Incentive Stock Option Agreement - Rentrak Corp. and Kenneth M. Papagan
RENTRAK CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, effective as of November 18, 2002, is made by and between
Rentrak Corporation, an Oregon corporation (hereinafter referred to as
"Company"), and Kenneth M. Papagan, an employee of Company (hereinafter referred
to as "Employee"):
WHEREAS, Company wishes to afford Employee the opportunity to purchase
shares of its $.001 par value Common Stock; and
WHEREAS, Company has adopted 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 determined that
it would be to the advantage and best interest of Company and its shareholders
to grant the Incentive Stock Option (the "Option") provided for herein to
Employee as an inducement to remain in the service of Company 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 acknowledged, the
parties agree as follows:
1. GRANT OF OPTION
1.1 Grant of Option. In consideration of Employee's agreement to remain in
the employ of Company or its Subsidiaries and for other good and valuable
consideration, effective as of the date of this Agreement, Company irrevocably
grants to Employee an Option to purchase any part or all of an aggregate of
_______ shares of its $.001 par value Common Stock upon the terms and conditions
set forth in this Agreement and the Plan; provided that to the extent that any
provision of this Agreement or Employee's Employment Agreement with Company
conflicts with the provisions of the Plan (including without limitation Section
1.33 of the Plan), the provisions of this Agreement or Employee's Employment
Agreement will control.
1.2 Purchase Price. The purchase price of the shares of Common Stock
covered by the Option is ______ per share, without commission or other charge,
subject to adjustment as provided in Section 9.3(a) of the Plan.
1.3 Consideration to Company. In consideration of the granting of this
Option by Company, Employee agrees to render faithful and efficient services to
Company or a Subsidiary, with such duties and responsibilities as set forth in
Employee's Employment Agreement with Company. Nothing in this Agreement or in
the Plan confers upon Employee any right to continue in the employ of Company or
any Subsidiary, or as a director of Company, or will
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interfere with or restrict in any way the rights of Company and its
Subsidiaries, which are expressly reserved, to discharge Employee at any time
for any reason whatsoever, with or without cause, except as provided in
Employee's Employment Agreement with Company.
1.4 Adjustments in Option. The Committee may make adjustments with respect
to the Option in accordance with the provisions of Section 9.3 of the Plan;
provided, however, that each such adjustment will be made in such manner as not
to constitute a "modification" within the meaning of Section 424(h)(3) of the
Code, unless the Optionee consents to an adjustment which would constitute such
a "modification".
2. PERIOD OF EXERCISABILITY
2.1 Commencement of Exercisability.
(a) Subject to Sections 2.1(b), 2.1(c), and 2.3, the Option will
become exercisable in four cumulative installments as follows:
(i) The first installment consists of 25% of the shares covered
by the Option and will become exercisable on the first anniversary of
the date the Option is granted.
(ii) The second installment consists of 25% of the shares covered
by the Option and will become exercisable on the second anniversary of
the date the Option is granted.
(iii) The third installment consists of 25% of the shares covered
by the Option and will become exercisable on the third anniversary of
the date the Option is granted.
(iv) The fourth installment consists of 25% of the shares covered
by the Option and will 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 will thereafter become exercisable.
(c) Notwithstanding Sections 2.1(a) and 2.1(b), the Option will become
fully and immediately exercisable in the event that after the occurrence of
an event that would constitute a "change in control" of Company (under
either the definition of that term in the Plan or the definition of that
term in Employee's Employment Agreement with Company) and during the term
of Employee's Employment Agreement with Company, Company terminates
Employee's employment with Company without "Cause" or Employee voluntarily
terminates his employment with Company with "Good Reason" (as those terms
are defined in Employee's Employment Agreement).
2.2 Duration of Exercisability. Once the Option becomes exercisable
pursuant to Section 2.1, it will remain exercisable until it becomes
unexercisable under Section 2.3.
