporation By: s/s Ron Berger Ron Berger, President I acknowledge that I have read and agree to the foregoing Agreement, including, without limitation, the provision allowing termination of my employment "at will" by Employer in Section 2.02. s/s Christopher E. Roberts Christopher E. Roberts EX-10.6 5 RENTRAK CORPORATION NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT, dated ____________, is made by and between Rentrak Corporation, an Oregon corporation (hereinafter referred to as "Company"), and ____________________________, an employee of the Company or a Subsidiary of the Company (hereinafter referred to as "Optionee"): WHEREAS, the Company wishes to afford the Optionee the opportunity to purchase shares of its $0.001 par value Common Stock; and WHEREAS, the Company wishes to carry out the 1997 Equity Participation Plan of Rentrak Corporation (hereinafter referred to as "Plan") (the terms of which are hereby incorporated by reference and made a part of this Agreement); and WHEREAS, the Committee, appointed to administer the Plan, has delegated to certain officers of the Company the authority to implement grants of Options under the Plan; and WHEREAS, such officers have determined that it would be to the advantage and best interest of the Company and its shareholders to grant the non-qualified Option provided for herein to the Optionee as an inducement to enter into or remain in the service of the Company or its Subsidiaries and as an incentive for increased efforts during such service; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE GRANT OF OPTION Section 1.1. - Grant of Option In consideration of the Optionee's agreement to remain in the employ of the Company or its subsidiairies and for other good and valuable consideration, on the date hereof the Company irrevocably grants to the Optionee the option to purchase any part or all of an aggregate of ____________ shares of its $0.001 par value Common Stock upon the terms and conditions set forth in this Agreement. Section 1.2. - Purchase Price The purchase price of the shares of stock covered by the Option shall be $__________ per share, without commission or other charge. Section 1.3. - Consideration to Company In consideration of the granting of this Option by the Company, the Optionee agrees to render faithful and efficient services to the Company or a Subsidiary, with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary, or as a director of the Company, or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without cause. Section 1.4. - Adjustments in Option The Committee shall make adjustments with respect to the Option in accordance with the provisions of Section 9.3 of the Plan. ARTICLE II. PERIOD OF EXERCISABILITY Section 2.1. - Commencement of Exercisability (a) Subject to Section 4.5, the Option shall become exercisable in [four (4) cumulative installments as follows: The first installment shall consist of twenty-five percent (25%) of the shares covered by the Option and shall become exercisable on the first anniversary of the date the Option is granted. The second installment shall consist of twenty-five percent (25%) of the shares covered by the Option and shall become exercisable on the second anniversary of the date the Option is granted. The third installment shall consist of twenty-five percent (25%) of the shares covered by the Option and shall become exercisable on the third anniversary of the date the Option is granted. The fourth installment shall consist of twenty-five percent (25%) of the shares covered by the Option and shall become exercisable on the fourth anniversary of the date the Option is granted. (b) No portion of the Option which is unexercisable at Termination of Employment shall thereafter become exercisable. Section 2.2. - Duration of Exercisability The installments provided for in Section 2.1 are cumulative. Each such installment which becomes exercisable pursuant to Section 2.1 shall remain exercisable until it becomes unexercisable under Section 2.1. Section 2.3. - Expiration of Option The Option may not be exercised to any extent by anyone after the first to occur of the following events: (a) The expiration of ten (10) years from the date the Option was granted; or (b) The expiration of one (1) month from the date of the Optionee's Termination of Employment unless such Termination of Employment results from his death, his retirement, his disability or his being discharged not for good cause; or (c) The expiration of one (1) month from the date of the Optionee's Termination of Employment by reason of his retirement or his being discharged not for good cause, unless the Optionee dies within said one-month period; or (d) The expiration of one (1) year from the date of the Optionee's Termination of Employment by reason of his disability; or (e) The expiration of one (1) year from the date of the Optionee's death. (f) The effective date of either the merger or consolidation of the Company with or into another corporation, or the acquisition by another corporation or person of all or substantially all of the Company's assets or eighty percent (80%) or more of the Company's then outstanding voting stock, or the liquidation or dissolution of the Company, unless the Committee waives this provision in connection with such transaction. As soon as practicable prior to the effective date of such merger, consolidation, acquisition, liquidation