SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Rent-Way, Inc.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth amount
on which the filing fee is calculated and state how it was
determined):
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
RENT-WAY, INC.
3230 WEST LAKE ROAD
ERIE, PENNSYLVANIA 16505
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 11, 1998
---------------
To The Shareholders of Rent-Way, Inc.:
Notice is hereby given that the Annual Meeting of the
Shareholders of Rent-Way, Inc. will be held at the Bel Aire Hotel located at
2800 West Eighth Street, Erie, Pennsylvania, on Wednesday, March 11, 1998 at
10:00 a.m. for the following purposes:
1. To elect two Class III directors to serve until the
2001 Annual Meeting of Shareholders;
2. To vote on amendments to the Company's 1995 Stock
Option Plan that increase the maximum number of
shares of Common Stock of the Company that may be
optioned or purchased thereunder from 400,000 to
2,000,000 shares.
3. To consider and act upon other matters that may
properly come before the meeting or any adjournment
thereof.
The Board of Directors has fixed the close of business on
January 26, 1998 as the record date for determining the shareholders having the
right to vote at the meeting or any adjournment thereof. Each shareholder is
entitled to one vote per share on all matters to be voted on by shareholders,
except that shareholders are entitled to cumulative voting in the election of
directors.
By Order of the Board of Directors,
WILLIAM LERNER
Secretary
Erie, Pennsylvania
February 11, 1998
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING,
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED PREPAID ENVELOPE.
<PAGE>
- 27 -
RENT-WAY, INC.
3230 WEST LAKE ROAD
ERIE, PENNSYLVANIA 16505
---------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 11, 1998
---------------
This Proxy Statement and the accompanying form of proxy are
being mailed on or about February 11, 1997 in connection with the solicitation
by the Board of Directors of Rent-Way, Inc. (hereinafter "Rent-Way" or the
"Company") of proxies to be voted at the Annual Meeting of Shareholders to be
held on Wednesday, March 11, 1998 and any adjournments thereof.
If the form of proxy enclosed herewith is executed and
returned as requested, it may nevertheless be revoked at any time prior to
exercise by filing an instrument with the Secretary of the Company revoking it
or by submitting a duly executed proxy bearing a later date.
The cost of soliciting proxies in the accompanying form will
be borne by the Company. The officers, directors and employees of the Company,
without additional compensation, may solicit proxies by mail, facsimile,
telephone or personal contact. The Company does not expect to pay any
compensation for the solicitation of proxies, but will reimburse brokerage firms
and other custodians, nominees and fiduciaries for their expenses in forwarding
proxies and proxy material to the beneficial owners of its common stock.
The authorized common stock of the Company consists of
20,000,000 shares, no par value, of which 10,792,876 shares are issued and
outstanding (the "Common Stock"). Each outstanding share of Common Stock is
eligible to be voted at the meeting. Holders of record as of January 26, 1998
will be entitled to one vote per share on all matters to be voted on by the
shareholders, except that shareholders are entitled to cumulative voting in the
election of directors, which means that a shareholder is entitled to a number of
votes equal to the number of shares held by such shareholder multiplied by the
number of directors to be elected, and all of such votes may be cast for one
nominee or distributed among any two or more nominees. Cumulative voting enables
shareholders to concentrate the voting of their shares in favor of the election
of a lesser number of nominees than the total number of directors being voted
upon. Persons holding less than a majority of the shares voting may therefore be
able to elect one or more directors.
The presence, in person or by proxy, of a majority of the
shares of the Common Stock outstanding on the record date will constitute a
quorum at the Annual Meeting. Abstentions and broker non-votes (i.e., proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote shares
as to a matter with respect to which brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining a quorum. Abstentions and broker non-votes will not be counted as
voting on any matter at the Annual Meeting.
ELECTION OF DIRECTORS
The Company's by-laws require that the directors be divided
into three classes, with the term of office of at least one class expiring each
year. Pursuant to the by-laws, the members of a class are elected for a term of
three years and until their respective successors have been elected and
qualified, or until the respective director resigns, is removed or disqualified.
The term of office of Class III directors expires at the Annual Meeting. The
Board of Directors proposes that the nominees described below, each of whom is
currently serving as a Class III director, be elected as Class III directors for
a new term of three years ending at the 2001 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
When the accompanying proxy is properly executed and returned,
the shares it represents will be voted in accordance with the direction
indicated, or, if no direction is indicated, the shares will be voted in favor
of the election of the nominees identified below. The Company expects each
nominee to be able to serve, if elected, but if any nominee notifies the Company
before the meeting that he is unable to do so, then the proxies will be voted
for such other person as the Board shall designate.
Information regarding the nominees standing for election as
Class III directors is set forth below:
William E. Morgenstern, a founder of the Company, has served as its
President and Chief Executive Officer and as a director since its formation in
1981. Mr. Morgenstern began his rental-purchase industry career with
Rent-A-Center in 1979 in Ft. Worth, Texas. While employed by Rent-A-Center, he
held the positions of store manager and district manager for Pennsylvania and
New York. Mr. Morgenstern is former President of the Pennsylvania Association of
Rental Dealers, a trade association that monitors activities in the state
legislature that affect the rental-purchase industry. From 1986 to 1988, he
served on the Board of Directors of APRO, the rental-purchase industry's
national trade association.
Vincent A. Carrino has been a director since January 1995 when he was
elected by the Board for a one-year term expiring in 1996. At the 1996 Annual
Meeting of Shareholders, Mr. Carrino was elected as a Class III director of the
Company. Mr. Carrino founded Brookhaven Capital Management, Inc., an investment
management company headquartered in Menlo Park, California, in 1986 and has been
its President since that date.
The Board of Directors unanimously recommends a
vote FOR election of each of the nominees for Class
III director.
MANAGEMENT INFORMATION
Directors and Executive Officers
Certain information regarding the directors and executive
officers of the Company is set forth below.
Name Age Position
---- --- --------
Gerald A. Ryan 62 Chairman of the Board and Director
William E. Morgenstern 39 President, Chief Executive Officer
and Director
William Lerner 62 Director and Secretary
Vincent A. Carrino 42 Director
Robert B. Fagenson 49 Director
Marc W. Joseffer 49 Director
Jeffrey A. Conway 40 Vice President and Chief Financial
Officer
Ronald D. DeMoss 46 Vice President and General Counsel
Kirk R. Smithee 34 Vice President-Operations
Gerald A. Ryan, a founder of the Company, has served as Chairman of the
Board of the Company and as a director since its formation in 1981. Mr. Ryan has
also been instrumental in the formation of several other companies, including
Spectrum Control, Inc., a company listed on the Nasdaq National Market, which
produces electronic components. He presently serves as Chairman of the Board of
Spectrum Control, Inc. In 1986, Mr. Ryan acquired Skinner Engine Company, a
privately-held company, which manufactures and rebuilds mixers for use in the
rubber industry, and serves as Chairman of the Board of that company. Mr. Ryan
is a Class I director of the Company whose term expires in 1999.
William Lerner has been a director of the Company since November 1992
and its Secretary since January 1993. Mr. Lerner, a practicing attorney in New
York since 1961 and in Pennsylvania since 1990, is of counsel to Snow Becker
Krauss P.C., New York, New York. Mr. Lerner is also a director of Seitel, Inc.,
a company listed on the New York Stock Exchange ("NYSE") that develops and
maintains a seismic data bank for the oil and gas industry, Helm Resources,
Inc., a company listed on the American Stock Exchange ("AMEX") that provides
management, financial and asset based lending services and Micros-to-Mainframes,
Inc., a company listed on the Nasdaq National Market that is a provider and
systems integrator of advanced technology communications products and Internet
services. From 1986 to 1989, Mr. Lerner was General Counsel to The Geneva
Companies, which provides merger and acquisition services to privately-owned
middle market companies, and from 1989 to 1990 was General Counsel to Hon
Development Company, a southern California real estate development company. Mr.
Lerner is a Class II director of the Company whose term expires in 2000.
Robert B. Fagenson has been a director since August 1993. He has, for
more than the past five years, been President and a director of Fagenson & Co.,
Inc., a NYSE specialist firm, and a Vice President and director of Starr
Securities, Inc., a registered broker-dealer and member of the NYSE. Mr.
