<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
</TABLE>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
RENT-WAY, INC.
--------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
<TABLE>
<S> <C> <C>
[ 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 the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------
[ ] 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:
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</TABLE>
<PAGE> 2
RENT-WAY, INC.
ONE RENTWAY PLACE
ERIE, PENNSYLVANIA 16505
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 8, 2000
------------------------
To the Shareholders of Rent-Way, Inc.:
Notice is hereby given that the Annual Meeting of the Shareholders of
Rent-Way, Inc. (the "Company") will be held at the Bel Aire Hotel located at
2800 West Eighth Street, Erie, Pennsylvania, on Wednesday, March 8, 2000 at
10:00 a.m. for the following purposes:
1. To elect three Class II directors to serve until the 2003 Annual
Meeting of Shareholders and
2. 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 7, 2000
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
January 31, 2000
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> 3
RENT-WAY, INC.
ONE RENTWAY PLACE
ERIE, PENNSYLVANIA 16505
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 8, 2000
------------------------
This Proxy Statement and the accompanying form of proxy are being mailed on
or about January 31, 2000 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
8, 2000, and any adjournments thereof.
If the form of proxy enclosed 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 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 50,000,000 shares,
no par value, of which 22,008,191 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 7, 2000 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 will be treated as present for purposes of
determining a quorum. Broker non-votes on any matter (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 not be treated as present for purposes of determining a quorum on that
matter. Abstentions and broker non-votes will not be counted as voting on any
matter at the Annual Meeting.
<PAGE> 4
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 by-laws
provide for a Board of Directors that is not more than nine members.
The term of office of Class II directors expires at the Annual Meeting. The
Board of Directors proposes that the nominees for Class II described below, each
of whom is currently serving as a Class II director, be elected as Class II
directors for a new term of three years ending at the 2003 Annual Meeting of
Shareholders and until their successors are duly elected and qualified. Mr. Paul
Upchurch who served as Class II director since February 1998, has indicated his
intention to resign effective upon the expiration of his term at the Annual
Meeting. The Board of Directors has selected Jeffrey A. Conway, President and
Chief Operating Officer of the Company, to fill the vacancy that will be created
by the resignation of Mr. Upchurch. The Board of Directors has determined that
Mr. Conway will serve as a Class I director with a term ending at the 2002
Annual Meeting of Shareholders and until his successor has been selected 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 II
directors is set forth below:
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. Mr. Lerner is also a director of
Seitel, Inc., a company listed on the NYSE that develops and maintains a seismic
data bank for the oil and gas industry, Helm Resources, Inc., a company traded
on the OTC Bulletin Board that provides management, financial and asset based
lending services, Micros-to-Mainframes, Inc., a company quoted on the Nasdaq
National Market that is a provider and systems integrator of advanced technology
communications products and Internet services, and Cortland Trust, Inc., a money
market mutual fund distributed primarily through securities brokerage firms and
commercial banks.
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.
JACQUELINE E. WOODS has been a director of the Company since March 1999.
Ms. Woods is a nationally-recognized educator and specialist in adult and
community colleges and in 1996 was appointed by President Clinton as the Liaison
for Community Colleges from the United States Department of Education. As the
Liaison for Community Colleges, Ms. Woods is a policy advisor to the Secretary
of Education and to the Clinton Administration on national issues affecting
community colleges. Prior to her current appointment, from 1993 to 1996, Ms.
Woods served as Vice Chancellor for External Affairs for the City Colleges of
Chicago. Ms. Woods also served as the Vice President for Institutional
Advancement at the Community College of Philadelphia from 1991 to 1993 and,
earlier in her career, held positions at various colleges.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
ELECTION OF EACH OF THE NOMINEES FOR CLASS II DIRECTOR.
