UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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RENTRAK CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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RENTRAK CORPORATION
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
July 11, 2001
To Our Shareholders:
Our 2001 Annual Meeting of Shareholders will be held on Thursday, August
16, 2001, at 10:00 a.m., Pacific Daylight Time, at our executive offices,
located at One Airport Center, 7700 N.E. Ambassador Place, Portland, Oregon,
97220. On the following pages you will find the formal Notice of Annual Meeting
and Proxy Statement. Our 2001 Annual Report is also enclosed.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted at the meeting. ACCORDINGLY, PLEASE
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. If you attend the
meeting, and the Board of Directors joins me in hoping that you will, there will
be an opportunity to revoke your proxy and to vote in person if you prefer.
Sincerely yours,
/s/ Paul A. Rosenbaum
PAUL A. ROSENBAUM
Chairman of the Board
RENTRAK CORPORATION
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held August 16, 2001
To the Shareholders of
Rentrak Corporation:
The Annual Meeting of Shareholders of Rentrak Corporation ("Rentrak") will
be held on Thursday, August 16, 2001, at 10:00 a.m., Pacific Daylight Time, at
Rentrak's executive offices, located at One Airport Center, 7700 N.E. Ambassador
Place, Portland, Oregon, 97220, for the following purposes:
1. To elect a Board of Directors consisting of six members, each to
serve until the next annual meeting of shareholders and until his
successor is duly elected and qualified;
2. To hear reports from various officers of Rentrak; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on June 20, 2001 as
the record date for determining shareholders entitled to notice of, and to vote
at, the meeting and any adjournments or postponements thereof. The proxy
statement, proxy card and 2001 Annual Report to Shareholders accompany this
Notice.
Whether or not you plan to attend the Annual Meeting, please fill out,
sign, date and promptly return the enclosed proxy in the enclosed postage paid
envelope. You may revoke your proxy in writing or at the Annual Meeting if you
wish to vote in person.
By Order of the Board of Directors:
/s/ F. Kim Cox
F. KIM COX
President and Secretary
Portland, Oregon
July 11, 2001
RENTRAK CORPORATION
One Airport Center
7700 N.E. Ambassador Place
Portland, Oregon 97220
------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held August 16, 2001
------------------------------
DATE, TIME, PLACE OF MEETING
The board of directors of Rentrak Corporation ("Rentrak") is furnishing
this proxy statement and the accompanying 2001 Annual Report to Shareholders,
notice of annual meeting, and the enclosed proxy card in connection with the
board's solicitation of proxies for use at Rentrak's 2001 Annual Meeting of
Shareholders (the "Annual Meeting"). The Annual Meeting will be held Thursday,
August 16, 2001, at 10:00 a.m. Pacific Daylight Time, at Rentrak's executive
offices, located on the fifth floor at One Airport Center, 7700 N.E. Ambassador
Place, Portland, Oregon 97220.
SOLICITATION AND REVOCATION OF PROXIES
Shares represented by a proxy card that is properly dated, executed and
returned will be voted as directed on the proxy. If no direction is given,
proxies will be voted FOR each of the director nominees selected by the board of
directors. If other matters properly come before the Annual Meeting, the persons
named in the accompanying proxy will vote in accordance with their best judgment
with respect to such matters. Any proxy given by a shareholder may be revoked at
any time prior to its use by execution of a later-dated proxy delivered to
Rentrak's Secretary, by vote in person at the Annual Meeting, or by written
notice of revocation delivered to Rentrak's Secretary.
Rentrak's board of directors has selected the two persons named on the
enclosed proxy card to serve as proxies in connection with the Annual Meeting.
These proxy materials and the accompanying Rentrak 2001 Annual Report to
Shareholders are being mailed on or about July 11, 2001 to shareholders of
record on June 20, 2001.
PURPOSES OF THE ANNUAL MEETING
The Annual Meeting has been called for the following purposes:
o To elect a board of directors consisting of six members, each to serve
until the next annual meeting of shareholders and until his successor
is duly elected and qualified;
o To hear reports from various officers of Rentrak; and
o To transact such other business as may properly come before the meeting
or any adjournments thereof.
Section 2.3.1 of Rentrak's 1995 Restated Bylaws, as amended, sets forth
procedures to be followed for introducing business at a shareholders meeting.
Rentrak has no knowledge of any other matters that may be properly presented at
the Annual Meeting. If other matters do properly come before the Annual Meeting
in accordance with the 1995 Restated Bylaws, the persons named in the proxy card
will vote your proxy in accordance with their judgment on such matters in the
exercise of their sole discretion.
RECORD DATE AND SHARES OUTSTANDING
Only shareholders of record at the close of business on June 20, 2001 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the close of business on the Record Date, 11,167,605 shares of
1
Rentrak common stock were outstanding. For information regarding the ownership
of Rentrak common stock by holders of more than five percent of the outstanding
shares and by Rentrak's directors and executive officers, see "Security
Ownership of Certain Beneficial Owners and Management."
VOTING; QUORUM; VOTE REQUIRED
Each share of common stock outstanding on the Record Date is entitled to
one vote per share at the Annual Meeting. Shareholders are not entitled to
cumulate their votes. The presence, in person or by proxy, of the holders of a
majority of Rentrak's outstanding shares of common stock is necessary to
constitute a quorum at the Annual Meeting. Assuming the existence of a quorum,
the affirmative vote of a plurality of the votes cast at the Annual Meeting, in
person or by proxy, will be required to elect persons nominated to be directors.
EFFECT OF ABSTENTIONS
If you abstain from voting, your shares will be deemed present at the
Annual Meeting for purposes of determining whether a quorum is present. However,
only votes cast in favor of a nominee for director will have an effect on the
outcome of the election of directors.
EFFECT OF BROKER NON-VOTES
If a broker holds your shares in street name, you should instruct your
broker how to vote. If you do not provide voting instructions, the broker will
have discretionary voting authority with respect to the election of directors.
Broker non-votes are deemed present at the Annual Meeting for purposes of
determining whether a quorum is present. However, broker-non-votes will have no
effect on the outcome of the election of directors.
2002 SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the proxy statement for the 2002 Annual Meeting of Shareholders is
March 13, 2002. To be considered at the 2002 Annual Meeting of Shareholders,
Section 2.3.1 of Rentrak's 1995 Bylaws, as amended, requires shareholders to
deliver notice of all proposals, nominations for director and other business to
Rentrak's principal executive office no later than 60 calendar days (or by June
17, 2002) and no earlier than 90 calendar days prior to the first anniversary of
the date of the 2001 Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Rentrak's 1995 Restated Bylaws, as amended, provide that its board of
directors shall consist of six members. The board of directors has nominated the
individuals named below to fill the six positions. If for any reason any of the
nominees named below should become unavailable for election (an event that the
board does not anticipate), proxies will be voted for the election of such
substitute nominee as the board in its discretion may recommend. Proxies cannot
be voted for more than six nominees. If a vacancy occurs after the Annual
Meeting, the board of directors may elect a replacement to serve for the
remainder of the unexpired term.
In May and June 2000, a group of nine individual Rentrak shareholders, led
by Paul Rosenbaum, agreed to form the Committee for the Achievement of Rentrak
Excellence ("CARE") for the purpose of conducting a proxy contest for the
election of directors at the Rentrak 2000 Annual Meeting of Shareholders. CARE
was successful in its efforts, as its five nominees, Cecil Andrus, George Kuper,
Joon Moon, James Petcoff, and Paul Rosenbaum, were elected as directors of
Rentrak effective September 19, 2000. These individuals comprise five of the six
nominees named below. Stanford Stoddard, the sixth nominee, was elected as a
director by the board of directors on May 23, 2001. The other members of CARE,
which was disbanded in late September 2000, were Michael J. Annechino, Mark A.
