EMPLOYMENT AGREEMENT
This
Employment
Agreement is entered
into as of October 1, 2005, between
ALLAN McLENNAN ("Executive") and RENTRAK CORPORATION, an Oregon corporation
("Corporation").
1. SERVICES
1.1 Employment Position. Corporation agrees to employ Executive as
President of Corporation's Information Division, and Executive accepts such
employment, under the terms and conditions of this Agreement. Executive also
agrees to serve, if elected, without
separate compensation, as an officer and/or
director of any subsidiary or affiliate of
Corporation.
Corporation
represents
to Executive that it currently has and will maintain directors and officers
liability insurance.
1.2 Term;
At-Will Employment Relationship. The term of this Agreement
(the
"Term") will commence on October 1, 2005,
and will expire
October 31,
2006.
Notwithstanding the foregoing, (a) in the event of a Change in Control of
Corporation, as defined in Section 7 of this
Agreement, during the Term of this
Agreement, the Term will automatically be
extended to December 31 of the second
calendar year following the year in which
the Change in Control occurs; and (b)
the parties acknowledge that Executive will be an at-will employee of
Corporation and nothing in this Agreement
will limit the right of Corporation or
Executive to terminate this Agreement at any time for any reason or for no
reason, subject to the provisions of this
Agreement describing the compensation
payable, if any, in connection with such a
termination of employment.
1.3 Duties.
For the period from
October 1, 2005, through October 31, 2005,
Executive will be a part-time employee of Corporation with such duties as are
assigned by Corporation's Chief Executive
Officer. During the
remaining portion
of the Term, Executive will serve in a
full-time executive capacity as President
of Corporation's Information Division. Executive will report directly to
Corporation's Chief Executive Officer. Executive will be responsible for
management of the Information Division and such other or
different duties
on
behalf of Corporation as may be assigned from time to time by Corporation's
Chief Executive Officer or Board of Directors (the
"Board"). Executive
will do
such traveling as may be required in
the performance
of his duties under
this
Agreement.
1.4 Outside
Activities.
Except as provided in
Section 1.3 with respect to
the initial part-time engagement and except as expressly approved by
Corporation's Chief Executive Officer, during his employment under this
Agreement, Executive will devote his full
business time, energies, and attention
to the business and affairs of Corporation,
and to the promotion and advancement
of its interests. Executive will perform his
services faithfully,
competently,
and to the best of his abilities and, except as expressly approved by
Corporation's Chief Executive Officer, will not engage in professional or
personal business activities that may require an appreciable portion of
Executive's time or effort to the detriment
of Corporation's business.
1.5 Application
of Corporate Policies.
Executive will, except as otherwise
provided in this Agreement, be subject to Corporation's rules,
practices,
and
policies applicable generally
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to Corporation's senior executive employees, assuch rules, practices, and
policies may be revised from time to time
by the Board.
2. COMPENSATION AND
EXPENSES
2.1 Base
Salary. As compensation for services under this Agreement,
Corporation will pay to Executive a base
salary of $275,000 per year, payable in
a manner consistent with Corporation's payroll practices for management
employees, as such practices may be revised
from time to time.
Effective April
1, 2006, Corporation's Compensation Committee (the "Committee") will review
Executive's performance, the performance of Corporation, and Corporation's
economic prospects for the coming fiscal year, and will consider in its sole
discretion whether to increase (but will not
decrease) the base salary payable
to Executive.
2.2 Bonus
Compensation.
2.2.1 General. Executive will participate, together with
Corporation's
other senior
executives,
in Corporation's
Annual Incentive
Compensation
Plan under which
Executive will be assigned predetermined incentive target
levels and
performance criteria
and factors
established in the discretion
of the Committee and will have the opportunity to receive bonus
compensation
based on such criteria.
2.2.2 Bonus Pool Program. Executive's Information Division business
unit
"Report Card" parameters and "Personal Expectation" performance
parameters
for the fiscal year
ending March 31, 2006 ("Fiscal 2006") will
be prepared by
Corporation
and reviewed with Executive not later than
November 30,
2005. Executive's
initial targeted bonus for Fiscal 2005 will
be $40,000. As
soon as practicable after March 31, 2006, the Committee will
determine the
bonus pool for
Corporation's senior
executives
for Fiscal
2005,
and evaluate the extent to which Executive and other senior
executives have
met their respective
Report Card and Personal Expectation
parameters
for Fiscal 2005, and, based on the extent to which such
parameters have
been accomplished,
(a) determine which
senior executives
will
participate
in the bonus pool for
Fiscal 2006 and (b)
determine the
allocation
of the bonus pool
among the
participating senior
executives.
