Document:

exv4w5

 

RENT-WAY, INC.

2006 EQUITY INCENTIVE PLAN

1 PREAMBLE

     This Rent-Way, Inc. 2006 Equity Incentive Plan, as it may be amended from time to time (the
“Plan”), is intended to promote the interests of Rent-Way, Inc., a Pennsylvania corporation
(“Rent-Way” and, together with its Subsidiaries, the “Company”), and its stockholders by providing
officers and other employees and non-employee directors of the Company with appropriate incentives
and rewards to encourage them to enter into and continue in service to the Company and to acquire a
proprietary interest in the long-term success of the Company, while aligning the interests of key
employees and management with those of the stockholders.

     This Plan is intended to provide a flexible framework that will permit the development and
implementation of a variety of stock-based programs based on changing needs of the Company, its
competitive market and the regulatory climate.

2 DEFINITIONS

     As used in the Plan, the following definitions apply to the terms indicated below:

     (a) “Award Agreement” shall mean the written agreement between the Company and a Participant
or other document approved by the Committee evidencing an Incentive Award.

     (b) “Board of Directors” shall mean the Board of Directors of Rent-Way.

     (c) “Cause,” and the term “for cause” shall mean,

          (1) with respect to a Participant who is a party to a written employment agreement with the
Company, which agreement contains a definition of “for cause” or “cause” (or words of like import)
for purposes of termination of employment thereunder by the Company, “for cause” or “cause” as
defined in the most recent of such agreements, or

          (2) in all other cases, as determined by the Committee, in its sole discretion.

     (d) “Change in Control”, unless otherwise defined in an Award Agreement, occurs if

          (1) any “Person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act of
1934), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 25% of the total combined voting power of all classes of
capital stock of Rent-Way normally entitled to vote for the election of directors of Rent-Way; or

 - 1 - 

 

          (2) the Board of Directors shall approve a sale of all or substantially all of the assets of
the Company, in one transaction or a series of related transactions, or

(3) the Board of Directors shall approve any merger, consolidation or other
reorganization of Rent-Way in which the shareholders of Rent-Way immediately prior
to such transaction own, in the aggregate, less than 50% of the total combined
voting power of all classes of capital stock of the surviving entity normally
entitled to vote for the election of directors of the surviving entity.

     For purposes hereof, ownership of voting securities shall take into account and shall include
ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) (as in effect on the date
hereof) pursuant to the Exchange Act.

     (e) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (f) “Committee” shall mean the Compensation Committee of the Board of Directors or such other
committee as the Board of Directors shall appoint from time to time to administer the Plan;
provided, that the Committee shall at all times consist of two or more persons, each of whom shall
be a member of the Board of Directors. To the extent required for transactions under the Plan to
qualify for the exemptions available under Rule 16b-3 (as defined herein), members of the Committee
(or any subcommittee thereof) shall be “non-employee directors” within the meaning of Rule 16b-3.
To the extent required for compensation realized from Incentive Awards (as defined herein) under
the Plan to be deductible by the Company pursuant to Section 162(m) of the Code, members of the
Committee (or any subcommittee thereof) shall be “outside directors” within the meaning of such
section.

     (g) “Company Stock” shall mean the common stock, without par value, of Rent-Way.

     (h) “Covered Employee” means a Participant who is, or could be, a “covered employee” within
the meaning of Section 162(m) of the Code.

     (i) “Disability,” unless otherwise provided in an Award Agreement, shall mean

          (1) with respect to a Participant who is a party to a written employment agreement with the
Company, which agreement contains a definition of “disability” or “permanent disability” (or words
of like import) for purposes of termination of employment thereunder by the Company, “disability”
or “permanent disability” as defined in the most recent of such agreements, or

          (2) in all other cases, means such Participant’s inability to perform substantially his or her
duties to the Company by reason of physical or mental illness, injury, infirmity or condition, as
determined by the Committee, in its sole discretion.

     (j) “Dividend Equivalents” means a right granted to a Participant pursuant to Section 10 to
receive the equivalent value (in cash or Stock) of dividends paid on Stock.

     (k) “Effective Date” shall mean January 13, 2006, the date the Plan was adopted by the Board
of Directors, subject to approval by Rent-Way’s stockholders. The Plan will be

 - 2 - 

 

deemed to be approved by the stockholders if it receives the affirmative vote of the holders
of a majority of the shares of stock of Rent-Way present or represented and entitled to vote at a
meeting at which a quorum representing a majority of all outstanding voting stock is, either in
person or by proxy, present and voting and duly held in accordance with the applicable provisions
of Rent-Way’s Bylaws. Incentive Awards may be granted under the Plan at any time prior to the
receipt of stockholder approval; provided, however, that each such grant shall automatically
terminate in the event such approval is not obtained. Without limiting the foregoing, no Option or
SAR may be exercised prior to the receipt of such approval, and no share certificate will be issued
pursuant to a grant of Restricted Stock or Stock Bonus prior to the receipt of such approval.