2
<PAGE> 5
MANAGEMENT INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS
Certain information regarding the directors and executive officers of the
Company is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William E. Morgenstern.................... 41 Chairman of the Board, Chief Executive Officer and
Director
William Lerner............................ 64 Director and Secretary
Vincent A. Carrino........................ 44 Director
Robert B. Fagenson........................ 51 Director
Gerald A. Ryan............................ 64 Chairman Emeritus of the Board and Director
Marc W. Joseffer.......................... 51 Director
Jacqueline E. Woods....................... 41 Director
Jeffrey A. Conway......................... 42 President and Chief Operating Officer
William A. McDonnell...................... 38 Vice President and Chief Financial Officer
Ronald D. DeMoss.......................... 49 Vice President and General Counsel
Jeffrey K. Underwood...................... 43 Vice President of Operations
Kirk R. Smithee........................... 36 Vice President of Administration
</TABLE>
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. In October 1999, Mr. Morgenstern was elected Chairman of the Board of the
Company. As of January 2000, Mr. Morgenstern will serve as the Chairman of the
Board and Chief Executive Officer and will no longer serve as President of the
Company. 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 a 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. Mr. Morgenstern is a Class III director of the
Company whose term expires in 2001.
GERALD A. RYAN, a founder of the Company, served as Chairman of the Board
of the Company from 1981 to October 1999 and as a director since its formation
in 1981. Mr. Ryan currently serves as Chairman Emeritus of the Board of the
Company and as a consultant to the Company. Mr. Ryan has also been instrumental
in the formation of several other companies, including Spectrum Control, Inc., a
company quoted on the Nasdaq National Market, which produces electronic
components. He presently serves as Chairman of the Board of Spectrum Control,
Inc. Mr. Ryan is also a director of Intrenet, Inc., a company that is listed on
the Nasdaq SmallCap Market which is a holding company for truckload carrier
subsidiaries and one of the largest flat-bed trucking companies in the United
States. Mr. Ryan is a Class I director of the Company whose term expires in
2002.
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 New York Stock Exchange ("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 Cash Technologies, Inc., a company
quoted on the Nasdaq SmallCap Market that provides bulk coin processing
services, of United Diagnostics, Inc., a company quoted on the OTC Bulletin
Board that researches medicines for the treatment of cancer, and of Intrenet,
Inc., a company listed on the Nasdaq SmallCap Market that is a holding company
for truckload carrier subsidiaries and is one of the largest flat-bed trucking
companies in the United States. Mr. Fagenson is a Class I director of the
Company whose term expires in 2002.
3
<PAGE> 6
VINCENT A. CARRINO has been a director since January 1995. 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. Mr. Carrino is also a director of Cash Technologies, Inc., a
company listed on the Nasdaq SmallCap Market that provides bulk coin processing
services, and of Intrenet, Inc., a company that is also listed on the Nasdaq
SmallCap Market which is a holding company for truckload carrier subsidiaries
and one of the largest flat-bed trucking companies in the United States. Mr.
Carrino is a Class III director of the Company whose term expires in 2001.
PAUL N. UPCHURCH has been a director since February 1998. Mr. Upchurch was
President and Chief Executive Officer of Champion Rentals, Inc. from April 1989
through February 1998. Prior to his employment with Champion, Mr. Upchurch was a
practicing attorney in Daytona Beach, Florida. Mr. Upchurch is a Class II
director of the Company whose term expires in 2000 and who has indicated his
intention to resign from the Board of Directors upon the expiration of his term
at the Annual Meeting.
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. In March 1999, Mr. Conway was elected
Senior Vice President of the Company. As of January 2000, Mr. Conway serves as
President and Chief Operating Officer of the Company. 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.
WILLIAM A. MCDONNELL was hired by the Company effective February 1, 2000 as
Vice President and Chief Financial Officer. Prior to his employment with
Rent-Way, Mr. McDonnell was a director in the Global Distribution Group for the
Bank of Montreal. Prior to that position, Mr. McDonnell was Vice President and
Relationship Manager in the Emerging Majors Group for Harris Bank. Harris Bank
is a wholly-owned subsidiary of the Bank of Montreal, part of Rent-Way's bank
syndicate.
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. Since 1996, Mr. DeMoss has served on the Board of Directors of APRO
and on its executive committee. Mr. DeMoss also serves on APRO's Government
Relations Committee. From 1981 through 1990, Mr. DeMoss was a practicing
attorney in Wichita, Kansas.
JEFFREY K. UNDERWOOD was hired by the Company in February 1998 and was
recently appointed Vice President of Operations. From January 1989 to February
1998, he was employed by Champion Rentals where he served in various positions,
including store manager, Regional Manager, Director of Operations, and Vice
President of Operations. Prior to Champion, Mr. Underwood was employed by JC
Penney for 16 years, reaching the position of Senior Merchandising Manager.