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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 10 years from the date the Option was granted;
(b) If Employee owned (within the meaning of Section 424(d) of the
Code), at the time the Option was granted, more than 10% of the total
combined voting power of all classes of stock of Company or any Subsidiary
or parent corporation thereof (within the meaning of Section 422 of the
Code), the expiration of five years from the date the Option was granted;
(c) The expiration of one month from the date of Employee's voluntary
Termination of Employment without Good Reason;
(d) The expiration of three months from the date of Employee's
Termination of Employment by reason of his retirement, his being discharged
without Cause, or his voluntary Termination of Employment for Good Reason,
unless Employee dies within said three-month period;
(e) The expiration of one year from the date of Employee's Termination
of Employment by reason of his permanent and total disability (within the
meaning of Section 22(e)(3) of the Code);
(f) The expiration of one year from the date of Employee's death;
(g) Immediately upon Employee's Termination of Employment for Cause;
or
(h) On the date specified in Section 2.4(b) in connection with a
Terminating Event (as that term is defined in Section 2.4(b)).
2.4 Adjustments to and/or Cancellation of the Option.
(a) Neither (i) the issuance of additional shares of stock of Company
in exchange for adequate consideration (including services), nor (ii) the
conversion of outstanding preferred shares of Company into Common Stock,
will be deemed to require an adjustment in the shares covered by the Option
or in the purchase price of shares subject to the Option pursuant to
Section 9.3(a) of the Plan. In the event the Committee determines that an
event has occurred affecting Company such that an adjustment to the Option
under Section 9.3(a) of the Plan should be made but that it is not
practical or feasible to make such an adjustment, such event will be deemed
a Terminating Event subject to the following paragraph.
(b) Subject to Section 9.3(b)(vii) of the Plan, in the event of a
"Change in Control" of Company (under either the definition of that term in
the Plan or the definition of that term in Employee's Employment Agreement)
or the occurrence of an event in accordance with the last sentence of the
previous paragraph (any of such events is herein referred to as a
"Terminating Event"), the Committee will determine whether a provision
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will be made in connection with the Terminating Event for an appropriate
assumption of the Option by, or substitution of appropriate new options
covering stock of, a successor corporation employing Employee 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 will give notice of the determination to Employee and
the terms 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 purchase price, and (iii) to the terms and conditions of the Option,
will be binding upon Employee. If the Committee determines that no
assumption or substitution will be made, the Committee will give notice of
this determination to Employee, whereupon Employee will have the right for
a period of 30 days following the notice to exercise in full or in part the
unexercised and unexpired portion of this Option, all of which will become
fully and immediately vested without regard to the limitation on
exercisability specified in Section 2.1(a) above. Upon the expiration of
this 30 day period, the Option will expire to the extent not earlier
exercised.
(c) The Committee will exercise its discretion in connection with the
determinations under this Section 2.4 in good faith and in a uniform and
nondiscriminatory manner with respect to all participants under the Plan.
2.5 Special Tax Consequences. Employee acknowledges that, to the extent
that the aggregate Fair Market Value of stock with respect to which "incentive
stock options" (within the meaning of Section 422 of the Code, but without
regard to Section 422(d) of the Code), including the Option, are exercisable for
the first time by Employee during any calendar year (under the Plan and all
other incentive stock option plans of Company, any Subsidiary and any parent
corporation thereof (within the meaning of Section 422 of the Code)) exceeds
$100,000, such options will be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. Employee further acknowledges that the rule
set forth in the preceding sentence will be applied by taking options into
account in the order in which they were granted. For purposes of these rules,
the Fair Market Value of stock will be determined as of the time the option with
respect to such stock is granted.
3. EXERCISE OF OPTION
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 will be for not
less than 100 shares and must be for whole shares only.
3.2 Manner of Exercise. The Option, or any exercisable portion thereof, may
be exercised solely by delivery to Company's 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:
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(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 must be signed by Employee or other person then
entitled to exercise the Option or such portion.
