Document:

EX-10.2

 

Exhibit 10.2

NONCOMPETITION AGREEMENT

     This Noncompetition Agreement (the “Noncompetition Agreement”) is made and entered into as of
March 22, 2005, by and between William E. Morgenstern and Rent-Way, Inc. (“Rent-Way”), a
Pennsylvania corporation. For purposes of this Noncompetition Agreement, the “Rent-Way Companies”
refers to Rent-Way, together with its past and present parents, subsidiaries, affiliates and
divisions.

RECITALS

     WHEREAS, Morgenstern was one of the founders of Rent-Way and has served as its Chief Executive
Officer and President and a member of its Board of Directors (the “Board”) since the formation of
Rent-Way in 1981;

     WHEREAS, Morgenstern was elected Chairman of the Board of Rent-Way in October 1999 and is
currently serving in such position;

     WHEREAS, Morgenstern has been employed by Rent-Way pursuant to an Employment Agreement dated
as of November 20, 2001 (the “Employment Agreement”);

     WHEREAS, Morgenstern desires to resign as Rent-Way’s President and Chief Executive Officer;

     WHEREAS, Rent-Way desires to continue to engage Morgenstern as a consultant, and Morgenstern
desires to provide such services; and

     WHEREAS, this Noncompetition Agreement is being executed simultaneously with the Consulting
Agreement and Release between Morgenstern and Rent-Way, dated as of March 22, 2005 (the “Consulting
Agreement”);

     NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth
and set forth in the Consulting Agreement, and intending to be and being legally bound hereby, the
parties agree as follows:

AGREEMENT

     1. Payments to Morgenstern in Consideration for His Obligations Under Noncompetition
Agreement. In exchange for and in full consideration of Morgenstern’s promises, covenants and
agreements set forth in this Noncompetition Agreement, Rent-Way will pay Morgenstern and
Morgenstern will accept payments (the “Noncompetition Payments”) at the annual rate of One Hundred
Fifty Thousand Dollars ($150,000) for the period beginning May 1, 2005 and ending on the lesser of
(a) seven years from such date, and (b) two years after the termination for any reason of
Morgenstern’s consulting engagement with Rent-Way other than a termination by the Company without
Cause (as defined in the Consulting Agreement) or by
Morgenstern for Good Reason (as defined in the Consulting Agreement) following a Change in

 

 

Control (as defined in the Consulting Agreement) pursuant to Section 9(f)(iv) of the Consulting
Agreement (such time, the “Covered Time”). Such Noncompetition Payments will be paid monthly in
arrears and shall be subject to all legally required and customary withholdings. The
Noncompetition Payments to be provided herein shall not affect, limit or restrict any remuneration
Morgenstern may be eligible to receive under the Consulting Agreement or in connection with
rendering services for Rent-Way as its Chairman of the Board or as a member of its Board.

     2. Noncompetition; Nonsolicitation.

          (a) Morgenstern acknowledges and recognizes the highly competitive nature of Rent-Way’s
business and that access to Rent-Way’s confidential records and proprietary information renders him
special and unique within Rent-Way’s industry. In consideration of the payments to be made by
Rent-Way to Morgenstern pursuant to this Noncompetition Agreement, Morgenstern agrees that during
the Covered Time, Morgenstern will not directly or indirectly, establish, finance, own, manage,
operate, engage in, be employed by, act as a consultant for, or otherwise participate in the
conduct of, any business in the United States in the rental purchase industry or which engages in
an Other Competitive Business (as defined below) engaged in by Rent-Way (together, the “Business”);
provided, however, that the provisions of this Section 2(a) will not be deemed breached merely
because Morgenstern is a passive investor who owns less than 1% of the outstanding common stock of
a publicly-traded company; and further provided that this provision shall not prohibit
Morgenstern’s employment or provision of services to a business by virtue of the fact that such
business has divisions or affiliates that engage in the Business so long as Morgenstern does not
provide services to and has no managerial or supervisory authority with respect to such divisions
or affiliates. As used in this Noncompetition Agreement, “Other Competitive Business” shall mean a
business not in the rental purchase industry that (i) is the same or substantially similar to any
business engaged in or proposed to be engaged in by Rent-Way at the time Morgenstern begins any
involvement with such business and (ii) generates or is reasonably expected within the ensuing
twenty-four months to generate at least 20% of Rent-Way’s revenues or profits.