KIRK R. SMITHEE was hired by the Company in September 1995 as a regional
manager, in July 1996 was named a director of operations, in October 1997 was
named to Vice President of Operations and most recently was named Vice President
of Administration. 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. Lerner and Joseffer and Ms. Woods
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,
Nominating and Executive Committees. The Board of Directors held nine meetings
in fiscal year 1999. Each director attended at least 75% of meetings of the full
Board and meetings of committees on which each served.
4
<PAGE> 7
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 two meetings in fiscal year 1999.
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
four meetings in fiscal year 1999.
The Stock Option Committee consists of Messrs. Fagenson and Lerner. The
Stock Option Committee administers the Company's 1992, 1995 and 1999 Stock
Option Plans and otherwise administers and oversees the grant of stock options
by the Company. The Stock Option Committee had three meetings in fiscal year
1999.
The Nominating Committee consists of Messrs. Ryan, Morgenstern and
Joseffer. The Nominating Committee recommends nominees for election as directors
to the Board and to committees of the Board. The Nominating Committee had two
meetings in fiscal year 1999.
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 two meetings in fiscal year 1999.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company (Messrs. Carrino, Fagenson,
Joseffer, Lerner and Woods) receive $2,500 for each Board meeting attended in
person and $500 for each meeting attended by telephone and an annual retainer of
$5,000, 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 who serve as chairman of one of the Board's standing committees
receive an additional annual retainer of $5,000, payable quarterly. Non-employee
directors are also entitled to participate under the Company's 1992, 1995 and
1999 Stock Option Plans. During fiscal year 1999, pursuant to the 1995 Stock
Option Plan, non-employee directors of the Company received the following option
grants: (i) on December 11, 1998, in return for services rendered, Mr. Carrino,
Mr. Fagenson, Mr. Joseffer, and Mr. Lerner each received a grant of 30,000
options, vesting one-third immediately, one-third on March 1, 2000 and one-third
on March 1, 2001 at an exercise price of $24.87 per share (which was the closing
price of the Company's Common Stock on the New York Stock Exchange on the grant
date) and (ii) on March 23, 1999, Ms. Woods received a grant of 1,000 options,
vesting one-half immediately and one-half on the first anniversary of the grant
date, at an exercise price of $24.00 per share (which was the closing price of
the Company's Common Stock on the New York Stock Exchange on the grant date).
Directors who are employees of the Company receive no additional compensation
for their services as directors.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table discloses compensation for the years ended September
30, 1997, 1998 and 1999 received by Messrs. Ryan and Morgenstern and by those
executive officers of the Company who served as such at the close of the fiscal
year ended September 30, 1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION (1) SECURITIES
---------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
--------------------------- ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Gerald A. Ryan.......................... 1999 150,000 100,000 45,000 --
Chairman of the Board 1998 150,000 132,445 -- --
1997 150,000 72,221 60,000 --
William E. Morgenstern.................. 1999 298,107 200,000 440,000 --
President and 1998 240,000 269,926 -- --
Chief Executive Officer 1997 240,000 149,506 55,000 181,021(2)
Jeffrey A. Conway....................... 1999 178,156 120,000 220,000 --
Senior Vice President and 1998 120,000 144,000 -- --
Chief Financial Officer 1997 120,000 97,250 27,000 --
Ronald D. DeMoss........................ 1999 141,091 10,000 2,500 --
Vice President and 1998 100,700 10,000 5,000 --
General Counsel 1997 100,700 7,000 3,000 --
Jeffrey K. Underwood.................... 1999 141,157 10,000 85,000 --
Vice President of Operations
Kirk R. Smithee......................... 1999 170,731 28,000 45,000 --
Vice President of Administration 1998 160,000 55,000 30,000 --
</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 perquisites 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 Mrs. Morgenstern's exercise of 60,000 stock options in May
1997. In return, Mr. Morgenstern surrendered stock options to the Company
for cancellation.