(b) Full payment to Company for the shares with respect to which such
Option or portion is exercised, which must be:
(i) In cash; or
(ii) With the consent of the Committee, (A) shares of Company's
Common Stock owned by Employee, and, if acquired from Company, held
for at least six months, duly endorsed for transfer to Company, with a
Fair Market Value on the date of delivery equal to the aggregate
purchase price of the shares as to which the Option is exercised, or
(B) shares of Company's Common Stock issuable to Employee upon
exercise of the Option, with a Fair Market Value on the date of
delivery equal to the aggregate purchase price of the shares as to
which the Option is exercised; or
(iii) With the consent of the Committee, by delivery of a notice
that Employee has placed a market sell order with a broker with
respect to shares of 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 Company in
satisfaction of the purchase price of the shares as to which the
Option is exercised.
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by Employee or other person then
entitled to exercise such Option or portion as the Committee in its
discretion, determines is necessary or appropriate to effect compliance
with the Securities Act of 1933 and any other federal or state securities
laws or regulations. Without limiting the generality of the foregoing, such
agreement may provide that (i) as of the date of any subsequent transfer of
the shares acquired on exercise of the Option (the "Option Shares"), the
Committee may require an opinion of counsel acceptable to it to the effect
that such transfer of the Option Shares does not violate the Securities Act
of 1933, and (ii) Company may issue stop-transfer orders covering the
Option Shares. Share certificates evidencing Option Shares will 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) will not be required if the
shares to be issued pursuant to such exercise have been registered under
the Securities Act of 1933, and such registration is then effective in
respect of such shares.
(d) Full payment to 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 Company's Common Stock owned by Employee, duly endorsed for
transfer, with a Fair Market Value equal to the sums required to be
withheld, or (ii) shares of Company's Common Stock issuable to
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Employee 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.
(e) In the event the Option or portion is exercised pursuant to
Section 4.1 by any person or persons other than Employee, appropriate proof
of the right of such person or persons to exercise the Option.
3.3 Rights as Shareholder. The holder of the Option is not, and does not
have any of the rights or privileges of, a shareholder of Company in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares have been issued by Company to such
holder.
4. OTHER PROVISIONS
4.1 Option Not Transferable. Neither the Option nor any interest or right
therein or part thereof may 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 in the Option (or part thereof) will be
liable for the debts, contracts or engagements of Employee or his successors in
interest or will 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 will be null and
void and of no effect, except to the extent that such disposition is permitted
by the preceding sentence.
4.2 Shares to Be Reserved. Company will at all times during the term of the
Option reserve and keep available such number of shares of Common Stock as will
be sufficient to satisfy the requirements of this Agreement.
4.3 Notices. Any notice to be given under the terms of this Agreement to
Company must be addressed to Company in care of its Secretary, and any notice to
be given to Employee will be addressed to him at the address given beneath his
signature. By a notice given pursuant to this Section 4.3, either party may
designate a different address for notices to be given. Any notice which is
required to be given to Employee will, if Employee is then deceased, be given to
Employee's personal representative if such representative has previously
informed Company of his status and address by written notice under this Section
4.3. Any notice will be deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as pursuant to this Section, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by
the United States Postal Service.
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.
4.5 Notification of Disposition. Employee will give prompt notice to
Company of any disposition or other transfer of any shares acquired under this
Agreement if such disposition
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or transfer is made (a) within two years from the date of granting the Option
with respect to such shares or (b) within one year after the transfer of such
shares to him. Such notice must specify the date of such disposition or other
transfer and the amount realized, in cash, other property, assumption of
indebtedness or other consideration, by Employee in such disposition or other
transfer.
4.6 Construction. This Agreement will be administered, interpreted and
enforced under the internal laws of the State of Oregon without regard to
conflicts of laws thereof.
4.7 Conformity to Securities Laws. Employee acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act of 1933 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 will 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 will be deemed amended to the extent necessary to conform to such
laws, rules and regulations.
4.8 Definition of Terms. All capitalized terms used herein without
definition have the meanings ascribed to such terms in the Plan.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
RENTRAK CORPORATION
By _______________________________
President
Kenneth M. Papagan
Address:
Employee's Taxpayer Identification Number: ___________________
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