          (b) In further consideration of the payments to be made by Rent-Way to Morgenstern pursuant to
this Noncompetition Agreement, Morgenstern agrees that during the Covered Time, he shall not
directly or indirectly (i) solicit, encourage or attempt to solicit or encourage any of the
employees, agents, consultants or representatives of any of the Rent-Way Companies to terminate
his, her, or its relationship with such Rent-Way Company; (ii) solicit, encourage or attempt to
solicit or encourage any of the employees, agents, consultants or representatives of the Rent-Way
Companies to become employees, agents, consultants or representatives of any other person or
entity; (iii) directly or indirectly solicit or do business with or attempt to solicit or do
business with any customer, vendor or distributor of any of the Rent-Way Companies with respect to
any product or service being furnished, made, sold or leased by such Rent-Way Company in connection
with Morgenstern’s involvement with any business or venture in the rental purchase industry or an
Other Competitive Business; or (iv) persuade or seek to persuade any customer of any of the
Rent-Way Companies to cease to do business or to reduce the amount of business which any customer
has customarily done or contemplates doing with such Rent-Way Company, whether or not the
relationship between the Rent-Way Company
and such customer was originally established in whole or in part through Morgenstern’s
efforts.

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For purposes of this Section 2(b) only, during any period within the Covered Time
subsequent to the termination of Morgenstern’s consulting engagement, the terms “customer,”
“vendor” and “distributor” shall mean a customer, vender or distributor who has done business with
the Rent-Way Companies within twenty-four months preceding the termination of Morgenstern’s
consulting engagement.

          (c) During the Covered Time, Morgenstern agrees that upon the earlier of his (i) negotiating
with any Competitor (as defined below) concerning the possible employment of Morgenstern by the
Competitor, (ii) receiving an offer of employment from a Competitor, or (iii) becoming employed by
a Competitor, Morgenstern will (x) immediately provide notice to Rent-Way and (y) provide copies of
this Noncompetition Agreement and Section 11 of the Consulting Agreement to the Competitor.
Morgenstern further agrees that Rent-Way may provide notice to a Competitor of Morgenstern’s
obligations under this Noncompetition Agreement and Section 11 of the Consulting Agreement. For
purposes of this Noncompetition Agreement, “Competitor” shall mean any entity (other than any of
the Rent-Way Companies) that (A) engages, directly or indirectly, in any business in the United
States in the rental purchase industry or (B) engages in an Other Competitive Business.

          (d) Morgenstern understands that the provisions of this Section 2 of the Noncompetition
Agreement may limit his ability to earn a livelihood in a business similar to the business of the
Rent-Way Companies but nevertheless agrees and hereby acknowledges that the consideration provided
to him under this Noncompetition Agreement is sufficient to justify the restrictions contained in
such provisions. In consideration thereof and in light of Morgenstern’s education, skills and
abilities, Morgenstern agrees that he will not assert in any forum that such provisions prevent him
from earning a living or otherwise are void or unenforceable or should be held void or
unenforceable.

     2. Enforcement. Morgenstern acknowledges and agrees that, by virtue of his position,
his services, and access to and use of confidential records and proprietary information, any
violation by him of any of the undertakings contained in this Noncompetition Agreement would cause
the Rent-Way Companies immediate, substantial and irreparable injury for which they have no
adequate remedy at law. Accordingly, Morgenstern agrees and consents to the entry of an injunction
or other equitable relief by a court of competent jurisdiction restraining any violation or
threatened violation of any undertaking contained in this Noncompetition Agreement. Morgenstern
waives posting by the Rent-Way Companies of any bond otherwise necessary to secure such injunction
or other equitable relief. Rights and remedies provided for in this Noncompetition Agreement are
cumulative and shall be in addition to rights and remedies otherwise available to the Rent-Way
Companies under any other agreement or applicable law.

     3. Cancellation of Noncompetition Agreement. Rent-Way, in its sole discretion, may
elect to cancel the Noncompetition Agreement if a court of competent jurisdiction makes a
preliminary or final determination that (a) any covenant in the Noncompetition Agreement is
unenforceable or invalid in its entirety, or (b) reduces the scope, duration and/or area of such
provision (and substitutes provisions for any such invalid or unenforceable provisions) and/or
deletes specific words and phrases in order to make such provision enforceable to the fullest
extent permitted by law; provided that Rent-Way may not cancel this
Noncompetition Agreement pursuant to this Section 4 unless Morgenstern contended in the

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proceeding resulting in such determination that the Noncompetition Agreement was invalid or
unenforceable in whole or in part.