Brown, Thomas S. Cousins, Jr., Gordon A. Reck, Donald W. Remlinger, David R.
Rosencrantz, M.D., Guy R. Wolcott, and Frederick L. Zehnder.
2
The board of directors recommends a vote "FOR" the election of each of the
following nominees for director:
CECIL D. ANDRUS (age 69). In 1995, Mr. Andrus founded and serves as the
chairman of the Andrus Center for Public Policy at Boise State University. Since
1995, Mr. Andrus has also been of counsel to the Gallatin Group, a public policy
consulting firm in Boise, Idaho. He was elected governor of the state of Idaho
for four terms (beginning in 1970, 1974, 1986, and 1990). Mr. Andrus also was
the U.S. Secretary of the Interior from 1977 to 1981. Mr. Andrus serves as a
director of Albertsons, Inc., KeyCorp, and Coeur d'Alene Mines.
GEORGE H. KUPER (age 60). Since April 2001, Mr. Kuper has been serving as
Chief Operating Officer of Rentrak's e-fulfillment subsidiary 3PF.COM, Inc., on
a part-time consulting basis. For several years, Mr. Kuper has been an
independent consultant in the areas of public policy, environmental and energy
issues and provides advice to small and start-up companies in the chemical,
electronics, and software industries. Mr. Kuper has also served as president,
chief executive officer, and a director of the Council of Great Lake Industries
("CGLI") located in Ann Arbor, Michigan, since 1994. CGLI is affiliated with the
World Business Council for Sustainable Development located in Geneva,
Switzerland and is a not-for-profit association consisting of more than two
dozen U.S. and Canadian companies. Since 1994, Mr. Kuper has also served as the
chairman of the Office of the Secretary of Defense Working Group on Dual-Use
Technology Policy. Prior to 1994, Mr. Kuper's activities included serving for
three years as the executive director of the National Center for Productivity
and Quality of Working Life, a Presidential appointment, working for General
Electric Company for five years to enhance its productivity programs, and
serving as executive director of the Manufacturing Studies Board of the National
Academy of Sciences, National Research Council, for five years. Mr. Kuper
received a B.A. in political science from The Johns Hopkins University and an
M.B.A. from the Harvard School of Business Administration.
JOON S. MOON, Ph.D. (age 63). Dr. Moon has served as the chairman of Rooto
Corporation, a manufacturer of industrial and household chemicals, for more than
the past five years. Dr. Moon's background is as a research chemist with E.I.
duPont de Nemours Company and Celanese Corporation. Dr. Moon received a B.S. in
chemical engineering from Michigan State University and a Ph.D. in chemical
engineering from the University of California at Berkeley. Dr. Moon serves as a
member of the board of directors of Thomas Jefferson University, and has
previously served as a director of Michigan State University Foundation,
Michigan Bank, Independence One Mutual Fund, Michigan General Corporation, Maxco
Energy, and Progressive Dynamics Corporation.
JAMES G. PETCOFF (age 45). Mr. Petcoff has served as president and chief
executive officer of North Pointe Financial Services, Inc., a provider of
insurance and other financial services, since 1986. Since 1999, Mr. Petcoff has
also served as president and chief executive officer of Queensway Financial
Holdings Limited, a Canadian holding company affiliated with North Pointe
Financial Services, Inc. He received an M.B.A. and a J.D. from the University of
Detroit. Mr. Petcoff is a director of Lease Corporation of America.
PAUL A. ROSENBAUM (age 58). Mr. Rosenbaum serves Rentrak as its current
Chairman and Chief Executive Officer since his election on September 19, 2000.
Prior to his current position at Rentrak, Mr. Rosenbaum founded SWR Corporation
in 1994 and continues to serve as its chief executive officer. SWR Corporation
designs, tests, and markets industrial chemicals. Mr. Rosenbaum has also been
engaged in the private practice of law through his own firm specializing in
corporate and administrative law since 1978. He received a B.S. in American
studies from Springfield College and a J.D. from The George Washington
University Law School.
STANFORD C. STODDARD (age 70). Mr. Stoddard has been chairman of LaGrande
Capital, L.L.C., a financial consulting firm with offices in Southfield,
Michigan, since his retirement more than five years ago. During his 30-year
banking career, Mr. Stoddard was President of Michigan National Bank of Detroit,
Chairman of the outstate Michigan National Bank, and Founder, President and
Chairman of Michigan National Corporation, the parent bank holding company of
the banks. Mr. Stoddard is currently chairman of MTC Capital Corporation, the
holding company for Michigan Trust Bank. Mr. Stoddard is a former director of
Chatham Supermarkets, Inc., Michigan National Corporation, Michigan National
Bank, Michigan National Bank of Detroit, Florida Leasing and
3
Capital Corporation, Federal Home Life Insurance Company, FHF Life Insurance
Company and the Chamber of Commerce of the United States of America. Mr.
Stoddard graduated from the University of Michigan with a B.A. in business
administration.
See "CERTAIN RELATIONSHIPS AND TRANSACTIONS" for a discussion of certain
agreements and relationships between Rentrak and its directors.
COMMITTEES AND MEETINGS OF THE BOARD
The board of directors has a standing Finance Committee, Audit Committee
and Compensation Committee. The board of directors does not have a nominating
committee.
The Finance Committee is comprised of Joon Moon, Chair, George Kuper and
Paul Rosenbaum and is responsible for evaluating strategic financial issues
facing Rentrak.
The Audit Committee is presently comprised of Cecil Andrus, Chair, James
Petcoff and Stanford Stoddard and is responsible for evaluating the integrity of
Rentrak's financial reporting to shareholders. During the fiscal year ended
March 31, 2001, the Audit Committee held four meetings.
The Compensation Committee is presently comprised of James Petcoff, Chair,
and Cecil Andrus and is responsible for evaluating the performance of Rentrak's
management and making compensation decisions regarding Rentrak's executive
employees. During the fiscal year ended March 31, 2001, the Compensation
Committee met three times.
During the fiscal year ended March 31, 2001, the board of directors held
six regular meetings, each of which were conducted in person, and 11 special
meetings, nine of which were conducted by telephone conference call. While in
office, each director nominated for reelection above attended at least 75
percent of the total number of meetings held by the board of directors and the
committees of the board of directors on which he served during the fiscal year
ended March 31, 2001.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 20, 2001, certain information
regarding the beneficial ownership of Rentrak common stock by (i) each person
known to be the beneficial owner of 5 percent or more of Rentrak's outstanding
shares of common stock, (ii) each director of Rentrak, (iii) Rentrak's Chief
Executive Officer and the next four most highly compensated executive officers
who were employed by Rentrak at March 31, 2001 (the "Named Executive Officers"),
and (iv) the present directors and executive officers of Rentrak as a group.