Notwithstanding
the foregoing,
recognizing
that, during his first year,
Executive
will likely spend more
time than in subsequent years on overall
orientation,
establishing
internal
relationships,
organizing
the
Information Division and his management team,
etc., $20,000 of the
target
bonus for Fiscal
2006 is guaranteed to be paid to Executive. Executive will
not be eligible
to receive any
portion of the bonus
pool (including
any
guaranteed
portion) for Fiscal 2005 unless Executive remains an employee
of
Corporation
through March 31, 2006. Executive will be entitled to
participate in
Corporation's Bonus Pool Program for subsequent fiscal years
during which
Executive remains employed by Corporation
based on similar
performance
parameters as approved by Corporation.
2.2.3 Signing Bonus. Corporation will pay Executive a signing bonus
in
the amount of
$10,000 (subject to applicable withholding and payroll taxes)
in its first
payroll period following Executive's commencement of full time
employment with
Corporation
(providing this
Agreement has been executed).
Executive
agrees to repay
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the full
$10,000 signing bonus to Corporation in the event Executive
voluntarily
terminates his employment with Corporation for any reason on or
before October
31, 2006.
2.2.4 Information
Division Performance
Incentive. In the
event that
operating
income for the
Information
Division for the
fiscal year ending
March 31, 2006,
exceeds $4,542,500 (115% of $3,950,000 (the "Projected
Amount")
projected by
Corporation for such fiscal year), Corporation will
pay Executive an Information Division Performance Incentive Bonus (in
addition to the
other bonus amounts
described in this Section 2.2.4) equal
to 15% of the
excess of the operating income for such fiscal year over
the
Projected
Amount. Such Incentive payment will be
payable in a single lump
sum payment
(subject to applicable
withholding and
payroll taxes) as soon
as practicable
after the operating income for the Information Division for
the fiscal year is determined by Corporation. Executive will not be
eligible
to receive any portion
of the Information
Division Performance
Incentive
for such fiscal year unless Executive remains an employee of
Corporation
through March 31, 2006.
2.3 Equity-Based
or Other Long-Term Incentive Compensation.
2.3.1 General. Executive will participate, together with
Corporation's
other senior
executives,
in Corporation's
2005 Stock Incentive
Plan (the
"Plan").
Executive
will be granted options to purchase shares of
Corporation's
common stock and/or other equity-based awards under the Plan,
or under another long-term incentive compensation plan that may be
developed by
Corporation for its senior executives, at the times and in the
amounts
determined
by the Committee. All awards will be subject to the
provisions of
the Plan or such other long-term plan.
2.3.2 Initial Grant. Effective as of October 3, 2005, Corporation
will
grant
Executive a nonqualified stock option under the Plan for 75,000
shares with an
option price equal to
the Fair Market Value
(as defined in
the Plan) of a
share of Corporation's common stock on such date. The option
will be subject
to the terms and
conditions of an Award
Agreement in the
form attached to
this Agreement as Appendix 2.3.2.
2.4 Additional
Employee Benefits. Executive will receive an annual grant of
208 hours of credit (or such higher number of hours as are credited to
Corporation's other senior executives) under Corporation's Personal Time Off
(PTO) program. Personal time off and vacation may
be taken in accordance
with
Corporation's rules, practices,
and policies
applicable to Corporation's senior
executive employees, as such rules,
practices, and
policies may be revised from
time to time by the Board or the Committee.
During the Term,
Executive will be
entitled to any other employee benefits approved by the Board or
the Committee,
or available to officers and other
management employees generally, including any
life and medical insurance plans, 401(k)
and other similar plans, and health and
welfare plans, each whether now existing or
hereafter approved by
the Board or
the Committee ("Benefit Plans").
The foregoing will not
be construed to require
Corporation to establish any such plans or
to prevent Corporation from modifying
or terminating any such Benefit Plans.
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2.5 Expenses. Subject to review and approval by the chairman of
Corporation's audit committee, Corporation will reimburse Executive for
reasonable expenses actually incurred by Executive in connection with the
business of Corporation. Executive will submit to Corporation such
substantiation for such expenses as may be
reasonably required by Corporation.