     (l) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     (m) “Fair Market Value” means, for any particular date, (i) for any period during which the
Company Stock shall be listed for trading on a national securities exchange or the National
Association of Securities Dealers Automated Quotation System (“NASDAQ”), the closing price per
share of Company Stock on such exchange or the NASDAQ closing bid price as of the close of such
trading day, or (ii) the market price per share of Company Stock as determined in good faith by the
Board of Directors in the event (i) above shall not be applicable. If the Fair Market Value is to
be determined as of a day when the securities markets are not open, the Fair Market Value on that
day shall be the Fair Market Value on the next preceding day when the markets are open.

     (n) “Incentive Award” shall mean an Option, SAR, share of Restricted Stock, Restricted Stock
Unit or Stock Bonus (each as defined herein) granted pursuant to the terms of the Plan.

     (o) “Incentive Stock Option” shall mean an Option that is an “incentive stock option” within
the meaning of Section 422 of the Code.

     (p) “Issue Date” shall mean the date established by the Committee on which Certificates
representing shares of Restricted Stock shall be issued by the Company pursuant to the terms of
Section 9(e).

     (q) “Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option.

     (r) “Option” shall mean an option to purchase shares of Company Stock granted pursuant to
Section 7.

     (s) “Participant” shall mean an employee, a non-employee consultant or service provider, or
non-employee director of the Company to whom an Incentive Award is granted pursuant to the Plan
and, upon his or her death, his or her successors, heirs, executors and administrators, as the case
may be.

     (t) “Performance-Based Award” means an Award granted to selected Covered Employees pursuant to
Sections 9 and 10, but which is subject to the terms and conditions set forth in Section 12. All
Performance-Based Awards are intended to qualify as Qualified

 - 3 - 

 

Performance-Based Compensation.

     (u) “Performance Criteria” means the criteria that the Committee selects for purposes of
establishing the Performance Goal or Performance Goals for a Participant for a Performance Period.
The Performance Criteria that will be used to establish Performance Goals are limited to the
following: net earnings (either before or after interest, taxes, depreciation and amortization),
economic value-added (as determined by the Committee), sales or revenue, net income (either before
or after taxes), operating earnings or income, cash flow (including, but not limited to, operating
cash flow and free cash flow), return on capital, return on investment, return on stockholders’
equity, return on assets or net assets, return on capital, stockholder returns, return on sales,
gross or net profit margin, productivity, expense, margins, operating efficiency, cost reduction or
savings, customer satisfaction, working capital, earnings or diluted earnings per share, price per
share of Company Stock, and market share, any of which may be measured either in absolute terms or
as compared to any incremental increase or as compared to results of a peer group. The Committee
shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion the
manner of calculating the Performance Criteria it selects to use for such Performance Period for
such Participant.

     (v) “Performance Goals” means, for a Performance Period, the goals established in writing by
the Committee for the Performance Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the Performance Goals may be
expressed in terms of overall Company performance or the performance of a division, business unit,
or an individual. The Committee, in its discretion, may, within the time prescribed by Section
162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance
Period in order to prevent the dilution or enlargement of the rights of Participants (a) in the
event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event,
or development, or (b) in recognition of, or in anticipation of, any other unusual or nonrecurring
events affecting the Company (determined consistent with U.S. Generally Accepted Accounting
Principles), or the financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business conditions.

     (w) “Performance Period” means the one or more periods of time, which may be of varying and
overlapping durations, as the Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s right to, and the
payment of, a Performance-Based Award.

     (x) “Prior Plans” means the Company’s 1999 and 2004 Stock Options Plans.

     (y) “Qualified Performance-Based Compensation” means any compensation that is intended to
qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the
Code.

     (z) A share of “Restricted Stock” shall mean a share of Company Stock that is granted pursuant
to the terms of Section 9 hereof and that is subject to the restrictions set forth in Section 9(c).

 - 4 - 

 

     (aa) “Restricted Stock Unit” means the right to receive a share of Company Stock that is
granted pursuant to the terms of Section 10.

     (bb) “Rule 16b-3” shall mean the rule thus designated as promulgated under the Exchange Act.

     (cc) “SAR” shall mean a stock appreciation right granted pursuant to Section 8.