Fagenson is also a director of the NYSE, of Healthy Planet Products, Inc., a
company listed on the AMEX that designs, publishes and markets greeting cards,
Hudson Hotel Corporation (formerly Microtel Franchise and Development
Corporation), a company listed on the Nasdaq National Market and a developer of
economy lodging facilities and owner and operator of hotel, motel and resort
properties, AutoInfo, Inc., a company listed on the Nasdaq National Market and a
dealer in computerized products and services for after-market motor vehicle
parts, and Nu-Tech Biomedical, Inc., a company listed on the Nasdaq National
Market that researches medicines for the treatment of cancer. Mr. Fagenson is a
Class I director of the Company whose term expires in 1999.
Marc W. Joseffer has been a director of the Company since May 1994 and was
employed by the Company in various management positions from May 1994 through
October 1996. For more than five years prior thereto, he was Vice President and
a principal shareholder of D.A.M.S.L. Corp., a privately-owned company engaged
in the rental-purchase industry. D.A.M.S.L. Corp. was acquired by the Company in
May 1994, at which time Mr. Joseffer was elected a director of the Company by
the Board. Mr. Joseffer is a Class II director of the Company whose term expires
in 2000.
Jeffrey A. Conway was employed by the Company as a financial advisor
from February 1992 through September 1992 and in October 1992 was appointed Vice
President and Chief Financial Officer. He served as Chief Financial Officer of
Rentclub, Inc., a 17 store rental-purchase chain, from June 1990 through
November 1991. From 1979 through June 1987 and from July 1987 to October 1989,
Mr. Conway was employed by the independent accounting firms of Coopers & Lybrand
and Ernst & Young, respectively, as an Audit Manager. Mr. Conway is a certified
public accountant.
Ronald D. DeMoss was elected Vice President and General Counsel of the
Company in February 1996. From June 1990 through November 1995, Mr. DeMoss was
employed as a corporate counsel for Rent-A-Center and, in such capacity, was
involved in the enactment of rental-purchase legislation in 11 states. During
1995, Mr. DeMoss also served as Rent-A-Center's Director of Government
Relations. In August 1996, Mr. DeMoss was elected to APRO's Board of Directors
for a two-year term. Mr. DeMoss also serves on APRO's Government Relations
Committee. From 1981 through 1990, Mr. DeMoss was a practicing attorney in
Wichita, Kansas.
Kirk R. Smithee was hired by the Company in November 1995 as a regional
manager, in July 1996 was named a director of operations and in October 1997 was
promoted to Vice President-Operations. From September 1987 through September
1995, Mr. Smithee served in various management positions with Rent-A-Center,
including field training manager, district manager and regional manager.
Additional information regarding Messrs. Morgenstern and Carrino
appears under the caption "Election of Directors" in this Proxy Statement.
Meetings and Committees of the Board
The Board of Directors has standing Audit, Compensation, Stock
Option and Executive Committees. The Board does not have a Nominating Committee.
The Board of Directors held seven meetings in 1997. Each director attended at
least 75% of meetings of the full Board and meetings of committees on which each
served in 1997.
The Audit Committee consists of Messrs. Carrino, Fagenson and
Lerner. The Audit Committee ratifies the selection of the independent auditors,
reviews the arrangements for and scope of the annual audit and reviews the
results of such audit, inquires into important internal control, accounting and
financial reporting matters, reviews potential conflict of interest situations,
as appropriate, and reports and make recommendations to the full Board, as
appropriate. The Audit Committee had one meeting in 1997.
The Compensation Committee consists of Messrs. Fagenson and Lerner. The
Compensation Committee reviews the Company's compensation policies, reviews and
approves the compensation of executive officers. The Compensation Committee had
one meeting in 1997.
The Stock Option Committee consists of Messrs. Fagenson and
Lerner. The Stock Option Committee administers the Company's 1992 and 1995 Stock
Option Plans and otherwise administers and oversees the grant of stock options
by the Company. The Stock Option Committee had one meeting in 1997.
The Executive Committee consists of Messrs. Ryan and
Morgenstern. The Executive Committee meets between regular Board meetings to
consider items of general concern to the Company. In addition, it recommends
nominees to the Board, sets the compensation of senior management (other than
executive officers), approves locations for and timing of new store openings,
and takes such further action as appropriate for the Company to properly
function between Board meetings (subject to ratification or approval of the full
Board, as appropriate). The Executive Committee had 15 meetings in 1997.
Compensation of Directors
Directors who are not employees of the Company (Messrs.
Carrino, Fagenson, Joseffer and Lerner) receive $250 for each Board meeting
attended in person or by telephone and an annual retainer of $2,000, payable
quarterly, and are reimbursed for their out-of-pocket expenses incurred for
attendance at meetings of directors and shareholders. Mr. Lerner receives no
compensation for serving as Secretary to the Company. Non-employee directors are
also entitled to participate under the Company's 1992 and 1995 Stock Option
Plans. Pursuant to the 1995 Stock Option Plan, on March 12, 1997, Messrs.
Fagenson, Joseffer and Lerner each received options to purchase 30,000 shares of
Common Stock and Mr. Carrino received options to purchase 60,000 shares of
Common Stock. The options become exercisable one-third on the grant date,
one-third on the first anniversary of the grant date and one-third on the second
anniversary of the grant date and expire on March 11, 2002. The exercise price
of the options is the closing price of the Company's Common Stock on the Nasdaq
National Market on the grant date, or $9.375 per share. Directors who are
employees of the Company receive no additional compensation for their services
as directors.
Executive Compensation
The following table discloses compensation for the years ended
September 30, 1995, 1996 and 1997 received by the Chairman of the Board and the
President and Chief Executive Officer of the Company and by those executive
officers of the Company who served as such for the full fiscal year ended
September 30, 1997 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation(1) Awards
Securities
Underlying Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation
<S> <C> <C> <C> <C> <C>
Gerald A. Ryan 1997 $150,000 $ 72,221 60,000
Chairman of the Board 1996 122,600 13,750 --
1995 114,000 -- 63,000
William E. Morgenstern 1997 $240,000 $149,506 55,000 $181,012(2)
President and Chief 1996 181,000 14,000 --
Executive Officer 1995 144,000 -- 63,000
Jeffrey A. Conway 1997 $120,000 $ 97,250 27,000
Vice President and Chief 1996 90,000 5,250 --
Financial Officer 1995 89,000 -- 30,000
Thomas E. Wurm(3) 1997 $156,000 $ 20,000 55,000
Vice President-Operations 1996 124,000 5,000 10,000
Ronald D. DeMoss 1997 $100,700 $ 7,000 3,000
Vice President and 1996 95,000 25,000 30,000
General Counsel
</TABLE>
(1) Except as set forth above, the Named Executive Officers did not receive
any annual compensation not properly characterized as salary or bonus,
except for certain prerequisites or other benefits the aggregate
incremental cost of which to the Company did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for each
such officer. The Company has a medical and health benefits plan and
provides term life insurance for its employees, however, such plans do
not discriminate in scope, terms or operation in favor of executive
officers or directors and are generally available to all salaried
employees. The Company has a 401(k) plan but does not have any other
pension plan or any long-term incentive plan.
(2) Represents withholding taxes that the Company became obligated to pay
in connection with Mr. Morgenstern's exercise of 60,000 stock options
in May 1997. In return, Mr. Morgenstern surrendered stock options to
the Company for cancellation.
(3) Mr. Wurm resigned effective October 17, 1997.
Employment Agreements
The Company has entered into an employment agreement with Mr.
Ryan pursuant to which he serves as Chairman of the Board of the Company for a
term that commenced October 1, 1995 and continues until September 30, 1998,
unless earlier terminated in accordance with its terms. The term of the
employment agreement is automatically extended for an additional one year period
unless either party gives notice at least 60 days prior to the date which is one
year prior to the date on which the agreement would otherwise terminate. Mr.