     3. Notices. Any notice required or permitted hereunder shall be in writing and shall
be sufficiently given if personally delivered or if sent by registered or certified mail, postage
prepaid, with return receipt requested, addressed: (a) in the case of Rent-Way, to Rent-Way, Inc.,
One RentWay Place, Erie, Pennsylvania 16505, attn.: Chairman, Compensation Committee, with a copy
to Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New York 10022, attn.: Robert
N. Holtzman, Esq. if prior to April 10, 2005 and to Kramer Levin Naftalis & Frankel LLP, 1177
Avenue of the Americas, New York, New York 10036, attn.: Robert N. Holtzman, Esq. if on or after
April 10, 2005; and (b) in the case of Morgenstern, to William E. Morgenstern, 4011 Westbury Ridge
Drive, Erie, Pennsylvania 16506, or to such other address as Morgenstern shall designate by written
notice to Rent-Way, with a copy to Kronish Lieb Weiner & Hellman LLP, 1114 Avenue of the Americas,
New York, New York 10036, attn: Paul M. Ritter, Esq. Any notice given hereunder shall be deemed to
have been given at the time of receipt thereof by the person to whom such notice is given if
personally delivered or at the time of mailing if sent by registered or certified mail.

     4. Assignment and Transfer.

          (a) Rent-Way. This Noncompetition Agreement shall inure to the benefit of and be
enforceable by, and shall be assignable by Rent-Way to, any purchaser of all or substantially all
of Rent-Way’s business or assets, any successor to Rent-Way or any assignee thereof (whether direct
or indirect, by purchase, merger, consolidation or otherwise).

          (b) Morgenstern. The parties hereto agree that Morgenstern is obligated under the
Consulting Agreement to render personal services of a special, unique, unusual, extraordinary and
intellectual character, thereby giving the Consulting Agreement and this Noncompetition Agreement
special value. Morgenstern’s rights and obligations under this Noncompetition Agreement shall not
be transferable by Morgenstern by assignment or otherwise, and any purported assignment, transfer
or delegation thereof shall be void; provided, however, that if Morgenstern shall die, all amounts
then payable to Morgenstern hereunder shall be paid in accordance with the terms of this
Noncompetition Agreement to Morgenstern’s estate.

     4. Miscellaneous.

          (a) In the event any payments made or to be made pursuant to this Noncompetition Agreement
shall be deemed to be subject to an excise tax imposed pursuant to Section 409A of the Internal
Revenue Code, Rent-Way agrees to negotiate in good faith with Morgenstern to seek to avoid the
imposition of, or reduce the amount of, such excise tax.

          (b) Any waiver of any term or provision hereof, or of the application of any such term or
provision to any circumstances, shall be in writing signed by the party charged with giving such
waiver. Waiver by any of the parties hereto of any breach hereunder by any other party shall not
operate as a waiver of any other breach, whether similar to or different from the breach waived.
No delay on the part of any of the parties in the exercise of
any of their respective rights or remedies shall operate as a waiver thereof, and no single or

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partial exercise by any of the parties of any such right or remedy shall preclude other or further
exercise thereof.

          (c) If any provision of this Noncompetition Agreement or the application of any such provision
to any party or circumstances shall be determined by any court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Noncompetition Agreement, or the
application of such provision to such person or circumstances other than those to which it is so
determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof
shall be enforced to the fullest extent permitted by law. If any provision of this Noncompetition
Agreement, or any part thereof, is held to be invalid or unenforceable because of the scope or
duration of or the area covered by such provision, the parties hereto agree that the court making
such determination shall reduce the scope, duration and/or area of such provision (and shall
substitute appropriate provisions for any such invalid or unenforceable provisions) in order to
make such provision enforceable to the fullest extent permitted by law and/or shall delete specific
words and phrases, and such modified provision shall then be enforceable and shall be enforced.
The parties hereto recognize that if, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants contained in this Noncompetition Agreement, then that invalid or
unenforceable covenant contained in this Noncompetition Agreement shall be deemed eliminated from
these provisions to the extent necessary to permit the remaining separate covenants to be enforced.
In the event that any court determines that the time period or the area, or both, are unreasonable
and that any of the covenants is to that extent invalid or unenforceable, the parties hereto agree
that such covenants will remain in full force and effect, first, for the greatest time period, and
second, in the greatest geographical area that would not render them unenforceable. Following any
court action taken pursuant to this Section 7(b), Rent-Way shall have the rights provided for in
Section 4 above.

          (d) This Noncompetition Agreement shall be governed by and construed (both as to validity and
performance) and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania
applicable to agreements made and to be wholly performed within such jurisdiction, without regard
to the principles of conflicts of law or where the parties are located at the time a dispute
arises. The parties consent and submit themselves to the non-exclusive jurisdiction of the state
and federal courts sitting in Erie County, Pennsylvania over any dispute arising out of or related
to this Noncompetition Agreement.