SHARES BENEFICIALLY OWNED
--------------------------------------------- --------------------------------
NAME NUMBER (1) PERCENTAGE (1)
--------------------------------------------- --------------- ---------------
Cecil Andrus 1,000 *
F. Kim Cox 352,194 3.1%
Marty Graham 78,468 *
George Kuper 4,000 *
Michael Lightbourne 140,000 1.2%
Joon Moon 1,000 *
James Petcoff 21,500 (2) *
Christopher Roberts 59,022 *
Paul Rosenbaum 237,220 2.1%
Stanford Stoddard 92,833 *
All executive officers and directors as a 1,107,099 9.4%
group (14 persons)
Ron Berger 1,610,744 (3) 14.4%
P.O. Box 2190
Gresham, Oregon 97030
Walt Disney Company 1,543,203 (4) 12.1%
500 South Buena Vista St.
Burbank, California
* Less than 1%
----------------------------------
(1) Unless otherwise indicated, each person has sole voting and dispositive
power over the shares listed opposite his name. All percentages have been
calculated assuming that 11,167,605 shares of Rentrak common stock are
issued and outstanding as of June 20, 2001. In accordance with SEC
regulations, the number of shares and percentage calculation with respect
to each shareholder assumes the exercise of all outstanding options such
shareholder holds and that can be exercised within 60 days after June 20,
2001, as follows: F. Kim Cox, 303,288 shares; Marty Graham, 78,464 shares;
Michael Lightbourne, 46,000 shares; Christopher Roberts, 57,724 shares;
and all executive officers and directors as a group, 577,472 shares.
(2) Mr. Petcoff shares voting and dispositive power over his shares with his
spouse.
(3) See "CERTAIN RELATIONSHIPS AND TRANSACTIONS" for discussion of a pending
lawsuit brought by Rentrak against Mr. Berger relating to the validity of
1,495,750 shares shown as held by Mr. Berger.
(4) Represents shares of common stock subject to warrants that are currently
exercisable.
5
EXECUTIVE OFFICERS
The names, ages, positions and backgrounds of Rentrak's present executive
officers in addition to Paul Rosenbaum are as follows:
POSITION
HELD
NAME AGE SINCE CURRENT POSITION(S) WITH RENTRAK AND BACKGROUND
--------- ----- -------- -----------------------------------------------
F. Kim Cox 48 2000 President and Secretary. From 1999
until 2000, Mr. Cox served as
Executive Vice President, Secretary
and Treasurer. From 1995 until
1999, Mr. Cox served as Executive
Vice President, Chief Financial
Officer, Secretary and Treasurer.
Prior to joining Rentrak in 1985,
Mr. Cox was an attorney in private
practice and, prior to that, an
accountant with Arthur Andersen
LLP.
Timothy Erwin 32 2000 Vice President, Customer Relations.
Mr. Erwin has been with Rentrak for
15 years and, prior to his
promotion in June 2000, held
positions including Manager of
Customer Services and Key Accounts
and Director of Customer Relations.
Marty Graham 43 1991 Vice President, Product
Development. Prior to joining
Rentrak in October 1988 as Director
of Product Development, Mr. Graham
served as General Manager and
Secretary/Treasurer of Pacific
Western Video Corporation.
Michael Lightbourne 54 1997 Executive Vice President. Mr.
Lightbourne was Senior Vice
President, Marketing, of Rentrak
from 1992 to 1996, Vice President,
Marketing, from 1991 to 1992, and
Director of Sales from 1988 to
1991.
Richard Nida 54 1998 Vice President, Investor Relations.
Prior to joining Rentrak in
September 1998, Mr. Nida served as
the Director of Corporate
Communications and Investor
Relations for Payless ShoeSource
from 1988 to August 1998.
Christopher Roberts 33 1994 Vice President, Sales. Prior to
becoming Vice President, Sales in
1994, Mr. Roberts was Rentrak's
National Director of Sales, a
position he held beginning in
September 1992.
Mark Thoenes 48 2001 Vice President and Chief Financial
Officer. From July 1, 2000, to
December 31, 2000, Mr. Thoenes was
engaged as an outside consultant to
serve as Rentrak's Chief Financial
Officer. Prior to that, he served
as Chief Financial Officer and Vice
President and Chief Operating
Officer for PhyCor of Vancouver,
Inc., and Physician Partners, Inc.,
both health care companies, from
1996 until joining Rentrak.
Amir Yazdani 41 2001 Vice President and Chief
Information Officer. Mr. Yazdani
was Vice President, Management
Information Systems of Rentrak's
subsidiary 3PF.COM, Inc., from 1999
to June 2001 and Vice President,
Management Information Systems of
Rentrak from 1993 to 1999.
6
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by Rentrak to the
Named Executive Officers and Rentrak's former Chief Executive Officer during the
fiscal years ended March 31, 2001, 2000 and 1999.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------
Awards
------------
Fiscal Securities
Year Other Underlying All Other
Name and Ended Salary Bonus Annual Options/SARs Compensation
Principal March ($) ($) Compensation (#) ($)(3)
Position (1) 31, ($)(2)
----------------------------------------------------------------------------------------
Paul Rosenbaum, 2001 $152,500 $ 0 $23,703 100,000 $ 0
Chairman and
Chief Executive
Officer
F. Kim Cox, 2001 201,044 40,000 0 5,000(4) 5,647
President and 2000 191,029 85,000 0 32,623 5,571
Secretary 1999 181,136 0 0 63,805 6,065
Marty Graham, 2001 160,598 0 0 10,000 3,635
Vice President, 2000 152,265 35,000 0 10,000 3,835
Product 1999 140,083 15,000 0 0 4,032
Development
Michael 2001 196,132 0 0 10,000 8,951
Lightbourne, 2,500(4)
Executive Vice 2000 188,255 50,000 0 10,000 8,201
President 1999 178,037 0 0 0 7,987
Christopher 2001 139,921 13,000 0 10,000 1,500
Roberts, Vice 2000 137,596 26,750 0 10,000 1,500
President of Sales 1999 135,854 20,000 0 0 1,500
Ron Berger, 2001 193,742 85,000 125,485 5,000 (4) 1,372,379
Chairman and 2000 429,353 2,264 19,945 260,943 (5) 24,448
Chief Executive 1999 405,540 0 6,541 510,481 (5) 40,657
Officer
---------------------------
(1) Reflects principal position as of March 31, 2001. Mr. Berger resigned in
September 2000 as Rentrak's Chief Executive Officer. In September 2000, Mr.
Rosenbaum was appointed Chief Executive Officer. Mr. Cox was appointed
President in May 2000.
(2) Amounts disclosed in this column include monthly lease and maintenance
payments on automobiles of $29,116 to Mr. Berger and $3,302 to Mr.
Rosenbaum; payoff of the lease on an automobile on behalf of Mr. Berger in
the amount of $96,369 (which is the subject of a pending lawsuit brought by
Rentrak against Mr. Berger seeking return of the automobile or its cash
value, among other matters); and $17,762 to Mr. Rosenbaum for housing in
Portland, Oregon, and $2,639 for a miscellaneous payment.
(3) Amounts disclosed in this column reflect the following matching
contributions during fiscal 2001 under Rentrak's 401(k) plan: F. Kim Cox,
$1,500; Marty Graham, $1,500; Michael Lightbourne, $1,500; Christopher
Roberts, $1,500, and Ron Berger, $1,500. Rentrak also made payments to
supplemental disability and life insurance plans during fiscal 2001 as
follows: F. Kim Cox, $4,147; Marty Graham, $2,135; Michael Lightbourne,
$7,451; and Ron Berger $8,537. Rentrak paid Mr. Berger $1,362,342 as
severance under the terms of his employment agreement upon his resignation
as Chief Executive Officer on September 14, 2000.
7
(4) Represents options to purchase shares of 3PF.COM, Inc. ("3PF"), common
stock.