Ryan is not required to render full-time service to the Company. Under the
employment agreement, Mr. Ryan is to receive an annual salary of $125,000
(subject to annual cost of living increases) and is eligible to receive an
annual bonus in an amount determined by the Board of Directors. Mr. Ryan's
annual salary under the employment agreement was subsequently increased by the
Board of Directors to $150,000. Mr. Ryan is also eligible to participate in
employee benefit plans and to receive fringe benefits made generally available
to senior management.
The Company has entered into an employment agreement with Mr.
Morgenstern pursuant to which he is employed full-time as the President and
Chief Executive Officer of the Company for a term that commenced on October 1,
1995 and continues to September 30, 1998, unless earlier terminated in
accordance with its terms. The term of the employment agreement is automatically
extended for an additional one year period unless either party gives notice at
least 60 days prior to the date which is one year prior to the date on which the
agreement would otherwise terminate. Under the employment agreement, Mr.
Morgenstern is to receive an annual salary of $175,000 (subject to annual cost
of living increases) and is eligible to receive an annual bonus in an amount
determined by the Board of Directors. Mr. Morgenstern's annual salary under the
employment agreement was subsequently increased by the Board of Directors to
$240,000. Mr. Morgenstern is also eligible to participate in all employee
benefit plans and to receive fringe benefits made generally available to senior
management.
The Company has entered into an employment agreement with Mr.
Conway pursuant to which he is employed full-time as the Vice President and
Chief Financial Officer of the Company for a term that commenced on October 1,
1995 and continues to September 30, 1998, unless earlier terminated in
accordance with its terms. The term of the employment agreement is automatically
extended for additional two year periods unless either party gives notice at
least 60 days prior to the date which is one year prior to the date on which the
agreement would otherwise terminate. Under the employment agreement, Mr. Conway
receives an annual salary of $90,000, $95,000 and $100,000, respectively, during
the first three years of the employment agreement. In each year following the
third year, Mr. Conway's salary would be adjusted for increases in the cost of
living. Mr. Conway's annual salary for the second and third years of the
employment agreement was subsequently increased by the Board of Directors to
$120,000. Mr. Conway is also eligible to receive an annual bonus in an amount
determined by the Board of Directors. Mr. Conway is also eligible to participate
in all employee benefit plans and to receive fringe benefits made generally
available to senior management.
The Company has entered into an employment agreement with Mr.
DeMoss pursuant to which he is employed full-time as the Vice President and the
General Counsel of the Company for a term that commenced on January 15, 1996 and
continues for a minimum period of 36 months. Following the first 24 months of
the initial 36 month term, Mr. DeMoss' employment continues on a revolving 12
month basis, such 12-month period commencing on the first day of the month next
succeeding the expiration of the first 24-months of the term and continuing
thereafter commencing on the first day of each succeeding month, until
terminated. Under the employment agreement, Mr. DeMoss is to receive an annual
salary of $95,000, is eligible to receive a annual bonus in an amount determined
by the Board of Directors and is eligible for reimbursement of certain expenses.
Mr. DeMoss' annual salary under the employment agreement was subsequently
increased by the Board of Directors to $100,000. Mr. DeMoss is also eligible to
participate in all employee benefit plans in accordance with the terms of such
plans.
<PAGE>
Stock Options
The following table sets forth information concerning stock
option grants made to the Named Executive Officers in the fiscal year ended
September 30, 1997:
<TABLE>
<CAPTION>
Option Grants
Individual Grants
Number of % of Total Potential Realizable
Securities Options Value at Assumed Annual
Underlying Granted to Rates of Stock Price
Options Employees in Exercise Price Expiration Appreciation for
Name Granted (#) Fiscal Year ($/sh) Date Option Term ($)
---- ----------- ------------- ---------------- ----------- ---- ---------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Gerald A. Ryan 60,000 8.5 9.38 3/12/02 155,792 343,595
William E. Morgenstern 55,000 7.8 9.38 3/12/02 142,809 314,962
Jeffrey A. Conway 27,000 3.8 9.38 3/12/02 70,106 154,618
Ronald D. DeMoss 3,000 0.4 11.00 11/12/01 9,117 20,147
Thomas E. Wurm 50,000 7.1 10.50 10/17/01 145,048 320,518
5,000 0.7 11.00 10/18/01 15,195 33,578
</TABLE>
<PAGE>
The following table sets forth information concerning stock
option exercises by the Named Executive Officers during the fiscal year ended
September 30, 1997 and the number of shares and the value of options outstanding
as of September 30, 1997 for each such officer:
<TABLE>
<CAPTION>
Aggregate Option Exercises and
Option Values as of September 30, 1997
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
9/30/97(#) 9/30/97 ($)(1)
Shares
Acquired on Value
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald A. Ryan -- -- 120,500 40,000 1,694,688 470,000
William E. Morgenstern 45,071 587,700 118,084 36,666 1,662,771 430,826
Jeffrey A. Conway -- -- 66,000 18,000 951,285 211,500
Ronald D. DeMoss -- -- 12,750 17,250 151,594 227,531
Thomas E. Wurm 27,500 83,512 12,500 25,000 132,813 253,125
- --------------------
(1) Based on the closing sales price of the Common Stock on the Nasdaq National
Market of $21.125 per share on September 30, 1997, less the exercise price.
</TABLE>
<PAGE>
Compensation Committee Report
The Compensation Committee of the Board of Directors reviews
and approves compensation levels and benefit plans and policies applicable to
senior management of the Company, including the Chief Executive Officer and
other executive officers of the Company, and submits its recommendations to the
Board of Directors for ratification.
The Company's compensation policies are designed (a) to
attract and retain individuals of the best quality available in the
rental-purchase industry, (b) to motivate and reward these individuals based on
corporate and individual performance, and (c) to align the interests of these
individuals with the interests of the shareholders of the Company through
stock-based incentives. Consistent with the above-stated philosophy, senior
management compensation generally consists of three components: base salary,
bonus and incentive awards in the form of stock options. Salary levels for
senior management are determined generally on the basis of pay practices of
comparable companies in the rental-purchase industry. Bonuses are determined by
considering performance during and over the course of each performance year.
Decisions with respect to the size and timing of bonus payments are made by
reference to both Company and individual performance factors and there is no
target, cap or floor regarding the amount of any bonus. Stock option awards are
made to senior management in order to link a portion of compensation directly to
the value of the Company's Common Stock. Because the Company does not grant
discounted stock options, the ultimate value of the options depends entirely on
future appreciation in the Company's Common Stock. Because the Company desires
to hire and retain senior managers of the best quality available in the
rental-purchase industry, its compensation levels will generally be at or above
those of its competitors.
Compensation of the Company's Chief Executive Officer, William
E. Morgenstern, is determined annually by the Compensation Committee based on
Company performance, both relative to its competitors in the rental-purchase
industry and overall, and Mr. Morgenstern's performance, and is then approved by
the Board of Directors. In determining the level of base salary and bonus to be
paid Mr. Morgenstern in fiscal year 1997, the Compensation Committee considered
both the value of Mr. Morgenstern to the Company and pay practices for
comparable performance in the rental-purchase industry. For fiscal year 1997,
Mr. Morgenstern's base salary was increased from $175,000 to $240,000. Mr.
Morgenstern also received total bonuses of $149,506, an increase from the bonus
awarded him for fiscal year 1996 of $42,000. The increases in base salary and
bonus are attributable to the Company's growth in total stores, revenues and
earnings per share during fiscal year 1997 and Mr. Morgenstern's integral role
in bringing about these results.
Robert B. Fagenson
William Lerner
<PAGE>
Performance Graph
The following graph compares for the four-year period ended
September 30, 1997, the cumulative total shareholder return for the Company, the
Total Return Index for the Nasdaq Stock Market (U.S. companies) (the "Nasdaq
Composite Index"), and a group consisting of publicly-traded rental-purchase
companies (the "Industry Group"). The graph assumes that $100 was invested on
August 12, 1993 in the Common Stock of the Company, the Nasdaq Composite Index
and the Industry Group, and assumes reinvestment of dividends. The stock price
performance shown on the following graph is not necessarily indicative of future
price performance.
[GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
9/30/93 9/30/94 9/30/95 9/30/96 9/30/97
<S> <C> <C> <C> <C> <C>
Rent-Way, Inc. 100 129 193 257 430
Nasdaq
Composite Index 100 100 137 161 221
Industry Group 100 94 166 218 260
</TABLE>
<PAGE>
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended September 30, 1997, Robert B. Fagenson and
William Lerner served as the members of the Compensation Committee. Other than
Mr. Lerner, who is Secretary of the Company, no person who served as a member of
the Company's Compensation Committee during the fiscal year ended September 30,
1997 was (i) an officer or employee of the Company during such fiscal year or
(ii) formerly an officer of the Company. No executive officer of the Company
served as a member of the compensation or similar committee or Board of
Directors of any other entity an executive officer of which served on the
Compensation Committee or Board of Directors of the Company.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the
shares of Common Stock beneficially owned by (i) each beneficial owner of more
than 5% of the outstanding shares of Common Stock, (ii) each director of the
Company; (iii) the Named Executive Officers of the Company; and (iv) the
directors and executive officers of the Company as a group. This information is
presented as of February 4, 1998. Except as otherwise noted, the Company
believes that the persons listed below have sole investment and voting power
with respect to the shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Name and Address of Beneficial Owner (1) Owned (2) of Class
---------------------------------------- --------- --------
<S> <C> <C> <C>
Gerald A. Ryan (3)........................................ 700,026 6.5%
William E. Morgenstern ................................... 485,859 4.5
William Lerner............................................ 38,000 *
Vincent A. Carrino........................................ 102,500 1.0
Robert B. Fagenson (4).................................... 224,000 2.1
Marc W. Joseffer.......................................... 75,942 *
Jeffrey A. Conway......................................... 122,500 1.1
Ronald D. DeMoss.......................................... 21,000 *
Kirk R. Smithee........................................... 7,375 *
Directors/Executive Officers as a group
(9 persons)............................................... 1,777,202 15.8
Massachusetts Mutual Life Insurance
Company and affiliates (5)................................ 914,017 8.5
1295 State Street
Springfield, Massachusetts 01111
Putnam Investments, Inc.
and affiliates (6)........................................ 673,000 6.3
One Post Office Square
Boston, Massachusetts 02109
- -----------------------
* Less than 1%
</TABLE>
(1) Unless otherwise indicated, the address for all persons listed above is
c/o Rent-Way, Inc., 3230 West Lake Road, Erie, Pennsylvania 16505.
(2) Includes shares issuable upon exercise of stock options and warrants
which are currently exercisable or which will become exercisable within
60 days.
(3) Includes 100,000 shares owned by the Ryan Children's Trust of 1993, of
which Mr. Ryan is sole trustee.
(4) Includes 6,000 shares owned by the Fagenson & Co., Inc. Employee
Pension Plan and Trust, of which Mr. Fagenson is a co-trustee.
(5) Includes 105,000 shares of Common Stock issuable on the exercise of
certain warrants and 74,794 shares issuable on conversion of $1,000,000
of the Company's 7% Convertible Subordinated Debentures due 2007.
Massachusetts Mutual Life Insurance Company, Mass Mutual Corporate
Investors, Mass Mutual Participation Investors, Mass Mutual Corporate
Value Partners Ltd. and Mass Mutual High Yield Partners have filed a
Schedule 13G with respect to their ownership of Common Stock of the
Company. The beneficial ownership information presented is based on the
Schedule 13G.
(6) Putnam Investments, Inc., Marsh & McLennan Companies, Inc., Putman
Investment Management, Inc. ("PIM") and the Putnam Advisory Company,
Inc. ("PAC") have filed a Schedule 13G with respect to Common Stock of
the Company owned by PIM and PAC. The beneficial ownership information
presented is based solely on the Schedule 13G.
CERTAIN TRANSACTIONS INVOLVING MANAGEMENT
In connection with the acquisition of D.A.M.S.L. Corp. in May
1994, the Company entered into a consulting agreement and non-compete agreement
with Marc W. Joseffer, a director of the Company. Mr. Joseffer receives payments
from the Company under a five-year consulting agreement which expires on May 18,
1999. Annual payments to Mr. Joseffer for each year of such consulting agreement
are $132,000, $120,000, $144,000, $132,000 and $192,000, respectively. Under the
terms of the non-compete agreement entered into by Mr. Joseffer, he receives
monthly payments from the Company of $2,143, which monthly payments continue
through March 1999.
The Company leases two store locations from Mr. Joseffer or a
company controlled by him. The Company paid $92,238 in rent and related amounts
under such leases for the years ended September 30, 1997. The Company believes
the lease rate and terms, which include the Company's obligation to pay real
estate taxes, are similar to those obtainable on an arms'-length basis.
In September 1995, the Company paid $170,000 and issued
warrants to purchase 37,500 shares of Common Stock to Starr Securities, Inc. and
certain officers thereof as a financial advisory and investment banking fee for
arranging the Company's sale of convertible subordinated notes to Massachusetts
Mutual Life Insurance Company and certain affiliates. Robert B. Fagenson, a
director of the Company, is a Vice President and Director of Starr Securities,
Inc.
<PAGE>
PROPOSAL TO AMEND THE 1995 STOCK OPTION PLAN
In accordance with the terms of the Company's 1995 Stock
Option Plan (the "1995 Plan"), the Board of Directors, by resolutions adopted
March 12, 1997 and December 17, 1997, amended the 1995 Plan to increase the
maximum number of shares of Common Stock that may be optioned or purchased
pursuant thereunder from 400,000 to 2,000,000. In order that options previously
granted and to be granted in the future be eligible to qualify for treatment as
incentive stock options under the Internal Revenue Code, shareholder approval of
the amendments is required. The affirmative vote of a majority of the votes cast
by all shareholders entitled to vote thereon is required for approval of the
amendment.
General
The 1995 Plan was adopted by the Board of Directors on October
18, 1995 and approved by the shareholders of the Company on March 6, 1996. As
adopted, the 1995 Plan provided that the maximum number of shares of Common
Stock that may be optioned or purchased pursuant thereto was 400,000 shares. The
Board of Directors subsequently amended the 1995 Plan to increase such maximum
number of shares to 2,000,000.
The increase in the maximum number of shares under the 1995
Plan is necessitated by the growth in the number of employees of the Company,
especially new management personnel, and the grant of additional stock options
to existing employees and others as previously granted stock options vest and
become exercisable.
As of January 27, 1998, 58,762 shares had been issued on
exercise of options granted under the 1995 Plan, options for 53,778 shares had
been cancelled under the 1995 Plan and options for 692,860 shares were
outstanding under the 1995 Plan. Shares not purchased under an option prior to
its forfeitures, surrender, termination, expiration, cancellation or exchange
are available for future grants under the 1995 Plan. As of January 27, 1998, the
fair market value of shares subject to outstanding options under the 1995 Plan
was $14,550,060, based on the closing price of the Common Stock as reported on
the Nasdaq National Market on such date.
As of January 27, 1998, (i) options to purchase 188,000 shares
of Common Stock had been received under the 1995 Plan by current executive
officers as a group (5 persons), (ii) options to purchase 180,000 shares of
Common Stock had been received under the 1995 Plan by current directors who are
not executive officers as a group (4 persons) and (iii) options to purchase
437,400 shares of Common Stock had been received under the 1995 Plan by all
employees, including current officers who are not executive officers, as a group
(290 persons). For information with respect to options to purchase shares of
Common Stock received by the Company's Chief Executive Officer and the other
Named Executive Officers under 1995 Plan, see "Management Information--Stock
Options."
Purpose
The 1995 Plan is intended to provide long term incentives and
rewards to directors, officers and other key employees or persons responsible
for the success and growth of the Company, to attract and retain such persons on
a competitive basis and to associate the interests of such persons with those of
the Company.
Duration, Modification and Termination of the 1995 Plan
The Company's Board of Directors and the Compensation
Committee, or other committee designated to administer the 1995 Plan, may at any
time and from time to time alter, amend, suspend or terminate the 1995 Plan in
whole or in part, except that no amendment may adversely affect any of the
rights of any optionee, without such optionee's consent, under any option
theretofore granted under the 1995 Plan. The power to grant options under the
1995 Plan will automatically terminate 10 years following the approval of the
1995 Plan by the shareholders of the Company, or March 6, 2006. In the event
that the 1995 Plan is terminated, any unexercised options shall continue to be
exercisable in accordance with their terms and the terms of this 1995 Plan in
effect immediately prior to such termination; provided, however, that in no
event may any option be exercised more than 10 years from its date of grant.