     (dd) “Stock Bonus” shall mean a bonus payable in shares of Company Stock or a payment made in
shares of Company Stock pursuant to a deferred compensation plan of the Company.

     (ee) “Subsidiary” shall mean any corporation or other entity in which, at the time of
reference, the Company owns, directly or indirectly, stock or similar interests comprising more
than 50 percent of the combined voting power of all outstanding securities of such entity.

     (ff) “Vesting Date” shall mean the date established by the Committee on which a share of
Restricted Stock or Restricted Stock Unit may vest.

3 STOCK SUBJECT TO THE PLAN

     (a) Shares Available for Awards

     The total number of shares of Company Stock with respect to which Incentive Awards may be
granted shall not exceed 2,468,561 shares. This limit consists of 2,468,561 shares of Company
Stock available for issuance under the Prior Plans as of the Effective Date, which shares shall be
treated as no longer available for option grants under the Prior Plans following the Effective
Date. The Committee may direct that any stock certificate evidencing shares issued pursuant to the
Plan shall bear a legend setting forth such restrictions on transferability as may apply to such
shares pursuant to the Plan.

     (b) Total Grants by Award Type

     The total number of shares of Company Stock to be awarded under the Plan as Options or SARs
shall not exceed 2,468,561 shares. The total number of shares of Company Stock to be awarded under
the Plan as Incentive Stock Options shall not exceed 2,468,561 shares. The total number of shares
of Company Stock to be awarded under the Plan as Restricted Stock, Restricted Stock Units or as
Stock Bonuses shall, in the aggregate, not exceed 750,000 shares in any fiscal year of the Company.

     (c) Individual Limitation

     The total number of shares of Company Stock subject to Options and SARs awarded to any one
employee during any fiscal year of the Company, shall not exceed 250,000 shares. Determinations
under the preceding sentence shall be made in a manner that is consistent with Section 162(m) of
the Code and regulations promulgated thereunder. The provisions of this Section 3(c) shall not
apply in any circumstance with respect to which the Committee determines that compliance with
Section 162(m) of the Code is not necessary.

 - 5 - 

 

     (d) Adjustment for Change in Capitalization

     If there is any change in the outstanding shares of Company Stock by reason of a stock
dividend or distribution, stock split-up, recapitalization, combination or exchange of shares, or
by reason of any merger, consolidation, spinoff or other corporate reorganization in which the
Company is the surviving corporation, the number of shares available for issuance both in the
aggregate and with respect to each outstanding Incentive Award, the price per share under each
outstanding Incentive Award, and the limitations set forth in Section 3(b) and (c), shall be
proportionately adjusted by the Committee, whose determination shall be final and binding. After
any adjustment made pursuant to this Section 3(d), the number of shares subject to each outstanding
Incentive Award shall be rounded to the nearest whole number.

     (e) Other Adjustments

     In the event of any transaction or event described in Section 3(d) or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the
financial statements of the Company or any affiliate (including without limitation any Change in
Control), or of changes in applicable laws, regulations or accounting principles, and whenever the
Committee determines that action is appropriate in order to prevent the dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan or with respect to
any Incentive Award under the Plan, to facilitate such transactions or events or to give effect to
such changes in laws, regulations or principles, the Committee, in its sole discretion and on such
terms and conditions as it deems appropriate, including, if the Committee deems appropriate, the
principles of Treasury Regulation Section 1.424-1(a)(5) except to the extent necessary to ensure
that the action does not violate Section 409A of the Code, either by amendment of the terms of any
outstanding Incentive Awards or by action taken prior to the occurrence of such transaction or
event and either automatically or upon the Participant’s request, is hereby authorized to take any
one or more of the following actions:

     (i) To provide for either (A) termination of any such Incentive Award in exchange for
an amount of cash and/or other property, if any, equal to the amount that would have been
attained upon the exercise of such Incentive Award or realization of the Participant’s
rights (and, for the avoidance of doubt, if as of the date of the occurrence of the
transaction or event described in this Section 3(e) the Committee determines in good faith
that no amount would have been attained upon the exercise of such Incentive Award or
realization of the Participant’s rights, then such Incentive Award may be terminated by the
Company without payment) or (B) the replacement of such Incentive Award with other rights
or property selected by the Committee in its sole discretion;

     (ii) To provide that such Incentive Award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for by similar
options, rights or awards covering the stock of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and

     (iii) To make adjustments in the number and type of shares of Company Stock (or other
securities or property) subject to outstanding Incentive Awards, and in the

 - 6 - 

 

number and kind of outstanding Restricted Stock and/or in the terms and conditions of
(including the grant or exercise price), and the criteria included in, outstanding options,
rights and awards and options, rights and awards which may be granted in the future;

     (iv) To provide that such Incentive Award shall be exercisable or payable or fully
vested with respect to all shares covered thereby, notwithstanding anything to the contrary
in the Plan or the applicable Award Agreement; and

     (v) To provide that the Incentive Award cannot vest, be exercised or become payable
after such event.