(5) All of the options granted to Mr. Berger in fiscal 2000 and options covering
243,659 shares granted to him in fiscal 1999 were cancelled during fiscal
2001 in order to correct a possible inadvertent violation of the 15 percent
beneficial ownership threshold specified in Rentrak's shareholder rights
plan, which was adopted in May 1995 in an effort to assure that all of
Rentrak's shareholders receive fair and equal treatment in the event of
certain proposals to acquire Rentrak. All remaining options expired
unexercised following Mr. Berger's resignation as Chief Executive Officer.
STOCK OPTION GRANTS
The following table sets forth information concerning stock option grants
to each of the Named Executive Officers and Rentrak's former Chief Executive
Officer during the fiscal year ended March 31, 2001. Rentrak did not grant any
stock appreciation rights to executive officers during the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
Potential realizable value
at assumed annual rates
of stock price appreciation
Individual Grants (1) for option term (2)
-------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price Date 5% ($) 10% ($)
-------------------------------------------------------------------------------------------
Paul Rosenbaum 100,000(3) 32.90% $3.500(4) 3/30/11 $220,113 $557,810
F. Kim Cox 5,000(5) 3.94% 6.750(6) 7/18/10 21,250 53,789
Marty Graham 10,000(7) 3.29% 3.750(4) 4/19/10 23,584 59,765
Michael Lightbourne10,000(7) 3.29% 3.750(4) 4/19/10 23,584 59,765
2,500(5) 1.97% 6.750(6) 7/18/10 10,625 26,894
Christopher Roberts10,000(7) 3.29% 3.750(4) 4/19/10 23,584 59,765
Ron Berger 5,000(5) 3.94% 6.750(6) 7/18/10 21,250 53,789
-------------------------------
(1) Options granted include both incentive stock options and nonqualified stock
options.
(2) These calculations are based on certain assumed annual rates of appreciation
as required by SEC rules and regulations governing the disclosure of
executive compensation. Under these rules, an assumption is made that the
market price of the shares underlying the stock options shown in this table
could appreciate at rates of 5% and 10% per annum on a compounded basis over
the ten-year term of the stock options. Actual gains, if any, on stock
option exercises are dependent on the future performance of the common stock
of Rentrak and 3PF, as applicable, and overall stock market conditions.
3PF's common stock is not publicly traded. There can be no assurance that
the gains reflected in this table will be achieved.
(3) Option vests in full on September 19, 2001.
(4) The exercise price per share equals the fair market value of Rentrak's
common stock based on the closing sales price on the last trading day
preceding the date of grant.
(5) Options to purchase indicated number of shares of 3PF's common stock vesting
25 percent per year on each anniversary of the grant date. Options for a
total of 126,950 shares of 3PF's common stock were granted to employees of
Rentrak or its subsidiaries during fiscal 2001. Mr. Berger's options
terminated upon his resignation as Chief Executive Officer of Rentrak.
(6) The exercise price equals the value of 3PF's common stock on the date of
grant as determined by 3PF's board of directors.
(7) Option vests 20 percent per year on each anniversary of the grant date.
8
STOCK OPTION EXERCISES
The following table sets forth certain information concerning stock option
exercises by each of the Named Executive Officers and the former Chief Executive
Officer during the fiscal year ended March 31, 2001, and the value of
in-the-money options (e.g., options as to which the market value of Rentrak
common stock exceeds the exercise price of the options) held by such individuals
on March 31, 2001. The value of in-the-money options is based on the difference
between the exercise price of such options and the closing price of Rentrak
common stock on March 30, 2001, which was $3.69 per share. As 3PF's common stock
is not publicly traded, outstanding options are not deemed to be in-the-money as
the current value of the stock is not presently ascertainable. Unless otherwise
indicated, the options listed below are for Rentrak common stock.
AGGREGATED OPTION EXERCISES IN FISCAL 2001 AND
FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at Fiscal
Options at Fiscal Year-End (#) Year-End ($)
--------------------------------- ------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
-------------- ------------- ------------ ----------- ------------- ----------- -------------
Paul Rosenbaum 0 $ 0 0 100,000 $ 0 $18,800
F. Kim Cox 30,831 76,048 316,930 64,382 0 0
0 5,000(1) 0 0
Marty Graham 0 0 73,535 30,000 14,260 12,630
Michael Lightbourne 94,000 (2,875) 10,000 86,000 6,628 10,282
0 2,500(1) 0 0
Christopher Roberts 542 1,277 53,558 31,250 4,799 8,016
Ron Berger(2) 1,495,750 (1,549,494) 0 0 0 0
--------------------------
(1) Option to purchase shares of 3PF's common stock.
(2) See "CERTAIN RELATIONSHIPS AND TRANSACTIONS" for discussion of a pending
lawsuit brought by Rentrak against Mr. Berger relating to these shares.
COMPENSATION OF DIRECTORS
Rentrak compensates its non-employee directors for their services by
payment of $500 for each board meeting they attend in person or by telephone
conference call. Each director who serves on a board committee receives payment
of $500 for attending each in-person or telephone conference committee meeting.
In addition, each non-employee director is paid a retainer of $20,000 per year.
Rentrak also reimburses directors for their travel expenses for each meeting
attended in person. See also "CERTAIN RELATIONSHIPS AND TRANSACTIONS."
Each non-employee director receives an automatic grant, at the beginning
of each fiscal year, of a ten-year option to purchase 10,000 shares of Rentrak
common stock, with a grant of an option for an additional 2,500 shares to each
chairman of a board committee. Accordingly, on April 2, 2001, Messrs. Andrus and
Kuper and Dr. Moon each received an option for 12,500 shares and Mr. Petcoff
received an option for 10,000 shares, each at an exercise price of $3.69 per
share and exercisable in full one year after the date of grant. In addition, on
March 30, 2001, each nonemployee director was granted a ten-year option to
purchase 5,000 shares of Rentrak common stock at an exercise price of $3.50 per
share, which will become exercisable in full on September 19, 2001. All grants
to non-employee directors are made under Rentrak's 1997 Equity Participation
Plan.
9
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
RON BERGER. Effective April 21, 1998, Rentrak entered into a five-year
employment agreement with Mr. Berger under which Mr. Berger was employed as
Chairman and Chief Executive Officer of Rentrak. Under the agreement, Mr. Berger
received an annual base salary of $400,000, subject to increases on April 1 of
each year during the term of the agreement in an amount equal to the greater of
four percent or the change in the Consumer Price Index for the preceding year.
Under the provisions of the agreement providing for severance if Mr. Berger
terminated his employment following a "change of control" (as defined in the
agreement) or "potential change of control" (as defined in the agreement), Mr.
Berger was paid $1,362,342 in severance on September 15, 2001, following his
resignation as Chief Executive Officer. In March 2001, Mr. Berger filed a
counterclaim in a lawsuit brought against him by Rentrak in which he is seeking
damages of approximately $1.76 million plus attorney fees for the alleged
failure to pay certain specified compensation, including accumulated wages and
compensation and amounts for life and health insurance under provisions of his
employment agreement. See also "CERTAIN RELATIONSHIPS AND TRANSACTIONS."
F. KIM COX. Effective April 1, 1998, Rentrak entered into a four-year
employment agreement with Mr. Cox. Under the agreement, Mr. Cox will receive an
annual salary of $206,636 for the fiscal year ending March 31, 2002. If Mr. Cox
is terminated for certain reasons other than for "cause" (as defined in the
agreement), he is entitled to receive one year's base salary, subject to
reduction should Mr. Cox find alternative employment of "comparable status" (as
defined in the agreement), or if he does not exercise his best efforts to find
such employment. If Mr. Cox is terminated for cause, he will receive only the
amount of compensation accrued through the date of termination. If Mr. Cox's
employment is terminated due to his death or disability, he (or his legal
representative) is entitled to receive all compensation accrued as of the date
of termination plus a lump sum severance payment equal to 180 days' base salary.