Administration
The 1995 Plan provides that it is to be administered by the
Compensation Committee of the Board or such other committee as the Board may
designate (the "Committee"). The Board has designated the Stock Option Committee
of the Board to administer the 1995 Plan. The Committee will consist of not less
than two members of the Board who are "non-employee directors" (as defined in
Rule 16b-3 under the Exchange Act) and hold office until resignation or removal.
Subject to the requirements set forth above, the Board has the authority to
remove and add members of the Committee and fill all vacancies. The Committee
has the authority in its sole discretion, subject to and not inconsistent with
the express provisions of the 1995 Plan, to administer the 1995 Plan and to
exercise all the powers and authorities either specifically granted to it under
the 1995 Plan or necessary or advisable in administration of the 1995 Plan,
including, without limitation, the authority to grant options, to determine the
persons to whom and the time or times at which options shall be granted, to
determine the type and number of options to be granted and the terms, conditions
and restrictions relating to any option, to determine whether, to what extent,
and under what circumstances an option may be settled, cancelled, forfeited,
exchanged or surrendered, to construe and interpret the 1995 Plan and any
option, to prescribe, amend and rescind rules and regulations relating to the
1995 Plan, to determine the terms and provisions of agreements evidencing
options granted under the 1995 Plan, to correct any defect, supply any
deficiency and reconcile any inconsistency in the 1995 Plan or any option
granted under the 1995 Plan, to amend the 1995 Plan to reflect changes in
applicable law, and to make all other determinations deemed necessary or
advisable for the administration of the 1995 Plan. The Committee may designate
one or more persons to implement its rules, regulations and determinations made
with respect to the 1995 Plan.
All decisions, determinations and interpretations of the
Committee are final and binding on all persons, including the Company, any
optionee (or any person claiming any rights under the 1995 Plan from or through
any optionee) and the Committee, from time to time, and whenever requested, will
report to the Board on its administration of the 1995 Plan and the actions it
has taken. All expenses of administering the 1995 Plan will be paid by the
Company.
Securities Offered Under the 1995 Plan
The 1995 Plan authorizes the offer and sale of 2,000,000
shares of Common Stock pursuant to the exercise of stock options. The shares of
Common Stock to be purchased pursuant to the exercise of options under the 1995
Plan will be issued from either authorized and unissued shares of Common Stock
or any issued shares of Common Stock reacquired by the Company, including shares
of Common Stock purchased in the open market, in private transactions or
otherwise. In the event any shares subject to an option are forfeited,
cancelled, exchanged or surrendered or if an option otherwise terminates or
expires without a distribution of shares to the optionee, the shares of Common
Stock with respect to such option will, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be available
for grants of options under the 1995 Plan.
Eligibility
Persons eligible for the grant of options under the 1995 Plan
are the officers, directors and employees of the Company, and other persons
responsible for the success of the Company in the sole discretion of the
Committee. The Committee determines those persons to whom and the time or times
at which options shall be granted, the type and number of options to be granted
and the terms, conditions and restrictions relating to any option. There are,
however, no requirements imposed by the 1995 Plan with respect to the persons to
be granted options or the number of options to be granted to any persons, other
than the maximum number of shares available for issuance pursuant to the
exercise of options under the 1995 Plan.
Option Agreements
Stock options granted pursuant to the 1995 Plan are evidenced
by a written stock option agreement ("Option Agreement") in such form and
containing such terms and conditions as the Committee from time to time approve,
subject to the 1995 Plan. Each Option Agreement states the number of shares to
which it relates, whether the option constitutes an incentive stock option
("ISO") qualified under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") or a non-qualified stock option, and the option price,
which, pursuant to the 1995 Plan, may not be less than 100% of the fair market
value of the Common Stock on the date of grant of the option. In the case of an
ISO granted to a person owning more than 10% of the voting stock of the Company,
the option price will not be less than 110% of the fair market value of the
Common Stock on the date of grant. The fair market value of the Common Stock as
of a particular date means the last reported sales price of a share of Common
Stock as reported on the Nasdaq National Market on the last preceding day on
which such shares of Common Stock were reported sold.
An Option Agreement may require that the optionee agree to
remain in the employ of, or otherwise maintain his, her or its relationship
with, the Company for a specified period of time from the date of grant of the
option. The 1995 Plan and any Option Agreement will confer no right on any
person to continue in the employ of or to be entitled to any remuneration or
benefits not set forth in the 1995 Plan or any Option Agreement or otherwise
limit the Company's right to terminate the optionee's employment with or service
to the Company.
Payment for Common Stock Offered Under the 1995 Plan
Payment for Common Stock purchased pursuant to the exercise of
options granted under the 1995 Plan is to be made in full, at the time of
exercise (i) in cash, or (ii) in shares of Common Stock already owned by the
optionee having a fair market value equal to the option exercise price or in a
combination of cash and shares of Common Stock or (iii) in the sole discretion
of the Committee, through a cashless exercise procedure whereby the optionee
pays the exercise price by directing that shares of Common Stock otherwise
deliverable on exercise of the option be withheld. All required state and
federal withholding taxes are also payable by the optionee.
Term and Exercise of Options
The Committee has discretion to determine the term of an
option; provided, however, that under the 1995 Plan an option may never be
exercised more than 10 years from its date of grant. In the case of an ISO
granted to a person owning more than 10% of the voting stock of the Company, the
term may not exceed five years from the date of grant. Options may be exercised
in full at any time or in part from time to time in accordance with the 1995
Plan and the provisions of any applicable Option Agreement. The Committee may
require in its discretion that any option granted becomes exercisable only in
installments or after some minimum period of time, or both. The Committee has
the authority to accelerate the exercisability of any outstanding option at such
time and under such circumstances as it, in its sole discretion, deems
appropriate. An option is exercised under the 1995 Plan by written notice
delivered in person or by mail to the Secretary of the Company, specifying the
number of shares of Common Stock with respect to which the option is being
exercised. Options may not be transferred by an optionee except by will or the
laws of descent and distribution and shall be exercisable during the lifetime of
an optionee only by such optionee or such optionee's guardian or legal
representatives.
With respect to ISOs, the aggregate fair market value
(determined as of the date the ISO is granted) of the shares of Common Stock
with respect to which ISOs granted under this 1995 Plan and all other plans of
the Company become exercisable for the first time by each optionee during any
calendar year may not exceed $100,000.
Effect of Termination of Employment, Disability, Death
The Committee has exclusive authority to determine if, and for
how long, and under what conditions any option may be exercised after
termination of an optionee's employment with or service to the Company,
including by reason of the optionee's death; provided, however, that in no event
will an option continue to be exercisable beyond the expiration date of such
option.
To date, those Option Agreements evidencing options granted
under the 1995 Plan provide that on the optionee's termination of employment
with or service to the Company for any reason other than death or permanent and
total disability, the optionee will have the right to exercise the unexercised
option, or portion thereof, at any time within three months after termination.
Such Option Agreements further provide that on the optionee's termination of
employment with or service to the Company by reason of death or permanent and
total disability the option may be exercised at any time within one year after
termination. In the event of the death of an optionee, the executors,
administrators, legatees or distributees of the estate of such optionee, and in
the event of an optionee's permanent and total disability, the guardian or legal
representatives of the optionee, have the right to exercise the option. The
Company will be under no obligation to issue shares of Common Stock unless and
until it is satisfied that the person exercising the option is the duly
appointed executor or administrator or the proper legatee or distributee of the
estate of the optionee, or duly appointed guardian or legal representative of
the optionee, as the case may be.