or dissolution, the Committee shall give the Optionee notice of such event if the Option has then neither been fully exercised nor become unexercisable under this Section 2.3. Section 2.4. - Adjustments to and/or Cancellation of the Option If there is a material alteration in the capital structure of the Company on account of a reorganization, merger, recapitalization, exchange of shares, stock split, reverse stock split, stock dividend, or otherwise, the Committee shall make such adjustments to the Plan and to the Options then outstanding under the Plan as the Committee determines to be appropriate and equitable under the circumstances. Such adjustments may include, without limitation, (a) a change in the number or kind of shares of stock of the Company covered by the Options and/or (b) a change in the Option Price payable per share; provided, however, that the aggregate Option Price applicable to the unexercised portion of existing Options shall not be altered, it being intended that any adjustments made with respect to these Options shall apply only to the price per share and the number of shares subject thereto. For purposes of this paragraph, neither (i) the issuance of additional shares of stock of the Company in exchange for adequate consideration (including services), nor (ii) the conversion of outstanding preferred shares of the Company into Common Stock, shall be deemed a material alteration of the capital structure of the Company. In the event the Committee shall determine that the nature of a material alteration in the capital structure of the Company is such that it is not practical or feasible to make appropriate adjustments to the Plan or to this Option, such event shall be deemed a Termination Event subject to the following paragraph. In the event of (a) the dissolution or liquidation of the Company, (b) a reorganization , merger, or consolidation of the Company with one or more corporations as a result of which the Company will not be a surviving corporation, (c) the sale of all or substantially all of the assets of the Company, (d) a sale or other transfer of more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company, or (e) a material change in the capital structure of the Company that is subject to this Section in accordance with the last sentence of the previous paragraph (any of such events is herein referred to as a "Terminating Event"), the Committee shall determine whether a provision will be made in connection with the Terminating Event for an appropriate assumption of this Option for stock or for substitution of appropriate new options covering stock of a successor corporation employing the Optionee under this Plan and Agreement or stock of an affiliate of such successor employer corporation . If the Committee determines that such an appropriate assumption or substitution will be made, the Committee shall give notice of the determination to the Optionee and the provisions of such assumption or substitution, and any adjustments made (i) to the number and kind of shares subject to the Option outstanding under the Plan (or to options issued in substitution therefor), (ii) to the Option price and/or (iii) to the terms and conditions of this Option, shall be binding upon the Optionee. If the Committee determines that no assumption or substitution will be made, the Committee shall give notice of this determination to the Optionee, whereupon the Optionee shall have the right for a period of thirty (30) days following the notice to exercise in full or in part any unexercised or unexpired Option then held by him or her, without regarding to any contingent vesting provision to which the Option may otherwise been subject pursuant to Paragraph 2.1a above. Upon the expiration of this thirty (30) day period, this option shall expire to the extent not earlier exercised, and the Plan shall terminate. ARTICLE III. GRANT OF OPTION Section 3.1. - Partial Exercise Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 2.3; provided, however, that each partial exercise shall be for not less than ten (10) shares (or the minimum installment set forth in Section 2.1, if a smaller number of shares) and shall be for whole shares only. Section 3.2. - Manner of Exercise The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary or his office of all of the following prior to the time when the Option or such portion becomes unexercisable under Section 2.3: (a) A written notice complying with the applicable rules established by the Committee stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Optionee or other person then entitled to exercise the Option or such portion; and (b) Full payment to the Company for the shares with respect to which such Option or portion exercised in accordance with Section 5.2d of the Plan. (i) With the consent of the Committee, (A) shares of the Company's Common Stock owned by the Optionee, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or (B) shares of the Company's Common Stock issuabe to the Optionee upon exercise of the Option, with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised thereof; or (ii) With the consent of the Committee, a notice that the Optionee has placed a market sell order with a broker with respect to shares of the Company's Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price. (c) A bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Optionee or other person then entitled to exercise such Option or portion, as the Committee in its discretion shall determine is necessary or appropriate to effect compliance with the Securities Act and any other federal or state securities laws or regulations. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of this subsection (c) and the agreements herein. The written representation and agreement referred to in the first sentence of this subsection (c) shall, however, not be required if the shares to be issued pursuant to such exercise have been registered under the Securities Act, and such registration is then effective in respect of such shares; and (d) Full payment to the Company (or other employer corporation) of all amounts which, under federal, state or local tax law, it is required to withhold upon exercise of the Option; with the consent of the Committee, (i) shares of the Company's Common Stock owned by the Optionee, duly endorsed for transfer, with a Fair Market Value equal to the sums required to be withheld, or (ii) shares of the Company's Common Stock issuable to the Optionee upon exercise of the Option with a Fair Market Value equal to the sums required to be withheld, may be used to make all or part of such payment; and (e) In the event the Option or portion shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option. Section 3.3. - Rights as Shareholder The holder of the Option shall not be, nor have any of the rights or privileges of, a shareholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the Company to such holder. ARTICLE IV. OTHER PROVISIONS Section 4.1. - Option Not Transferable Neither the Option nor any interest or right therein or part thereof shall be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution, unless and until such Option has been exercised, or the shares underlying such Option have been issued, and all restrictions applicable to such shares have lapsed. Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. Section 4.2. - Shares to Be Reserved The Company shall at all times during the term of the Option reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement. Section 4.3. - Notices Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Section 4.3, either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be given to the Optionee's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 4.3. Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. Section 4.4. - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. Section 4.5. - Construction This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Oregon without regard to conflicts of laws thereof. Section 4.6. - Conformity to Securities Laws The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. RENTRAK CORPORATION By ___________________________ President Optionee's Taxpayer Identification Number: Optionee: ____________________________ EX-11 6 Rentrak Corporation Computation of Net Income Per Share For The Periods Ended September 30, 1996 and 1997
For the Quarter Ended For the Six Months Ended September 30, 1997 September 30, 1997 Primary Fully Diluted Primary Fully Diluted Calculation of Outstanding Shares Weighted average number of shares of common stock outstanding 11,369,295 11,369,295 11,533,504 11,533,504 Dilutive effect of exercise of stock options 4,698,506 4,948,506 4,643,284 5,664,886 Less: purchase of treasury shares, up to 20% of shares outstanding at period end (2,210,914) (2,210,914) (2,266,412) (2,266,412) Weighted average number of shares of common stock and common stock equivalents 13,856,887 14,106,887 13,910,376 14,931,978 Calculation of Net Income Per Share Net Income $1,203,888 $1,203,888 $2,515,022 $2,515,022 Plus: interest income from investments assumed purchased with proceeds from exercise of stock options and warrants in excess of proceeds used to purchase treasury stock. 131,879 140,052 269,347 361,965 Net Income for purposes of computing earnings per share. $1,335,767 $1,343,940 $2,784,369 $2,876,987 Net Income per Share $0.10 $0.10 $0.20 $0.19
For the Quarter Ended For the Six Months Ended September 30, 1996 September 30, 1996 Primary Fully Diluted Primary Fully Diluted Calculation of Outstanding Shares Weighted average number of shares of common stock outstanding 12,141,210 12,141,210 12,139,762 12,139,762 Dilutive effect of exercise of stock options 4,936,924 6,610,674 4,914,899 6,588,649 Less: purchase of treasury shares, up to 20% of shares outstanding at period end (2,428,248) (2,428,248) (2,427,988) (2,427,988) Weighted average number of shares of common stock and common stock equivalents 14,649,886 16,323,636 14,626,673 16,300,423 Calculation of Net Income Per Share Net Income $3,975,933 $3,975,933 $4,552,229 $4,552,229 Plus: interest income from investments assumed purchased with proceeds from exercise of stock options and warrants in excess of proceeds used to purchase treasury stock. 164,474 253,725 343,379 521,881 Net Income for purposes of computing earnings per share. $4,140,407 $4,229,658 $4,895,608 $5,074,110 Net Income per Share $0.28 $0.26 $0.33 $0.31
EX-27 7
5 6-MOS MAR-31-1998 SEP-30-1997 7,599,915 0 16,649,468 215,389 2,231,564 34,130,625 6,988,493 5,098,570 45,014,497 34,334,768 0 0 0 11,055 10,668,674 45,014,497 59,463,062 59,463,062 48,840,933 55,416,853 0 0 5,000 4,292,385 1,777,363 2,515,022 0 0 0 2,515,022 0.20 0.19
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