The agreement will expire on March 31, 2002.
MARTY GRAHAM. Effective May 17, 1997, Rentrak entered into an employment
agreement with Mr. Graham under which he is employed as Vice President, Product
Development. Under the agreement, Mr. Graham's initial base salary was $130,000
per year, with increases of $10,000 effective April 15 of each year during the
term of the agreement. Mr. Graham is also entitled to receive certain cash
bonuses for achieving specified objectives. Under the agreement, if Mr. Graham's
employment is terminated by Rentrak for certain reasons other than for "cause"
(as defined in the agreement) within two years after a "change of control" (as
defined in the agreement), or if Mr. Graham terminates his employment for "good
reason" (as defined in the agreement), he is entitled to receive his base salary
through the end of the agreement or his current base salary for one year,
whichever is less. If Rentrak otherwise terminates Mr. Graham's employment
without cause, he will be entitled to receive six months' base salary, subject
to reduction should he find other employment or should he not exercise his best
efforts to find such other employment. If Mr. Graham is terminated for cause, he
will receive only the full amount of his base salary accrued through the date of
termination. If Mr. Graham dies, his estate will receive the full amount of his
base salary accrued through the date of termination, plus a payment equal to 90
days' base salary at the rate in effect on the date of his death. If Mr. Graham
is terminated due to disability, he (or his legal representative) will receive
only the full amount of his base salary accrued through the date of termination.
As extended in September 2000, Mr. Graham's employment agreement will expire on
April 15, 2004.
MICHAEL LIGHTBOURNE. Effective July 10, 1997, Rentrak entered into a
five-year employment agreement with Mr. Lightbourne under which he is employed
as Executive Vice President. Under the agreement, Mr. Lightbourne's initial
annual base salary was $170,000, subject to increase each year during the term
of the agreement in an amount equal to the greater of five percent or the change
in the Consumer Price Index for the preceding year. If Mr. Lightbourne's
employment is terminated by Rentrak without "cause" (as defined in the
agreement) or by Mr. Lightbourne due to a material breach of the agreement by
Rentrak, he is entitled to receive severance equal to all compensation payable
in installments as if still employed through the end of the agreement, subject
to reduction by the amount of any compensation received from all other
employment during the severance period. If terminated for cause, he will receive
only the full amount of all compensation accrued as of the date of termination.
If Mr. Lightbourne's employment is terminated due to his death or disability, he
(or his estate or legal
10
representative) will receive, in a lump sum, all compensation that would
otherwise have been paid during the term of the agreement, reduced by amounts
payable under any life or disability insurance coverage provided by Rentrak. If
Mr. Lightbourne's employment is terminated by death or by Rentrak other than for
cause, all his outstanding stock options will vest immediately. The agreement
will expire on July 9, 2002, at which time he will be entitled to receive a
$75,000 bonus (reduced by $2,500 for each month prior to that date that his
employment terminates). Finally, Mr. Lightbourne is entitled to one year's
salary continuance if his employment agreement is not renewed or is terminated
by Rentrak for any reason other than for cause, in addition to any other amounts
payable under other terms of his agreement.
CHRISTOPHER ROBERTS. Effective October 27, 1997, Rentrak entered into a
five-year employment agreement with Mr. Roberts under which he is employed as
Rentrak's Vice President, Sales. Under the agreement, Mr. Roberts received an
initial base salary of $130,000, subject to increases of $5,000 on April 15 of
each year during the term of the agreement. If Mr. Roberts is terminated for
certain reasons other than for "cause" (as defined in the agreement) within two
years after a "change of control" (as defined in the agreement), or if Mr.
Roberts terminates his employment for "good reason" (as defined in the
agreement), he is entitled to receive his base salary through the end of the
agreement or his current base salary for one year, whichever is less. If Rentrak
otherwise terminates Mr. Roberts' employment without cause, he is entitled to
receive six months' base salary, subject to reduction should he find other
employment or should he not exercise his best efforts to find such other
employment. If Mr. Roberts is terminated for cause, he will receive only the
full amount of his base salary accrued through the date of termination. If Mr.
Roberts dies, his estate or legal representative will receive a payment equal to
90 days' base salary at the rate in effect on the date of his death. If Mr.
Roberts is terminated due to disability, he (or his legal representative) will
receive only the full amount of his base salary accrued through the date of
termination. The agreement will expire on November 1, 2002.
REPORT OF THE AUDIT COMMITTEE
The "Report of the Audit Committee" shall not be deemed incorporated by
reference by any general statement incorporating this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that Rentrak specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The Audit Committee of the board of directors reports to the board and is
responsible for overseeing Rentrak's financial reporting process, the systems of
internal accounting and financial controls established by management, and the
annual independent audit of Rentrak's financial statements. The Audit Committee
is comprised of three directors, each of whom meets the independence
requirements under current National Association of Securities Dealers corporate
governance standards. The Audit Committee's activities are governed by a written
charter adopted by the board on May 19, 2000. A copy of the Audit Committee
charter is attached to this proxy statement as Appendix A.
In discharging its responsibilities, the Audit Committee and its
individual members have met with management and Rentrak's independent auditors,
Arthur Andersen LLP, to review Rentrak's accounting functions and the audit
process. The Audit Committee discussed and reviewed with its independent
auditors all matters that the independent auditors were required to communicate
and discuss with the Audit Committee under applicable auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
regarding communications with audit committees. Audit Committee members also
discussed and reviewed the results of the independent auditors' examination of
the financial statements, the quality and adequacy of the Company's internal
controls, and issues relating to auditor independence. The Audit Committee has
received the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has discussed with the independent
auditors their independence.
Based on its review and discussions with management and the independent
auditors, the Audit Committee recommended to the board of directors that the
audited financial statements for the fiscal year ended March 31,
11
2001, be included in Rentrak's Annual Report on Form 10-K for filing with the
Securities and Exchange Commission.
Submitted by the Audit Committee of the Board of Directors:
Cecil Andrus (Committee Chair) James Petcoff Stanford Stoddard
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The "Report of the Compensation Committee on Executive Compensation" shall
not be deemed incorporated by reference by any general statement incorporating
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that Rentrak
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Compensation Committee of Rentrak is charged with determining the
compensation of all executive officers of Rentrak. These decisions are based on
Rentrak's executive compensation philosophy. This compensation philosophy has
four primary principles: (i) linking executive compensation to the creation of
sustainable increases in shareholder value; (ii) providing executive
compensation rewards contingent upon organizational performance; (iii)
differentiating compensation based on individual contribution; and (iv)
encouraging the retention of a sound management team.
To implement this philosophy, executive compensation has been comprised of
three primary components - annual salary, performance bonuses and a long-term
incentive program consisting of stock option grants. Ownership of shares of
Rentrak's common stock by executives is encouraged and forms a significant
component of the total executive compensation package. In addition, competitive
factors are considered in determining executive compensation.
Annual Salary
Rentrak has entered into employment agreements with its executive officers
other than its Chief Executive Officer which typically establish a base annual
salary rate and provisions for automatic annual increases in salary during the
term of the agreement. Base salary rates reflect the level of duties and
responsibilities of each executive officer, the executive officer's experience
and prior performance, and competitive factors in Rentrak's industry.