Certain Adjustments
In the event the Committee determines that any dividend or
other distribution (whether in the form of cash, stock or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Common Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of optionees under the 1995 Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any or
all of (i) the number and kind of shares of stock of the Company which may
thereafter be issued in connection with options, (ii) the number and kind of
shares of stock of the Company issued or issuable in respect of outstanding
options, and (iii) the exercise price, grant price or purchase price relating to
any option. With respect to ISOs, any such adjustments will be made in
accordance with the applicable requirements of the Code.
No optionee shall have any claim to be granted any option
under the 1995 Plan and there is no obligation for uniformity of treatment among
optionees. No optionee nor any transferee of an option shall have any rights as
a shareholder with respect to any shares of Common Stock covered by an option
until the date of issuance of a stock certificate for such shares.
Certain Federal Income Tax Consequences
The following discusses certain of the federal income tax
consequences associated with (i) the grant of a stock option under the 1995
Plan, (ii) the exercise of such option and (iii) the disposition of shares
received upon the exercise of an option. This description of tax consequences is
based upon present federal tax laws and regulations, but does not purport to be
a complete description of the federal income tax consequences applicable to an
optionee under the 1995 Plan. Accordingly, each optionee should consult with his
or her own tax advisor regarding the federal, state and local tax consequences
of the grant of an option and any subsequent exercise.
Non-Qualified Stock Options. The grant of a non-qualified
stock option (including any option that exceeds the limitations on incentive
stock options described below) to an optionee will not be a taxable event so
long as the option does not have a readily ascertainable fair market value.
Options granted pursuant to the 1995 Plan will not be regarded as having a
readily ascertainable fair market value. Accordingly, the optionee will not be
subject to any income tax consequences with respect to such option unless and
until the option is exercised.
Upon the exercise of a non-qualified stock option, the
optionee generally will recognize ordinary compensation income equal to the
"spread" between the exercise price and the fair market value of the Common
Stock on the date of exercise. Generally, the Company will be entitled to a
federal income tax deduction in the amount of the "spread" recognized by the
optionee as ordinary compensation income. However, if the Common Stock received
by the optionee is not "vested"--that is, the optionee's right to enjoy the full
benefits of ownership of the Common Stock is conditioned on rendering further
services or is subject to other restrictions that constitute a substantial risk
of forfeiture--then the optionee will not be required to include such "spread"
in income upon exercise, unless the optionee elected to do so under Section
83(b) of the Code. Shares purchased on exercise of options granted under the
standard terms of the 1995 Plan will generally be deemed vested, but officers or
directors exercising options should consider the potential restrictions on
transfer imposed by the short-swing profit liability provisions of Section 16(b)
of the Exchange Act.
On the delivery by an optionee of shares of Common Stock
already owned by the optionee as payment for the exercise price of a
non-qualified stock option, the number of shares received on exercise of the
option equal to the number of shares of Common Stock surrendered is a tax-free
exchange with no resulting recognition of income to the optionee. Any additional
shares the optionee receives on exercise of the option in excess of the number
of shares surrendered will be recognized by the optionee as ordinary
compensation income in an amount equal to the fair market value of such shares.
The tax basis of the shares received on surrender of the previously owned shares
of Common Stock is the tax basis of the shares so surrendered, and the tax basis
of the additional shares received is the amount recognized as ordinary
compensation income by the optionee, that is, the fair market value of such
additional shares.
The payment by an optionee of the exercise price of a
non-qualified stock option by means of surrender of the existing option will
result in the optionee recognizing ordinary compensation income on the "spread"
between the exercise price of the option surrendered and the fair market value
of the shares of Common Stock on the date of exercise. Generally, the Company
will be entitled to a deduction in the amount of this "spread." The tax basis of
the shares of Common Stock the optionee receives on exercise will be the fair
market value of such shares on the date of exercise.
The amount and character (whether long-term or short-term) of
any gain or loss realized on a subsequent disposition of Common Stock by the
optionee generally will depend on, among other things, whether such disposition
occurred before or after such Common Stock vested, whether an election under
Code Section 83(b) with respect to such shares had been made, and the length of
time such shares were held by the optionee.
Incentive Stock Options. Pursuant to the Code, incentive stock
options may be granted only to employees of the Company. There are no federal
income tax consequences associated with the grant of an incentive stock option
("ISO") to an employee. However, in contrast to the exercise of a non-qualified
stock option, the exercise of an ISO will not cause an employee to recognize
taxable income for regular income tax purposes. If the employee holds the shares
acquired upon exercise of the ISO for a minimum of two years from the date of
the grant of the ISO, and for at least one year after exercise, any gain
realized on the subsequent sale or exchange of such shares generally will be
treated as long-term capital gain. If the shares are sold or otherwise disposed
of prior to the expiration of such periods (a "disqualifying disposition"), then
a portion of any gain recognized by the employee which would otherwise be
characterized as capital gain will instead be taxable as ordinary compensation
income and the Company would be entitled to a federal income tax deduction in
such amount. The amount of such gain which would be characterized as ordinary
income will not exceed an amount equal to the excess of (i) the fair market
value of such shares as of the date the option was exercised over (ii) the
amount paid for such shares. Any loss recognized upon a taxable disposition of
the shares generally will be characterized as a capital loss.
On the delivery by an optionee of shares of Common Stock
already owned by the optionee as payment of the exercise price of an ISO, the
number of shares received on exercise of the ISO equal to the shares of the
Common Stock surrendered is a tax-free exchange with no resulting recognition of
income to the optionee. Any additional shares the optionee receives on exercise
of the ISO in excess of the number of shares surrendered will be treated as the
exercise of an ISO and will not cause the optionee to recognize taxable income
for regular income tax purposes. The tax basis of the shares received on
surrender of the previously owned shares of Common Stock is the tax basis of the
shares so surrendered, and the basis of any additional shares received on
exercise of the ISO is the amount of any cash or other property paid on such
exercise. However, if stock received on exercise of an ISO is used in connection
with the exercise of an ISO when the holding period with respect to such stock
is not met, such use will be considered a disqualifying disposition.
The payment by an optionee of the exercise price of an ISO by
means of surrender of such ISO will result in the optionee recognizing ordinary
compensation income on the spread between the exercise price and the fair market
value with respect to that number of options so surrendered less the number of
options exercised for shares. Generally, the Company will be entitled to a
deduction in the amount of this "spread." The tax basis of the shares of Common
Stock the optionee receives on exercise of the option in this manner will be the
amount paid for such shares.
Withholding Taxes. The Company may require any optionee or
such other person entitled to receive shares of Common Stock pursuant to the
exercise of an option, to pay to the Company the amount of any taxes which the
Company may be required to withhold before delivery to such optionee or other
person of a certificate representing such option shares. Each optionee shall
have the right to pay any or all required withholding taxes by delivering to the
Company shares of Common Stock already owned. The Company may authorize the
optionee to pay any or all required withholding taxes by directing that shares
otherwise deliverable upon exercise of the option be withheld.
On any disqualifying disposition of shares of Common Stock
acquired pursuant to the exercise of an ISO, the Company shall have the right to
require the payment of the amount of any taxes which are required by law to be
withheld with respect to such disqualifying disposition. The optionee has the
right to pay any or all of such required withholding taxes by delivering to the
Company shares of Common Stock already owned.
The Board of Directors recommends a vote FOR approval of the
amendments to the 1995 Stock Option Plan
REQUIREMENTS FOR REPORTING SECURITIES OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors, and persons who own more than
ten (10%) of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Executive officers, directors and greater than ten-percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based solely
upon its review of copies of such forms furnished to it, or written
representations from reporting persons that no such forms were required for
those persons, the Company believes that during fiscal year 1997 all filing
requirements applicable to executive officers, directors, and greater than
ten-percent beneficial owners were complied with, except that (i) two reports
covering an aggregate of two transactions were filed late by Marc W. Joseffer, a
director of the Company, (ii) one report, covering one transaction, was filed
late by Thomas E. Wurm and (iii) one report, covering one transaction, was filed
late by Ronald D.
DeMoss.
<PAGE>
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P. served as the Company's independent
accountants for the 1997 fiscal year. Representatives of that firm will be
present at the Annual Meeting, will be given the opportunity to make a statement
if they so desire, and will be available to respond to any appropriate
questions. The auditors for fiscal year 1998 will be selected at the meeting of
the Board of Directors to be held immediately following the Annual Meeting of
Shareholders on March 11, 1998.