          (e) This Noncompetition Agreement, together with the Consulting Agreement and the plans and
agreements or grants governing stock options granted to Morgentstern, constitutes the entire
agreement between Morgenstern and Rent-Way and cannot be modified or altered except in a writing
signed by both Morgenstern and Rent-Way. The parties acknowledge that they entered into this
Noncompetition Agreement voluntarily, that they fully understand all of its provisions, and that no
representations were made to induce execution of this Noncompetition Agreement, which are not
expressly contained herein or in the Consulting Agreement.

          (f) The Section headings herein are for convenience of reference only and shall not affect the
meaning of any provision of this Noncompetition Agreement

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          (g) Cessation or termination of Morgenstern’s consulting engagement hereunder with Rent-Way
shall not result in termination of this Noncompetition Agreement. The respective obligations of
Morgenstern and rights and benefits afforded to Rent-Way as provided in this Noncompetition
Agreement shall survive cessation or termination of Morgenstern’s consulting engagement hereunder.

     IN WITNESS WHEREOF, the parties have executed this Noncompetition Agreement.

	 	 	 	 	 
	 	 	RENT-WAY, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	 

	 	 	 	 
	William E. Morgenstern

	 	 	 	Robert Fagenson
	

	 	 	 	Chairman, Compensation Committee of the Board of Directors

-6-Exhibit 10.3

 

Exhibit 10.3

RENT-WAY, INC.

STOCK OPTION AGREEMENT

     THIS AGREEMENT (“Agreement”) is made and entered into as of this «Day» day of «Month» «Year»,
by and between Rent-Way, Inc., a Pennsylvania corporation (the “Company”) and the undersigned
employee (the “Optionee”).

WITNESSETH:

     WHEREAS, the Company has determined that an option to purchase shares of common stock of the
Company be granted to Optionee under the Rent-Way «PlanYear» Stock Option Plan (the “Plan”); and

     WHEREAS, the Board of Directors of the Company or a committee thereof has approved the grant
evidenced hereby.

     NOW, THEREFORE, in consideration of the premises, the mutual promises and representations
contained in this Agreement, and intending to be legally bound, the parties agree as follows:

	 	1.  	Stock Option. The Company hereby grants to Optionee an option (the
“Option”) to purchase, upon the terms and conditions set forth herein and in the Plan,
that number of shares of common stock of the Company set forth on Exhibit A. Subject
to the terms of the Plan and applicable law, the Option will be treated as an incentive
stock option or as a non-qualified stock option (in each case as such terms are defined
in the Plan) as set forth on Exhibit A.
	 
	 	2.  	Terms of Stock Option. The Option is subject to the following terms
and conditions:

	 	a.  	The exercise price is set forth on Exhibit A.
	 
	 	b.  	The Option will vest immediately. The shares of stock subject
to the Option will be subject to restrictions on transfer described on Exhibit
A. The certificates representing such shares shall bear a legend with respect
to those restrictions determined by the Company.
	 
	 	c.  	The Option may be exercised in whole or in part at any time or
from time to time by delivering a written notice (in the form attached hereto)
to the Company and paying to the Company the exercise price. Subject to
paragraph (e) below, if Optionee ceases to be employed by, or ceases to be in
the service of the Company for any reason other than death or disability,
Optionee will have the right to exercise the Option at any time within three
months after such termination, but only to the extent the Option was
exercisable at the date of such termination. Any portion of the Option not
then exercised will immediately expire following such three-month period.

 

 

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	 	   	In no event may the Option be exercised after its expiration date.
	 
	 	d.  	The Option may be exercised only by Optionee during his or her
lifetime, except in the case of death or disability, in which case it may be
exercised, in whole or in part, within one year following such death or
disability to the extent Optionee could have exercised the Option as of the
date of death or disability, by the person or persons who acquire the Option by
bequest or inheritance or by the Optionee’s legal representative. In no event
may the Option be exercised after its expiration date. The determination of
whether Optionee’s employment with or service to the Company has ceased due to
disability will be made by the Compensation Committee of the Company’s Board of
Directors or such other body administering the Plan in accordance with its
terms.
	 
	 	e.  	Notwithstanding the second sentence of paragraph (c) above, the
Option will expire automatically and may not be exercised following the
involuntary termination of Optionee’s employment with or service to the
Company. The determination of whether Optionee’s employment with or service to
the Company has been involuntarily terminated will be made by the Compensation
Committee of the Company’s Board of Directors or such other body administering
the Plan in accordance with its terms.
	 