Performance Bonuses
In February 2000, the then board of directors established a bonus pool in
the total amount of $375,000 to recognize performance with respect to the
settlement of Rentrak's lawsuit with Hollywood Entertainment Corp. During fiscal
2001, bonuses distributed from this pool to Rentrak officers included $85,000
paid to Ron Berger, then Chief Executive Officer, and $40,000 to F. Kim Cox,
President.
Long-Term Incentive Program
Stock option grants are used to motivate employees to focus on Rentrak's
long-term performance, and Rentrak has long maintained stock option plans for
key employees, including all executive officers. In some instances, option
grants are specified in an officer's employment agreement. The size of each
option grant is based upon such factors as the employee's duties,
responsibilities, performance, experience and anticipated contribution to
Rentrak.
Stock options are typically awarded to executive officers on an annual
basis. Additional grants may be made in the event of an executive officer's
promotion. In fiscal 2001, Rentrak granted options to purchase a total of
197,500 shares of common stock to its executive officers, including a 100,000
share grant to Mr. Rosenbaum as discussed below. Several executive officers also
were granted options to purchase shares of common stock of
12
Rentrak's subsidiary 3PF.COM, Inc., in recognition of their services in
establishing the former division as a separate subsidiary.
Compensation of Paul A. Rosenbaum, Chairman and Chief Executive Officer
Paul A. Rosenbaum has served as Chairman and Chief Executive Officer of
Rentrak since September 19, 2000. In September 2000, the newly elected board of
directors established the annual base salary rate for Mr. Rosenbaum at $240,000,
which was substantially below the base salary rate of his predecessor of
approximately $425,000. In November 2000, the board of directors raised Mr.
Rosenbaum's annual salary rate to $300,000. On March 30, 2001, the board of
directors granted an option to purchase 100,000 shares of Rentrak's common stock
to Mr. Rosenbaum in recognition of his service to Rentrak and to further align
his interests with those of Rentrak's other shareholders. Mr. Rosenbaum
abstained from deliberations by the board of directors on his compensation.
James Petcoff (Committee Chair) Cecil Andrus George Kuper Joon Moon Paul
Rosenbaum
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF RENTRAK
CORPORATION, NASDAQ MARKET INDEX, MG MEDIA INDUSTRY GROUP, AND PEER GROUP
The chart on the next page compares the five year cumulative total return
on Rentrak's common stock with that of the NASDAQ Market index, the MG Media
Industry Group, and a group of peer companies selected by Rentrak. The chart
assumes $100 was invested on April 1, 1996 in Rentrak's common stock, the NASDAQ
Market index, the media industry group, and the peer group, and that any
dividends were reinvested. The media industry group represents all public
companies reported by Media General Services as having the same company-level
Standard Industrial Classification (SIC) Code as Rentrak that are also generally
involved in the movie entertainment business. The peer group is composed of the
companies within the video distribution business and internet fulfillment
business reflected in the 2000 peer group appearing in last year's proxy
materials (excluding four companies that either are in bankruptcy or have
significantly reduced operations due to financial difficulties), as follows:
Hastings Entertainment, Inc., Blockbuster, Inc., Big Star Entertainment, Inc.,
Hollywood Entertainment Corp., Movie Gallery, Inc., Valley Media, Inc., and PFS
Web, Inc.
13
The following chart shall not be deemed incorporated by reference by any
general statement incorporating this proxy statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that Rentrak specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG RENTRAK CORPORATION, NASDAQ MARKET
INDEX AND PEER GROUP INDEX
[PERFORMANCE GRAPH APPEARS HERE]
Measurement Period NASDAQ MG Media Rentrak-Selected
(Fiscal Year Covered) Rentrak Corp. Market Index Industry Group Peer Group
--------------------- ------------- ------------ -------------- ----------------
Measurement PT - 3/29/96 $100.00 $100.00 $100.00 $100.00
3/31/97 52.38 111.87 110.92 121.16
3/31/98 180.95 169.07 158.19 74.74
3/31/99 53.57 220.94 172.47 91.59
3/31/00 104.76 406.86 258.62 37.78
3/30/01 70.25 167.46 130.69 43.83
14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2001, members of the Compensation Committee included Skipper
Baumgarten, Bill LeVine and Takaaki Kusaka until September 19, 2000, and George
Kuper, James Petcoff and Takaaki Kusaka (Mr. Kusaka from November 17, 2000 to
March 16, 2001 only) thereafter. Mr. Kuper resigned from the Compensation
Committee effective April 24, 2001, when he was appointed Chief Operating
Officer of Rentrak's subsidiary 3PF.Com, Inc. ("3PF"). Stanford Stoddard was
appointed to the Compensation Committee on May 23, 2001.
During fiscal 2001, Ron Berger was a director of American Contractors
Indemnity Co., a company of which Skipper Baumgarten was Chief Executive
Officer. Mr. Berger was also chairman of the board of directors of Rentrak Japan
Co., Ltd. ("Rentrak Japan"), a company of which Mr. Kusaka is President.
Muneaki Masuda, who was a member of Rentrak's board of directors from 1990
until September 19, 2000, is President of Culture Convenience Club Co., Ltd.
("CCC"), and is the controlling stockholder of So-Tsu Company ("So-Tsu"), which
in turn holds a controlling interest in CCC and Rentrak Japan. Rentrak Japan is
a joint venture formed by Rentrak and CCC which distributes video cassettes,
DVDs, and video games on a revenue-sharing basis throughout Japan. Throughout
fiscal 2001, Rentrak held a 9 percent equity interest in Rentrak Japan and
Rentrak Japan and CCC together held approximately an 8 percent equity interest
in Rentrak.
Pursuant to a Business Cooperation Agreement (Framework) entered into as
of November 2, 1998, Rentrak Japan agreed to pay Rentrak an annual royalty equal
to 1.67 percent of the first $47.9 million of Rentrak Japan's sales and 0.5
percent of Rentrak Japan's sales in excess of $47.9 million, based on a June 1
to May 31 royalty year. During fiscal 2001, Rentrak Japan incurred royalty fees
totaling $1.0 million which were offset against a $4 million reserve for future
royalties in consideration of Rentrak Japan's payment of advance royalties
totaling $2.5 million in fiscal 2000.
Effective April 2, 2001, Rentrak and Rentrak Japan entered into a
restructuring of their relationship as evidenced by execution of an Agreement
Concerning Changes to the Business Cooperation Agreement. Pursuant to the
Agreement Concerning Changes, Rentrak transferred exclusive rights to implement
its Pay-Per-Transaction (PPT(R)) system within specified countries in the Far
East, including related trademark and other intellectual property rights, to
Rentrak Japan. In exchange for the transfer, Rentrak Japan made a lump sum cash
payment of $5.65 million to Rentrak and released certain of Rentrak's payment
obligations totaling $2.1 million. As a part of the transaction, Rentrak Japan's
obligation to pay annual royalties to Rentrak in connection with use of its PPT
system was terminated.
Rentrak concurrently sold to So-Tsu 300,000 shares of Rentrak Japan stock,
or approximately 5.6 percent of the outstanding Rentrak Japan shares, in
exchange for a cash payment of $4.0 million. Rentrak also repurchased from
Rentrak Japan 614,000 shares of Rentrak's common stock for a cash payment of
$2.4 million, or $3.875 per share. Rentrak repurchased an additional 390,000
shares of its common stock for the same price per share, or a total of $1.5
million, from CCC. Rentrak also has the right, and upon the occurrence of
certain conditions will be required, to sell its remaining 180,000 shares of
Rentrak Japan stock, representing approximately 3.4 percent of the outstanding
Rentrak Japan shares, for a minimum payment of (Y)1,600 per share (currently
approximately $2.4 million in total).