2.6 Relocation. The parties are targeting
January 1, 2006 as the
date by
which Executive's relocation to Portland
will be completed. To simplify the
relocation process and fully enable Executive to manage his move from
the Bay
Area to the Portland area in a manner best suited to
his needs, Rentrak
will
provide Executive with a lump sum payment
of $43,000. This
payment is designed
to cover all out-of-pocket expenses related to the movement
and transportation
of his personal property, as well as any other relocation
expenses not
covered
by this agreement. During the relocation process, Corporation will pay or
reimburse Executive for reasonable
transportation and
interim housing expenses
as approved by Corporation.
3. CONFIDENTIAL INFORMATION
3.1 Definition.
"Confidential
Information"
is all nonpublic
information
relating to Corporation or its business that is disclosed
to Executive,
that
Executive produces, or that Executive otherwise obtains during employment.
Confidential Information also includes
information received
from third parties
that Corporation has agreed to treat as
confidential.
Examples of
Confidential
Information include, without limitation, marketing plans, customer lists or
other customer information, product design and manufacturing
information,
and
financial information. Confidential
Information does not include any information
that (i) is within the public domain other than as a result of
disclosure
by
Executive in violation of this Agreement, (ii) was, on or before the date
of
disclosure to Executive, already known by Executive, or (iii) Executive is
required to disclose in any governmental, administrative, judicial, or
quasi-judicial proceeding, but only to the extent
that Executive is so required
to disclose and provided that Executive takes reasonable steps to request
confidential treatment of such information
in such proceeding.
3.2 Access to
Information. Executive acknowledges that in the course of his
employment he has had and will have access to
Confidential
Information,
that
such information is a valuable asset of
Corporation, and that
its disclosure or
unauthorized use will cause Corporation
substantial harm.
3.3 Ownership.
Executive acknowledges that all Confidential Information
will continue to be the exclusive
property of
Corporation
(or the third
party
that disclosed it to Corporation), whether or not prepared in whole
or in part
by Executive and whether or not disclosed to Executive or entrusted to his
custody in connection with his employment
by Corporation.
3.4
Nondisclosure and Nonuse. Unless authorized or instructed in
advance in
writing by Corporation, or required by law (as
determined
by licensed
legal
counsel), Executive will not, except as
required in the course of Corporation's
business, during or after his employment, disclose to others or use any
Confidential Information, unless and until, and then only to the extent
that,
such items become available to the public
through no fault of Executive.
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3.5 Return of
Confidential Information. Upon request by Corporation
during
or after his employment, and without request upon termination of employment
pursuant to this Agreement, Executive will deliver
immediately to
Corporation
all written, stored, saved, or otherwise tangible materials containing
Confidential Information without retaining
any excerpts or copies.
3.6 Duration. The obligations set forth in this Section 3 will
continue
beyond the term of employment of Executive by Corporation and for so long as
Executive possesses Confidential Information or, if earlier,
until 18 months
following termination of Executive's
employment for any reason.
4. NONCOMPETITION
4.1 Competitive Entity. For purposes of this Agreement, a Competitive
Entity is any firm, corporation, partnership, limited liability company,
business trust, or other entity that is engaged in the development,
distribution, sale, or servicing of analytical
software and/or the
analysis of
market information relating to all or any of the
following (a "Software Related
Activity"):
(a) The wholesale
and/or revenue sharing
physical or electronic
distribution of home
entertainment software
in any media,
including
without
limitation video
cassettes,
DVDs,
and Video On-Demand
("Entertainment Software");
(b) The fulfillment, warehouse, or distributing business in
connection with the Entertainment Software industry;
(c) The collection,
aggregation, tracking,
and dissemination of
market information
and data (such as sales, marketing, inventory,
occurrence,
expenditure, and
advertising
data) related to
consumer
activity in connection with the Entertainment Software industry;
or
(d) The delivery of technological intelligence, industry
analysis, and strategic and tactical guidance with respect to
consumer
activity in connection with the Entertainment Software
industry.
Furthermore, a Competitive Entity includes any business
directly competitive
with a business then engaged in by
Corporation
or identified in
Corporation's
three-year business plan that is related to a Software Related Activity of
Corporation.
4.2 Covenant.
During the Term of and for a period ending on the last day of
the applicable Noncompete Period described in
Section 5.7, Executive
will not,
within any geographical area where
Corporation engages in business:
(a) Directly
or indirectly, alone or with any individual,
partnership, limited
liability company, corporation, or other entity,
become associated
with, render services to, invest in,
represent,
advise, or otherwise participate in any Competitive Entity;
provided,
however, that
nothing contained in this Section 4.1
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will prevent Ex