EMPLOYMENT AGREEMENTS
During the 1999 fiscal year, Mr. Ryan served as Chairman of the Board under
an employment agreement with the Company for a term that commenced October 1,
1998. This employment agreement was voluntarily terminated on September 30,
1999. As of October 1, 1999, Mr. Ryan entered into a new agreement with the
Company pursuant to which he serves as a consultant and the Chairman Emeritus of
the Board for a term that commences October 1, 1999 and continues to September
30, 2009. Under the new agreement, Mr. Ryan receives an annual compensation of
$100,000 (subject to annual cost of living increases and an annual review by the
Compensation Committee of the Board of Directors) and is eligible to receive an
annual bonus in an amount determined by the Board of Directors. Mr. Ryan is also
eligible to participate in the Company's employee benefit plans and to receive
fringe benefits made generally available to senior management.
During the 1999 fiscal year, Mr. Morgenstern served as full-time President
and Chief Executive Officer under an employment agreement with the Company for a
term that commenced October 1, 1998 and continues to
6
<PAGE> 9
September 30, 2001, unless earlier terminated in accordance with its terms. As
of October 1, 1999, Mr. Morgenstern assumed the role of the Chairman of the
Board. As of January 2000, Mr. Morgenstern serves as Chairman of the Board and
Chief Executive Officer and will no longer serve as President of the Company.
The term of the employment agreement is automatically extended for two year
periods beginning on the date which is one year prior to September 30, 2001 and
each anniversary of such date, unless either party gives notice at least 60 days
prior to any such date that the term shall not be extended. Under Mr.
Morgenstern's employment agreement, he receives an annual salary and is eligible
to receive annual bonuses in amounts determined by the Board of Directors. Mr.
Morgenstern's salary for the second and third years of the employment agreement
is to be increased over the salary payable in the previous year by 5% for each
10% increase in total revenues of the Company over the total revenues of the
Company reported in the previous fiscal year. Mr. Morgenstern's salary is also
subject to annual review by the Compensation Committee of the Board of Directors
and, following the third year of the employment agreement, is subject to annual
cost of living increases. Mr. Morgenstern is also eligible to participate in the
Company's employee benefit plans and to receive fringe benefits made generally
available to senior management.
During the 1999 fiscal year, Mr. Conway served as full-time Senior Vice
President and Chief Financial Officer under an employment agreement with the
Company for a term that commenced October 1, 1998 and continues to September 30,
2001, unless earlier terminated in accordance with its terms. As of January
2000, Mr. Conway serves as President and Chief Operating Officer and will no
longer serve as the Chief Financial Officer of the Company. The term of the
employment agreement is automatically extended for two year periods beginning on
the date which is one year prior to September 30, 2001 and each anniversary of
such date, unless either party gives notice at least 60 days prior to any such
date that the term shall not be extended. Under the employment agreement, Mr.
Conway receives an annual salary and is eligible to receive annual bonuses in
amounts determined by the Board of Directors. Mr. Conway's salary for the second
and third years of the employment agreement is to be increased over the salary
payable in the previous year by 5% for each 10% increase in total revenues of
the Company over the total revenues of the Company reported in the previous
fiscal year. Mr. Conway's salary is also subject to annual review by the
Compensation Committee of the Board of Directors and, following the third year
of the employment agreement, is subject to annual cost of living increases. Mr.
Conway is also eligible to participate in the Company's employee benefit plans
and to receive fringe benefits made generally available to senior management.
Effective February 1, 2000, Mr. William A. McDonnell will serve as the
Company's full-time Vice President and Chief Financial Officer under an
employment agreement with the Company for a term continuing to February 1, 2003,
unless earlier terminated in accordance with its terms. The term of the
employment agreement is automatically extended for two year periods beginning on
the date which is one year prior to February 1, 2003 and each anniversary of
such date, unless either party gives notice at least 60 days prior to any such
date that the term shall not be extended. Under the agreement, Mr. McDonnell
receives an annual salary of $190,000 for the first year of the agreement, which
amount will increase by the equivalent of 4% of base salary for the second and
third years of the agreement. Mr. McDonnell's salary is also subject to annual
review by the Compensation Committee of the Board of Directors and, following
the third year of the employment agreement, is subject to annual cost of living
increases. Mr. McDonnell is also eligible to participate in the Company's
employee benefit plans and to receive fringe benefits made generally available
to senior management.