During fiscal 2000, Rentrak Japan loaned (Y)120 million (approximately
US$200,000) to Rentrak UK. The loan was non-interest bearing and was forgiven in
connection with the April 2001 restructuring. During the term of the loan,
Rentrak Japan was entitled to 10 percent of Rentrak's share in Rentrak UK
royalties. No such share of royalties was earned by or paid to Rentrak Japan
during fiscal 2001.
Rentrak sold to So-Tsu 1 percent of Rentrak's equity interest in 3PF for a
cash payment of $1 million at the end of April 2001.
15
In August 1999, Rentrak and Rentrak Japan formed Rentrak International,
LLC ("RIC"), an Oregon limited liability company, for the purpose of developing
the PPT system in certain international markets. RIC was dissolved pursuant to a
dissolution agreement entered into by Rentrak and Rentrak Japan as of September
30, 2000, and Rentrak Japan relinquished its right to receive repayment of its
$180,000 capital contribution and other accrued amounts as part of the April
2001 restructuring transaction.
In August 1999, Mr. LeVine provided a line of credit to BlowOut Video
Holding Company ("Borrower"), a wholly owned subsidiary of Rentrak, in the
principal amount of up to $3 million (the "Loan"). The highest principal balance
of the Loan outstanding during fiscal 2001 was $500,000. The Loan bore interest
at the prime rate plus 1-1/2 percent. Borrower paid Mr. LeVine $40,008 in
interest during fiscal 2001. The Loan was repaid in full in September 2000.
In May 2000, the Committee for the Achievement of Rentrak Excellence
("CARE") was formed to pursue a proxy contest to replace the then directors of
Rentrak with a new slate, consisting of Messrs. Andrus, Kuper, Petcoff, and
Rosenbaum and Dr. Moon, at Rentrak's annual meeting of shareholders held on
September 19, 2000. The members of CARE, all Rentrak shareholders, collectively
owned approximately 9 percent of the outstanding Rentrak common stock. CARE was
successful in electing its slate at the 2000 annual meeting and the group
terminated their Agreement Among Rentrak Shareholders dated May 22, 2000, and
disbanded on September 22, 2000. The Rentrak board of directors authorized the
payment or reimbursement by Rentrak of CARE's expenses incurred in the proxy
contest, which totaled $392,876. Paul Rosenbaum, Chairman and Chief Executive
Officer and a director of Rentrak since September 19, 2000, was a member of
CARE.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Dr. Pradeep Batra, who was a member of Rentrak's board of directors until
September 19, 2000, is the President and controlling shareholder of Unique
Business Systems ("UBS"). In addition to other business activities, UBS develops
and sells point-of-sale ("POS") software that retail video stores use to track
rental and sale activity. Rentrak and UBS have entered into various agreements
pursuant to which, among other things: (i) they agree to cooperate to make UBS's
POS software compatible with Rentrak's PPT system; (ii) Rentrak agrees to pay a
commission for each PPT customer referred by UBS; and (iii) UBS agrees to share
software maintenance fees with Rentrak relating to a 1995 transaction in which
UBS purchased certain assets from Rentrak. In addition, Rentrak UK, a subsidiary
of Rentrak that distributes videocassettes in the United Kingdom, is party to a
POS software agreement with UBS, and BlowOut Video, Inc., a wholly owned
subsidiary of Rentrak that owns and operates a chain of retail video stores and
a retail video Web site, purchased computer hardware and a POS software system
from UBS. During fiscal 2001, Rentrak paid UBS an aggregate of $95,150. BlowOut
Video, Inc., paid UBS an aggregate of $2,871.
In June 2000, the then directors of Rentrak approved a program to make
loans available to those officers of Rentrak who were parties to an employment
agreement with Rentrak for the purpose of allowing them to exercise their
vested, unexercised "out of the money" employee stock options. Outstanding loans
under this program bear interest at the federal funds rate in effect on the date
of each loan (6.5 percent per annum) and interest is payable annually. The
principal amount of the loan is due on the earliest to occur of: (1) one year
prior to the expiration of the term of the borrower's current employment
agreement with Rentrak, (2) one year after the borrower leaves Rentrak's
employment unless such departure follows a "change of control" (which occurred
as a result of the replacement of Rentrak's board of directors on September 19,
2000), (3) five years from the date of the loan, or (4) one year from the date
of the borrower's death. The loans are secured by the stock purchased upon the
exercise of the options. The loans are without recourse (except as to the stock
securing the loans) as to principal and are with full recourse against the
borrower as to interest. The Rentrak board of directors discontinued the program
as to new loans in November 2000.
16
During fiscal 2001, five Rentrak officers obtained loans from Rentrak
under the option loan program. Ron Berger, then Chairman and Chief Executive
Officer of Rentrak, entered into three loan agreements, related promissory notes
in the aggregate amount of $7,350,624 and stock pledge agreements in connection
with his exercise of options to purchase a total of 1,495,750 shares of Rentrak
common stock. Rentrak has filed a lawsuit in Oregon state court alleging that
the loans extended to Mr. Berger under the option loan program are null and void
because Mr. Berger breached his fiduciary duty to Rentrak by causing Rentrak to
extend the loans to him on terms which were egregiously unfavorable to Rentrak
and with the purpose of allowing Mr. Berger to vote more than 1.3 million of the
shares so acquired at Rentrak's annual meeting of shareholders held on September
19, 2000.
Two officers who entered into loans under the option loan program agreed,
prior to December 31, 2000, to rescission of the transactions and reinstatement
of their options on their original terms as follows: Kim Cox, President,
rescinded a loan entered into on June 16, 2000, in the amount of $1,468,250 in
connection with his exercise of options to purchase 301,518 shares of Rentrak
common stock; and Marty Graham, Vice President, Product Development, rescinded a
loan entered into on September 2, 2000, in the amount of $244,940 in connection
with his exercise of options to purchase 50,535 shares of Rentrak common stock.
Two other officers have outstanding loans under the option loan program as
follows: Michael Lightbourne, Executive Vice President, entered into a loan
agreement, promissory note in the amount of $355,375, and stock pledge agreement
relating to his exercise of options on August 30, 2000, to purchase 94,000
shares of Rentrak common stock; and Richard Nida, Vice President, Investor
Relations, exercised options for a total of 5,000 shares in August and September
2000 and entered into loan agreements, promissory notes totaling $22,190, and
pledge agreements in connection with the exercises.
Dr. Joon S. Moon, a Rentrak director since September 19, 2000, received a
fee totaling approximately $241,500 for his services in negotiating the April
2001 transactions with Rentrak Japan and related parties. Dr. Moon will also
receive a fee equal to 2 percent of the sale proceeds of any sale of the
remaining 180,000 shares of Rentrak Japan stock held by Rentrak.
In November 2000, Rentrak engaged Dr. Moon's consulting services to assist
Rentrak in obtaining a replacement bank line of credit. If Dr. Moon is
successful in negotiating a new line of credit with a bank lender, Rentrak has
agreed to grant Dr. Moon an option to purchase 100,000 shares of Rentrak common
stock, and an option for an additional 50,000 shares if the interest rate on the
new line of credit is at least 25 basis points below the interest rate on
Rentrak's existing line of credit.
On April 24, 2001, George Kuper, a Rentrak director since September 19,
2000, was appointed Chief Operating Officer of 3PF with operational management
responsibility for the company. Mr. Kuper is being compensated for his services
to 3PF as an outside consultant in the amount of $15,000 per month.