PROPOSALS OF SHAREHOLDERS
Any shareholder who intends to present a proposal intended to
be considered for inclusion in the Proxy Statement for presentation at the 1998
Annual Meeting of Shareholders must submit such proposal by November 1, 1998. It
is suggested that the proposal be submitted to the Company's corporate offices
in Erie, Pennsylvania by certified mail, return receipt requested, and be
directed to the Secretary of the Company.
OTHER MATTERS
Management does not know of any matters to be presented at
this Annual Meeting other than those set forth in this Proxy Statement and in
the Notice accompanying this Proxy Statement. If other matters should properly
come before the Annual Meeting, it is intended that the proxy holders will vote
on such matters in accordance with their best judgment.
The 1997 Annual Report to Shareholders accompanies this Proxy
Statement, but is not a part hereof.
A copy of the Company's Annual Report on Form 10-K for fiscal
year 1997 may be obtained without charge by any shareholder of record by written
request made to Jeffrey A. Conway, Vice President and Chief Financial Officer,
Rent-Way, Inc., 3230 West Lake Road, Erie, Pennsylvania 16505.
By Order of the Board of Directors,
WILLIAM LERNER
Secretary
Erie, Pennsylvania
February 11, 1998
<PAGE>
RENT-WAY, INC.
1995 STOCK OPTION PLAN
1. Purpose.
The purposes of the Rent-Way, Inc. 1995 Stock Option Plan (the
"Plan") are to provide, through options to purchase shares of Rent-Way, Inc.
common stock, without par value, long term incentives and rewards to directors,
officers and other key employees or persons responsible for the success and
growth of Rent-Way, Inc. (the "Company"), to attract and retain such persons on
a competitive basis and to associate the interests of such person with those of
the Company.
2. Effective Date.
The Plan will become effective on the date adopted by the
Board of Directors (the "Effective Date") and shall be submitted for approval by
the Company's shareholders within 12 months of the Effective Date. No options
granted prior to stockholder approval of the Plan may be exercised, sold,
assigned or otherwise transferred until such stockholder approval shall have
been obtained.
3. Definitions.
The following terms, as used herein, shall have the following
meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Closing Price", as of a particular date, shall mean (i) if the
shares of Stock are then listed or admitted to trading on a national securities
exchange, the last reported sales price of a share of Stock sold in the regular
way on the principal national securities exchange on which such Stock is listed
or admitted to trade, or if no sales occurred on such date, the last sales price
on the last preceding day on which such shares of Stock were sold on such
exchange or (ii) if the shares of Stock are not then listed or admitted to
trading on any national securities exchange, the last reported sale price for a
share of Stock as reported on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on the last preceding day on which such
shares of Stock were reported sold.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean the Compensation Committee of the Board or
such other committee as the Board, in its discretion, designates to administer
the Plan, which Committee shall be composed of not less than two directors each
of whom is a "disinterested person" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
(e) "Company" shall mean Rent-Way, Inc. and its subsidiaries now held
or hereafter acquired.
(f) "Fair Market Value", as of a particular date, shall mean (i) if the
shares of Stock are then listed or admitted to trading on a national securities
exchange or reported on NASDAQ the Closing Price or (ii) if the shares of Stock
are not then listed or admitted to trading on a national securities exchange or
reported on NASDAQ, such value as the Committee, acting in good faith and in its
sole discretion, shall determine.
(g) "Incentive Stock Option" shall mean an Option that meets the
requirements of Section 422 of the Code, or any successor provision, and that is
designated by the Committee as an Incentive Stock Option.
(h) "Nonqualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
(i) "Option" shall mean the right, granted pursuant to this Plan, of a
holder to purchase shares of Stock under the Plan at a price and upon the terms
to be specified by the Committee.
(j) "Option Agreement" shall mean any written agreement, contract, or
other instrument or document between the Company and a Participant evidencing an
Option.
(k) "Participant" shall mean an officer, director, employee or
independent contractor of the Company who is, pursuant to Section 4 of the Plan,
selected to participate herein.
(l) "Plan" shall mean the Rent-Way, Inc. 1995 Stock Option Plan.
(m) "Stock" shall mean shares of common stock, without par value of the
Company.
(n) "Ten Percent Stockholder" shall mean a Participant who, at the time
an Incentive Stock Option is to be granted to such Participant, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
within the meaning of Sections 422(e) and 422(f), respectively, of the Code.
4. Administration.
The Plan shall be administered by the Committee. The Committee
shall have the authority in its sole discretion, subject to and not inconsistent
with the express provisions of the Plan, to administer the Plan and to exercise
all the powers and authorities either specifically granted to it under the Plan
or necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options; to determine the persons to whom and
the time or times at which Options shall be granted; to determine the type and
number of Options to be granted and the terms, conditions and restrictions
relating to any Option; to determine whether, to what extent, and under what
circumstances an Option may be settled, cancelled, forfeited, exchanged, or
surrendered; to construe and interpret the Plan and any Option; to prescribe,
amend and rescind rules and regulations relating to the Plan; to determine the
terms and provisions of Option Agreements; to correct any defect, supply any
deficiency and reconcile any inconsistency in the Plan or any Option granted
hereunder; to amend the Plan to reflect changes in applicable law; and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. The Committee may designate one or more persons to implement its
rules, regulations and determinations.
All decisions, determinations and interpretations of the
Committee shall be final and binding on all persons, including the Company, the
Participant (or any person claiming any rights under the Plan from or through
any Participant) and any stockholder. The Committee from time to time, and
whenever requested, shall report to the Board on its administration of the Plan
and the actions it has taken. The expenses of administering the Plan shall be
paid by the Company.
No member of the Board or the Committee shall be liable for
any action taken or determination made in good faith with respect to the Plan or
any Option granted hereunder.
5. Eligibility.
Options may be granted to officers, directors and employees of
the Company and other persons responsible for the success of the Company in the
sole discretion of the Committee. In determining the persons to whom Options
shall be granted and the type of Option, the Committee shall take into account
such factors as the Committee shall deem reasonable and appropriate in
connection with accomplishing the purposes of the Plan.
6. Stock Subject to the Plan; Limitation on Grants.
The maximum number of shares of Stock that may be optioned or
purchased pursuant to the Plan shall be 2,000,000 shares, subject to adjustment
as provided herein. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be reacquired by the
Company in the open market, in private transactions or otherwise. If any shares
subject to an Option are forfeited, cancelled, exchanged or surrendered or if an
Option otherwise terminates or expires without a distribution of shares to the
Participant, the shares of Stock with respect to such Option shall, to the
extent of any such forfeiture, cancellation, exchange, surrender, termination or
expiration, again be available for grants of Options under the Plan.
In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, stock, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share exchange, or
other similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any or
all of (i) the number and kind of shares of Stock which may thereafter be issued
in connection with Options, (ii) the number and kind of shares of Stock issued
or issuable in respect of outstanding Options, and (iii) the exercise price,
grant price, or purchase price relating to any Option; provided that, with
respect to Incentive Stock Options, such adjustment shall be made in accordance
with Section 424 of the Code.
7. Option Grants.
Each Option granted pursuant to this Plan shall be evidenced
by an Option Agreement, in such form and containing such terms and conditions as
the Committee shall from time to time approve, which Option Agreement shall
comply with and be subject to the following terms and conditions, as applicable.
(a) Number of Shares. Each Option Agreement shall state the
number of shares of Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically
state that the Option constitutes an Incentive Stock Option or a Nonqualified
Stock Option.
(c) Option Price. Each Option Agreement shall state the Option
price; provided, however, that the Option price for each Option shall not be
less than one hundred percent (100%) of the Fair Market Value of the shares of
Stock covered by the Option on the date of grant. The Option price shall be
subject to adjustment as provided in Section 6 hereof. The date as of which the
Committee adopts a resolution expressly granting an Option shall be considered
the day on which such Option is granted, unless a different grant date is
specified in such resolution.