The Company has 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, 1998. Mr. DeMoss' employment
continues on a revolving 12 month basis, such 12-month period commencing on the
first day of the month next succeeding January 15, 1998 and continuing
thereafter commencing on the first day of each succeeding month, until
terminated. Under the employment agreement, Mr. DeMoss receives an annual
salary, is eligible to receive a annual bonus in an amount determined by the
Board of Directors and is eligible for reimbursement of certain expenses. As of
January 1, 1999, Mr. DeMoss' annual salary under the employment agreement was
increased by the Board of Directors to $150,000. Mr. DeMoss is also eligible to
participate in the Company's employee benefit plans in accordance with the terms
of such plans.
In September 1999, the Company entered into an employment agreement with
Jeffrey K. Underwood pursuant to which he is employed full-time as Vice
President of Operations of the Company for a term that
7
<PAGE> 10
commenced on September 13, 1999. The term of Mr. Underwood's employment
agreement continues until September 30, 2002 or until terminated as provided in
the agreement. However, beginning on September 30, 2002, and every two-year
anniversary of this date, the agreement will be automatically extended for an
additional two years, unless terminated at least 60 days prior to any such
two-year anniversary date. Pursuant to the terms of Mr. Underwood's employment
agreement, should the Company choose not to renew the agreement, Mr. Underwood
will be entitled to continue to receive payments of base salary at the rate then
in effect for a period of 24 months. Mr. Underwood receives an annual base
salary of $200,000, is eligible for reimbursement for certain expenses and is
eligible to receive an annual bonus in an amount determined by the Chief
Executive Officer on the basis of corporate performance. Mr. Underwood is also
eligible to participate in the Company's employee benefit plans in accordance
with the terms of such plans.
In November 1999, the Company entered into an employment agreement with
Kirk R. Smithee pursuant to which he is employed full-time as the Vice President
of Administration of the Company for a term that commenced in November 1999. The
term of Mr. Smithee's employment agreement continues until September 30, 2002 or
until terminated as provided in the agreement. Should the Company choose to
terminate Mr. Smithee's agreement, other than for disability or cause, Mr.
Smithee will be entitled to continue to receive payments of base salary for 12
months following such termination. Mr. Smithee receives an annual base salary of
$175,000, is eligible for reimbursement of certain expenses and is eligible to
receive an annual bonus in an amount determined by the Chief Executive Officer
on the basis of corporate performance. Mr. Smithee is also eligible to
participate in the Company's employee benefit plans in accordance with the terms
of such plans.
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers in the fiscal year ended September 30,
1999:
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM ($)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ----------- ------------ -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald A. Ryan.......... 45,000 3.3% 24.88 12/11/03 346,560.68 765,808.48
William E.
Morgenstern........... 65,000 4.8% 24.88 12/11/03 446,712.75 987,118.36
375,000 27.5% 27.88 2/8/04 2,888,005.71 6,381,737.34
Jeffrey A. Conway....... 45,000 3.3% 24.88 12/11/03 309,262.67 683,389.63
175,000 12.8% 27.88 2/8/04 1,347,736.00 2,978,144.09
Ronald D. DeMoss........ 2,500 0.2% 27.88 2/8/04 19,253.37 42,544.92
Jeffrey K. Underwood.... 15,000 1.1% 27.88 2/8/04 115,520.23 255,269.49
70,000 5.1% 22.19 9/13/04 429,099.80 948,198.34
Kirk R. Smithee......... 45,000 3.3% 27.88 2/8/04 346,560.68 765,808.48
</TABLE>
The following table sets forth information concerning stock option
exercises by the Named Executive Officers during the fiscal year ended September
30, 1999 and the number of shares and the value of options outstanding as of
September 30, 1999 for each such officer:
8
<PAGE> 11
AGGREGATE OPTION EXERCISES AND
OPTION VALUES AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES 9/30/99 (#) 9/30/99 ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald A. Ryan.......... -- -- 137,999 30,001 $1,286,250 $ --
William E.