See "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" above
for information on other transactions involving certain directors of Rentrak.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Rentrak's
directors and officers and persons who beneficially own more than ten percent of
the outstanding shares of Rentrak's common stock ("ten percent shareholders"),
to file with the SEC initial reports of beneficial ownership and reports of
changes in beneficial ownership of shares of common stock and other equity
securities of Rentrak. To Rentrak's knowledge, based solely upon a review of the
copies of Forms 3, 4 and 5 (and amendments thereto) furnished to Rentrak or
otherwise in its files, all of Rentrak's officers, directors and ten percent
shareholders complied with all applicable Section 16(a) filing requirements,
except as follows:
o The following officers and directors each reported one option grant
after the report was due: Cecil Andrus, Kim Cox, Timothy Erwin, Marty
Graham, Thomas Guilford, George Kuper, Joon Moon,
17
Richard Nida, James Petcoff, Christopher Roberts, Paul Rosenbaum, Mark
Thoenes, and Amir Yazdani.
o The following officers filed an initial report of beneficial ownership
after it was due: Thomas Guilford and Mark Thoenes.
o Michael Lightbourne, a Rentrak officer, reported two option grants
after the respective reports were due.
o Richard Nida reported an option exercise after the report was due.
o Thomas Guilford reported three option exercises after the reports were
due.
o George Kuper reported a purchase of Rentrak common stock after the
report was due.
o Kim Cox reported a rescission of option exercises and reinstatement of
the related options after the report was due.
o Amir Yazdani reported a sale of Rentrak common stock after the report
was due.
o Carolyn Pihl, a former Rentrak officer, did not report an option grant
in April 1999.
INDEPENDENT ACCOUNTANTS
Rentrak's independent public accountants for the fiscal year ended March
31, 2001, were Arthur Andersen LLP. The board of directors intends to continue
to retain Arthur Andersen LLP during the current fiscal year. No election,
approval or ratification of the choice of independent public accountants by the
shareholders is required. A representative of Arthur Andersen LLP is expected to
be present at the Annual Meeting and will have the opportunity to make a
statement if he or she desires to do so. Such representative is also expected to
be available to respond to appropriate questions.
AUDIT FEES
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for the audit of Rentrak's financial statements for the fiscal year
ended March 31, 2001, and their review of the interim financial statements
included in its quarterly reports on Form 10-Q for that fiscal year, were
$155,240.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During fiscal 2001, Arthur Andersen LLP did not provide any professional
services to Rentrak with regard to financial information systems design and
implementation.
ALL OTHER FEES
Fees billed for services provided to Rentrak by Arthur Andersen LLP during
fiscal 2001, other than the services described above under "Audit Fees," were
$210,784. Such fees were for services rendered in connection with income tax
consulting, planning and return preparation and various other consulting
matters. The Audit Committee of the board has considered whether the provision
of these services to Rentrak is compatible with maintaining the independence of
Rentrak's independent public accountants.
FINANCIAL INFORMATION
A copy of Rentrak's 2001 Annual Report on Form 10-K, including audited
financial statements, is being sent to shareholders with this proxy statement.
INFORMATION CONCERNING THE SOLICITATION
Rentrak will bear all costs and expenses associated with this
solicitation. In addition to solicitation by mail, directors, officers, and
employees of Rentrak may solicit proxies from shareholders, personally or by
telephone, facsimile, or e-mail transmission, without receiving any additional
remuneration. Rentrak has asked brokerage
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houses, nominees and other agents and fiduciaries to forward soliciting
materials to beneficial owners of Rentrak common stock and will reimburse all
such persons for their expenses.
By Order of the Board of Directors,
/s/ F. Kim Cox
F. Kim Cox
President and Secretary
Portland, Oregon
July 11, 2001
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APPENDIX A
RENTRAK CORPORATION
AUDIT COMMITTEE CHARTER
PURPOSE OF THE AUDIT COMMITTEE
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors of Rentrak Corporation (the "Board") in fulfilling its
responsibility to oversee management's conduct of the Company's financial
reporting process, including by overseeing (a) the financial reports and other
financial information the Company provides to any governmental or regulatory
body, the public or other users thereof, (b) the Company's systems of internal
accounting and financial controls and (c) the annual independent audit of the
Company's financial statements.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain outside
counsel, auditors or other experts for this purpose.
The Board and the Committee are in place to represent the Company's
shareholders; accordingly, the outside auditor is ultimately accountable to the
Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual
basis.
MEMBERSHIP ON THE AUDIT COMMITTEE
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of the Audit
Committee Policy of the National Association of Securities Dealers.
Accordingly, all Committee members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate within
a reasonable period of time after appointment to the Committee.
In addition, at least one member of the Committee will have accounting or
related financial management expertise or background, including a current or
past position as a chief executive or financial officer or other senior officer
with financial oversight responsibilities.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management, as well as the outside auditors, have more time, knowledge and more
detailed information about the Company than do Committee members. Consequently,
in carrying out its oversight responsibilities, the Committee is not providing
any expert or special assurance as to the Company's financial statements or any
professional certification as to the outside auditor's work.
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The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
1. The Committee shall review with management and the outside auditors the
audited financial statements to be included in the Company's Annual Report on
Form 10-K (or the Annual Report to Shareholders if distributed prior to the
filing of Form 10-K) and review and consider with the outside auditors the
matters required to be discussed by Statement of Auditing Standards ("SAS") No.
61.
2. As a whole, or through the Committee chair, the Committee shall review
with the outside auditors the Company's interim financial results to be included
in the Company's quarterly reports to be filed with Securities and Exchange
Commission and the matters required to be discussed by SAS No. 61; this review
will occur prior to the Company's filing of the Form 10-Q. The Committee shall
discuss with management and the outside auditors the quality and adequacy of the
Company's internal controls.
3. The Committee shall:
o request from the outside auditors annually, a formal written
statement delineating all relationships between the auditor
and the Company consistent with Independence Standards Board
Standard Number 1;
o discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditor's
independence; and
o recommend that the Board take appropriate action to oversee
the independence of the outside auditor.
4. The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select (or
nominate for shareholder approval), evaluate and, where appropriate, replace the
outside auditor.
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[LOGO OF RENTRAK CORPORATION APPEARS HERE]
RENTRAK CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RENTRAK
CORPORATION (THE "COMPANY").
The undersigned hereby appoints each of Paul A. Rosenbaum and F. Kim Cox
as proxies, with full power of substitution, and hereby authorizes them to
represent and to vote as designated below, all the shares of the Company's
common stock held of record by the undersigned on June 20, 2001, at the annual
meeting of the shareholders to be held at the Company's executive offices, One
Airport Center, 7700 N.E. Ambassador Place, Portland, Oregon 97220, on August
16, 2001 at 10 a.m., Pacific Daylight Time, or any adjournments or postponements
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS PROVIDED, THE PROXIES NAMED
ABOVE WILL VOTE FOR EACH DIRECTOR NOMINEE NAMED IN PROPOSAL 1.
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PROPOSAL 1: ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
NAMED IN PROPOSAL 1.
Nominees: Cecil D. Andrus, George H. |_| FOR |_| WITHHOLD
Kuper, Joon S. Moon, James G. election of vote from
Petcoff, Paul A. Rosenbaum, all director all nominees
Stanford C. Stoddard nominees
(except as
noted below)
To withhold authority to vote for any individual nominee, identify the nominee
in the space below: Exceptions:
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In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please date and sign exactly as name appears hereon. When shares are held
as joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 2001
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Signature Signature if held jointly
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Please mark, sign, date and return the proxy using the enclosed envelope.