(d) Method and Time of Payment. The Option price shall be paid
in full, at the time of exercise, in cash or in shares of Stock having a Fair
Market Value equal to such Option price or in a combination of cash and Stock
or, in the sole discretion of the Committee, through a cashless exercise
procedure whereby the Participant may pay the exercise price by directing that
shares otherwise deliverable upon exercise of the Option be withheld. In
connection with any such cashless exercise, the portion of the Option relating
to the Shares being withheld in payment of the exercise price shall be deemed
surrendered and cancelled.
(e) Term and Exercisability of Options. Each Option shall be
exercisable in the manner determined by the Committee and as provided in the
Option Agreement; provided, however, that the Committee shall have the authority
to accelerate the exercisability of any outstanding Option at such time and
under such circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be ten (10) years from the date of the grant of the Option
or such shorter period as is determined by the Committee. The exercise period
shall be subject to earlier termination as provided in Section 7(f) hereof. An
Option may be exercised, as to any or all full shares of Stock as to which the
Option has become exercisable, by written notice delivered in person or by mail
to the Secretary of the Company, specifying the number of shares of Stock with
respect to which the Option is being exercised. For purposes of the preceding
sentence, the date of exercise will be deemed to be the date upon which the
Secretary of the Company receives such notice.
(f) Termination. The Committee shall have the exclusive
authority to determine if, and for how long, and under what conditions the
Option may be exercised after termination of a Participant's employment with or
service to the Company, including by reason of the Participant's death;
provided, however, that in no event will an Option continue to be exercisable
beyond the expiration date of such Option.
(g) Incentive Stock Options. Options granted as Incentive
Stock Options shall be subject to the following special terms and conditions, in
addition to the general terms and conditions specified in this Section 7.
(1) Value of Shares. The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted) of
the shares of Stock with respect to which Incentive Stock Options
granted under this Plan and all other Plans of the Company become
exercisable for the first time by each Participant during any calendar
year shall not exceed $100,000.
(2) Ten Percent Stockholder. In the case of an
Incentive Stock Option granted to a Ten Percent Stockholder, (x) the
Option Price shall not be less than one hundred ten percent (110%) of
the Fair Market Value of the shares of Stock on the date of grant of
such Incentive Stock Option and (y) the exercise period shall not
exceed five (5) years from the date of grant of such Incentive Stock
Option.
<PAGE>
1. General Provisions.
(a) Compliance with Legal Requirements. The Plan and the
granting and exercising of Options, and the other obligations of the Company
under the Plan and any Option Agreement or other agreement shall be subject to
all applicable federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Stock under
any Option as the Company may consider appropriate, and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Stock in
compliance with applicable laws, rules and regulations.
(b) Nontransferability. Options shall not be transferable by a
Participant except by will or the laws of descent and distribution and shall be
exercisable during the lifetime of a Participant only by such Participant or
such Participant's guardian or legal representative.
(c) No Right To Continued Employment. Nothing in the Plan or
in any Option granted or any Option Agreement or other agreement entered into
pursuant hereto shall confer upon any Participant the right to continue in the
employ of the Company or to be entitled to any remuneration or benefits not set
forth in the Plan or such Option Agreement or other agreement or to interfere
with or limit in any way the right of the Company to terminate such
Participant's employment.
(d) Withholding Taxes. Where a Participant or other person is
entitled to receive shares of Stock pursuant to the exercise of an Option, the
Company shall have the right to require the Participant or such other person to
pay to the Company the amount of any taxes which the Company may be required to
withhold before delivery to such Participant or other person of cash or a
certificate or certificates representing such shares. Each Participant shall
have the right to pay any or all required withholding taxes by delivering to the
Company of shares of Stock already owned. The Company may authorize the
Participant to pay any or all required withholding taxes by directing that
shares otherwise deliverable upon exercise of the Option be withheld.
Upon the disposition of shares of Stock acquired pursuant to the exercise
of an Incentive Stock Option, the Company shall have the right to require the
payment of the amount of any taxes which are required by law to be withheld with
respect to such disposition. Each Participant shall have the right to pay any or
all of such required withholding taxes by delivering to the Company shares of
Stock already owned.
(e) Amendment and Termination of the Plan. The Board or the
Committee may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part. Notwithstanding the foregoing, no
amendment shall affect adversely any of the rights of any Participant, without
such Participant's consent, under any Option theretofore granted under the Plan.
The power to grant Options under the Plan will automatically terminate ten years
after the earlier of the adoption of the Plan by the Board or the approval of
the Plan by shareholders of the Company. If the Plan is terminated, any
unexercised Options shall continue to be exercisable in accordance with its
terms and the terms of the Plan in effect immediately prior to such termination.
(f) Participant Rights. No Participant shall have any claim to
be granted any Option under the Plan, and there is no obligation for uniformity
of treatment for Participants. Except as provided specifically herein, a
Participant or a transferee of an Option shall have no rights as a stockholder
with respect to any shares covered by any Option until the date of the issuance
of a stock certificate for such shares.
(g) No Fractional Shares. No fractional shares of Stock shall
be issued or delivered pursuant to the Plan or any Option. The Committee shall
determine whether cash, other Options, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(h) Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the Commonwealth
of Pennsylvania without giving effect to the conflict of laws principles
thereof.
(i) Beneficiary. A Participant may file with the Committee a
written designation of a beneficiary on such form as may be prescribed by the
Committee and may, from time to time, amend or revoke such designation. If no
designated beneficiary survives the Participant, the executor or administrator
of the Participant's estate shall be deemed to be the grantee's beneficiary.
(j) Interpretation. With respect to Participants subject to
Section 16 of the Exchange Act, the Plan is intended to comply with all
applicable provisions of Rule 16b-3 promulgated thereunder (as such Rule may be
amended from time to time) and all provisions hereof shall be construed in a
manner to so comply. With respect to Participants subject to Section 16, all
Options granted hereunder shall be granted and may be exercised only in such a
manner as to conform to such Rule. To the extent permitted by applicable law,
the Plan and Options granted hereunder shall be deemed amended to the extent
necessary to conform to the applicable provisions of such Rule.
<PAGE>
PROXY PROXY
RENT-WAY, INC.
3230 WEST LAKE ROAD
ERIE, PENNSYLVANIA 16505
This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting on March 11, 1998.
The undersigned hereby appoints Gerald A. Ryan and William E. Morgenstern, and
each of them, proxies with the powers the undersigned would possess if
personally present and with full power of substitution, to vote all common
shares of the undersigned at the Annual Meeting of Shareholders of Rent-Way,
Inc. to be held at the Bel Aire Hotel, 2800 West 8th Street, Erie, Pennsylvania
on March 11, 1998, and at any adjournments, upon matters described in the proxy
statement furnished herewith and all other subjects that may properly come
before the meeting. IF NO DIRECTIONS ARE GIVEN, THE INDIVIDUALS DESIGNATED ABOVE
WILL VOTE FOR THE NOMINEES FOR DIRECTOR LISTED HEREIN, TO APPROVE THE AMENDMENTS
TO THE COMPANY'S 1995 STOCK OPTION PLAN, AND AT THEIR DISCRETION ON ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
(To be Signed on Reserve Side)
--------------------------------------------------------------------
<PAGE>
[X] Please mark your
votes as in this
example
FOR the nominees listed WITHHOLD
at right AUTHORITY
(except as marked to to vote for
the nominees the contrary) listed at right
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. ELECTION [__] [__]
OF
DIRECTORS
INSTRUCTION (To withhold authority to vote Nominees: Class III (term to 2001) If you do not sign and return a
for any individual nominee write his name in William E. Morgenstern proxy, or attend the meeting, your
the space below): shares cannot be voted.
Vincent Carrino
PLEASE SIGN HEREON and return in
______________________________________________________ the enclosed envelope promptly.
2. Approve the Amendments FOR AGAINST ABSTAIN Shareholders are entitled to
cumulative voting in the election
to the Company's 1995 [ ] [ ] [ ] of directors.
Stock Option Plan
3. In their discretion, upon such other business as may properly come
before the Annual Meeting or any adjournments.
SIGNATURE _________________________________ _____________ __________________________________ _____________________
Note: Sign here as name(s) appears on label DATED SIGNATURE IF JOINTLY OWNEDDATED
</TABLE>