Morgenstern........... 64,386 1,091,466 112,030 418,334 927,220 --
Jeffrey A. Conway....... 27,670 363,169 44,329 205,001 286,088 --
Ronald D. DeMoss........ -- -- 23,650 5,750 204,638 6,000
Jeffrey K. Underwood.... -- -- 10,000 95,000 -- --
Kirk R. Smithee......... -- -- 18,375 82,250 30,938 114,969
</TABLE>
- ---------------
(1) Based on the closing sales price of the Common Stock on the New York Stock
Exchange of $19.00 per share on September 30, 1999, less the exercise price.
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 nor
reprice outstanding 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 based on 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 to Mr. Morgenstern in fiscal year 1999, 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 1999, Mr. Morgenstern's base salary increased to $298,107. Mr.
Morgenstern's base salary was determined pursuant to the terms of his employment
agreement described above. Mr. Morgenstern also received total bonuses of
$200,000, a decrease from the bonus awarded him for fiscal year 1998 of
$269,926. The decrease in bonus is attributable to the lower percentage increase
in the Company's revenues and earnings per share during fiscal year 1999 versus
fiscal year 1998.
Under Mr. Morgenstern's employment agreement, his salary is subject to
increase for the 2000 and 2001 fiscal years based on percentage increases in the
Company's total revenues. The Compensation Committee believes that linking Mr.
Morgenstern's salary to total revenues motivates him to continue to pursue
growth opportunities for the Company in future fiscal years.
Robert B. Fagenson
William Lerner
9
<PAGE> 12
PERFORMANCE GRAPH
The following graph compares for the five-year period ended September 30,
1999, 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 September
30, 1994 in the Common Stock of the Company, the Nasdaq Composite Index and the
Industry Group, and assumes reinvestment of dividends. The Industry Group for
fiscal year 1995 consisted of Aaron Rents, Inc. and Advantage Companies, Inc.
For fiscal year 1996, Renters Choice, Inc. was added to the Industry Group. For
fiscal year 1997, Advantage Companies, Inc. was dropped from the Industry Group
(as a result of its acquisition by Thorn Americas, Inc., a non-reporting
company) and Alrenco, Inc. was added. For fiscal year 1998, Alrenco, Inc. was
dropped from the Industry Group since the Company and Alrenco, Inc. merged on
December 10, 1999 and Rainbow Rentals, Inc. was added. For fiscal year 1999, the
Industry Group remained the same as that composed for the fiscal year 1998. The
stock price performance shown on the following graph is not necessarily
indicative of future price performance.
<TABLE>
<CAPTION>
RENT-WAY, INC. NASDAQ COMPOSITE INDEX INDUSTRY GROUP
-------------- ---------------------- --------------
<S> <C> <C> <C>
'9/30/94' 100 100 100
'9/30/95' 193 137 166
'9/30/96' 257 161 218
'9/30/97' 430 221 260
'9/30/98' 501 222 253
'9/30/99' 386 360 217
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 30, 1999, 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,
1999 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 of the Board of
Directors of any other entity where an executive officer of which served on the
Compensation Committee or Board of Directors of the Company.
10
<PAGE> 13
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 December
29, 1999. 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>
William E. Morgenstern...................................... 621,881 2.8
William Lerner.............................................. 48,000 *
Vincent A. Carrino.......................................... 62,500 *
Robert B. Fagenson (3)...................................... 224,000 *
Marc W. Joseffer............................................ 105,942 *
Gerald A. Ryan (4).......................................... 500,025 2.3
Jacqueline Woods............................................ 500 *
Jeffrey A. Conway........................................... 208,484 *
Ronald D. DeMoss............................................ 27,784 *
Jeffrey K. Underwood........................................ 45,000 *
Kirk R. Smithee............................................. 26,875 *
Directors/Executive Officers as a group (11 persons)........ 1,901,026 8.0
Safeco Asset Management Company and affiliates (5).......... 2,346,600 10.85
601 Union Street
Suite 2500
Seattle, WA 98101
GDJ, Jr. Investments, Limited Partnership (6)............... 1,396,440 6.4
Bank of America Center
101 Convention Center Drive
Suite 850
Las Vegas, Nevada 89109
Michael D. Walts (7)........................................ 1,293,600 5.9
1700 State Street
New Albany, Indiana 47150
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the address for all persons listed above is c/o
Rent-Way, Inc., One RentWay Place, 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 6,000 shares owned by the Fagenson & Co., Inc. Employee Pension
Plan and Trust, of which Mr. Fagenson is a co-trustee.