	 	f.  	The exercise price will be payable to the Company upon the
exercise of the Option either (i) in cash or by check, (ii) by delivery of
Company common stock already owned by Optionee having a fair market value equal
to the exercise price or (iii) by a combination of (i) and (ii) above. To the
extent not inconsistent with the restrictions on transfer pertaining to the
stock subject to the Option as described on Exhibit A, the Option may also be
exercised by delivery to the Company of an irrevocable written notice
instructing the Company to deliver the shares deliverable upon exercise of the
Option to a broker selected by the Company, subject to the broker’s written
guarantee to deliver cash to the Company in the full amount of the exercise
price due on the Option’s exercise. The fair market value of stock delivered
in payment of the exercise price of the Option will be determined as of any
date in the same manner as the exercise price in accordance with the terms of
the Plan.
	 
	 	g.  	The Option will expire automatically at 11:59 p.m. Erie,
Pennsylvania local time on the expiration date as set forth on Exhibit A.

	 	3.  	Rights as Shareholder. Optionee will have no rights as a shareholder
with respect to any shares covered by the Option until the date of the issuance of a
stock certificate representing the shares acquired on exercise thereof.
	 
	 	4.  	Investment Purpose. This Option is granted on the condition that the
purchases of stock covered by the Option will be for investment purposes, and not with
a view towards resale or distribution. However, in the event the stock subject to the
Option is registered under the Securities Act of 1933, as amended, or a resale of

 

 

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	 	   	stock without registration with the Securities and Exchange Commission would
otherwise be permissible, such condition will be inoperative if, in the opinion of
counsel for the Company, such condition is not required under the Securities Act of
1933 or any other applicable law, regulation, or rule of any governmental agency,
national securities exchange or national securities association. All certificates
for common stock issued by the Company pursuant to this Agreement may contain the
following statement:
	 

	 	   	The securities represented by this certificate have not been
registered under any applicable federal or state securities
acts in reliance upon exemptions under those acts. These
securities may not be transferred unless the Company
receives a satisfactory opinion of counsel that such
transfer has been registered or is exempt from registration
under applicable securities laws.

	 	5.  	No Right to Continued Employment. Nothing in this agreement, the Plan
or any agreement or instrument delivered in connection herewith or therewith confers
upon Optionee the right to continue in the employ of or continue to provide service to
the Company or to be entitled to any remuneration or benefits not set forth in this
Agreement, the Plan or any other agreement, or to interfere with or limit in any way
the right of the Company to terminate Optionee’s employment or service.
	 
	 	6.  	Miscellaneous.

	 	a.  	This Agreement is binding upon the parties and their heirs,
legal representatives, successors and assigns.
	 
	 	b.  	This Agreement is subject to the terms of the Plan in all
respects. Any term or provision hereof that is inconsistent with the Plan will
be inoperative and the Plan will control.
	 
	 	c.  	The Option represented hereby is not transferable by the
Optionee except by will or the laws of descent and distribution.
	 
	 	d.  	The Agreement is governed by and will be construed in
accordance with the laws of the Commonwealth of Pennsylvania.

 

 

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its duly authorized
officer and Optionee has signed this Agreement.

	 	 	 
	OPTIONEE:

	 	RENT-WAY, INC.
	 
	 	 
	«OptioneeName»
	 	 
	«OptioneeSSNumber»
	 	 
	 
	 	 
	

Signature of Optionee

	 	By: 

William E. Morgenstern
	 
	 	 
	

Print Name of Optionee

	 	Title: Chief Executive Officer
	 
	 	 
	

Address
	 	 
	 
	 	 
	

Address
	 	 

 

 

EXHIBIT A

Number of shares subject to Option: «NumberofShares»

Tax status of Option: «TaxStatus»

Exercise price of Option: $«ExercisePrice»

Exercisability: The Option will vest and become exercisable immediately on grant.

Expiration Date: The Option may be exercised within a five (5) year period from the date of grant.

Restrictions on Transfer: The shares received on exercise of the Option will not be
transferable except as follows:

50% have no restriction.

25% on and after the first anniversary of the grant date of the Option.

25% on and after the second anniversary of the grant date of the Option.

 

 

EXERCISE OF STOCK OPTION AND DECLARATION

     Pursuant to the provisions of the stock option agreement entered into as of ___,
200___between Rent-Way, Inc. (the “Company”) and the undersigned as Optionee, I hereby exercise the
Option granted thereunder to the extent of ___shares of common stock of the Company. I hereby
make payment in full in accordance with the terms of the stock option agreement.

	 	 	 	 	 
	 	 	 
	Date: _____________, 20__ 	 	 
	 	(Optionee Signature)
 	 
	 	Print Name:  _________________________

Social Security Number:  _______________

Address: __________________________

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