(4) Includes 100,000 shares owned by the Ryan Children's Trust of 1993, of which
Mr. Ryan is sole trustee.
(5) Safeco Asset Management Company, Safeco Common Stock Trust ("Safeco Trust")
and Safeco Corporation have filed a Schedule 13G with respect to Common
Stock of the Company owned by Safeco Trust and Safeco Corporation. The
beneficial ownership information presented is based solely on the Schedule
13G.
11
<PAGE> 14
(6) GDJ, Jr. Investments, Limited Partnership has filed a Schedule 13D with
respect to its ownership of Common Stock of the Company on behalf of itself,
GDJ, Jr. Investment Corporation, George D. Johnson, Jr. and Daniel C.
Breeden, Jr. The beneficial ownership information presented is based on the
Schedule 13D.
(7) Michael D. Walts has filed a Schedule 13D with respect to his ownership of
Common Stock of the Company. The beneficial ownership information presented
is based on the Schedule 13D.
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 expired 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 received
monthly payments from the Company of $2,143, which monthly payments terminated
in March 1999.
The Company leases two store locations from Mr. Joseffer or a company
controlled by him. The Company paid $65,000 in rent and related amounts under
such leases for the years ended September 30, 1999. 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.
REQUIREMENTS FOR REPORTING SECURITIES OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
ten percent 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 1999 all filing
requirements applicable to executive officers, directors, and greater than
ten-percent beneficial owners were complied with, except that (i) one report
covering one transaction, was filed late by Mr. Conway and (ii) one report,
covering commencement of Section 16 reporting obligations was filed late by Ms.
Woods, a director of the Company.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers, LLP served as the Company's independent accountants
for the 1999 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 2000 will be selected at the meeting of the Board of
Directors to be held following the Annual Meeting of Shareholders on March 8,
2000.
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 2000 Annual Meeting
of Shareholders must submit such proposal by November 1, 2000. 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.
12
<PAGE> 15
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.
A copy of the Company's Annual Report on Form 10-K for fiscal year 1999 may
be obtained without charge by any shareholder of record by written request made
to Jeffrey A. Conway, President and Chief Operating Officer, Rent-Way, Inc., One
RentWay Place, Erie, Pennsylvania 16505.
By Order of the Board of Directors,
WILLIAM LERNER
Secretary
Erie, Pennsylvania
January 31, 2000
13
<PAGE> 16
PROXY PROXY
RENT-WAY, INC.
ONE RENTWAY PLACE
ERIE, PENNSYLVANIA 16505
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON MARCH 8, 2000.
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. (the "Company") to be held at the Bel Aire Hotel located at 2800 West
Eighth Street, Erie, Pennsylvania on March 8, 2000, 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 THE DIRECTORS
LISTED HEREIN AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING.
(To be Signed on Reserve Side)
--------------------------------------------------------------------
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C>
[X] Please mark your
votes as in this
example
FOR the nominees WITHHOLD
listed at right AUTHORITY to
(except as marked to vote for the nominees
the contrary) listed at right
1. ELECTION [__] [__] Nominees: Class II (term to 2003)
OF CLASS II DIRECTORS William Lerner
INSTRUCTION (To withhold authority to vote for any Marc W. Joseffer
individual nominee write their name in the space below): Jacqueline E. Woods
______________________________________________________
2. In their discretion, upon such other business as may
properly come before the Annual Meeting or any adjournments.
IF YOU DO NOT SIGN AND RETURN A
PROXY, OR ATTEND THE MEETING, YOUR
SHARES CANNOT BE VOTED.
PLEASE SIGN HEREON AND RETURN IN
THE ENCLOSED ENVELOPE PROMPTLY.
SHAREHOLDERS ARE ENTITLED TO
CUMULATIVE VOTING IN THE ELECTION
OF DIRECTORS.
SIGNATURE _________________________________ _____________ __________________________________ _____________________
DATED SIGNATURE IF JOINTLY OWNED DATED
Note: Sign here as name(s) appears on label
Title should be added if signing as executor, administrator, trustee, etc.
</TABLE>