     (f) Re-use of Shares

     To the extent that an Incentive Award terminates, expires, is cancelled, forfeited, or lapses
for any reason, or if an Incentive Award is settled by payment of cash, any shares of Company Stock
subject to the Incentive Award shall again be available for the grant of an Incentive Award
pursuant to the Plan. Shares that are used to pay the exercise price of an Option and shares
withheld to satisfy tax withholding obligations will not be available for further grants of
Incentive Awards pursuant to the Plan. To the extent permitted by applicable law or any securities
exchange rule, shares of Company Stock issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the Company or any
Subsidiary shall not be counted against shares of Company Stock available for grant pursuant to
this Plan. Dividend Equivalents payable in cash shall not be counted against the shares available
for issuance under the Plan.

     (g) No Repricing

     Absent stockholder approval, neither the Committee nor the Board of Directors shall have any
authority, with or without the consent of the affected holders of Incentive Awards, to “reprice” an
Incentive Award after the date of its initial grant with a lower exercise price in substitution for
the original exercise price. This paragraph may not be amended, altered or repealed by the Board
of Directors or the Committee without approval of the stockholders of the Company.

4 ADMINISTRATION OF THE PLAN

     The Plan shall be administered by the Committee. The Committee shall from time to time
designate the persons who shall be granted Incentive Awards and the amount, type and other features
of each Incentive Award.

     The Committee shall have full authority to administer the Plan, including authority to
interpret and construe any provision of the Plan and the terms of any Incentive Award issued under
it and to adopt such rules and regulations for administering the Plan as it may deem necessary or
appropriate. The Committee shall determine whether an authorized leave of absence or absence due
to military or government service shall constitute termination of employment. Decisions of the
Committee shall be final and binding on all parties. Determinations made by the Committee under
the Plan need not be uniform but may be made on a Participant-by-Participant basis.
Notwithstanding anything to the contrary contained herein,

 - 7 - 

 

the Board of Directors may, in its sole discretion, at any time and from time to time, resolve
to administer the Plan, in which case the term “Committee” as used herein shall be deemed to mean
the Board of Directors.

     The Committee may, in its absolute discretion, without amendment to the Plan, (i) accelerate
the date on which any Option or SAR granted under the Plan becomes exercisable, (ii) waive or amend
the operation of Plan provisions respecting exercise after termination of service or otherwise
adjust any of the terms of such Option or SAR and (iii) accelerate the Vesting Date or Issue Date,
or waive any condition imposed hereunder, with respect to any share of Restricted Stock or
Restricted Stock Unit or otherwise adjust any of the terms applicable to such share.

     No member of the Committee shall be liable for any action, omission or determination relating
to the Plan, and the Company shall, in addition to any obligations of indemnity and defense
contained in the Company’s by-laws or under applicable law, indemnify and hold harmless each member
of the Committee and each other director or employee of the Company to whom any duty or power
relating to the administration or interpretation of the Plan has been delegated against any cost or
expense (including counsel fees) or liability (including any sum paid in settlement of a claim with
the approval of the Committee) arising out of any action, omission or determination relating to the
Plan, unless, in either case, such action, omission or determination was taken or made by such
member, director or employee in bad faith and without reasonable belief that it was in the best
interests of the Company.

5 ELIGIBILITY

     The persons who shall be eligible to receive Incentive Awards pursuant to the Plan shall be
such employees of the Company (including employees who are also directors and prospective employees
conditioned on their becoming employees), non-employee consultants or service providers, and
non-employee directors of the Company as the Committee shall designate from time to time.

6 AWARDS UNDER THE PLAN; AWARD AGREEMENTS

     The Committee may grant Options, SARs, shares of Restricted Stock, Restricted Stock Units and
Stock Bonuses, in such amounts and with such terms and conditions as the Committee shall determine,
subject to the provisions of the Plan.

     Each Incentive Award granted under the Plan (except an unconditional Stock Bonus) will be
evidenced by an Award Agreement which shall contain such provisions as the Committee may in its
sole discretion deem necessary or desirable. By accepting an Incentive Award, a Participant
thereby agrees that the Incentive Award shall be subject to all of the terms and provisions of the
Plan and the applicable Award Agreement.

7 OPTIONS

(a) Identification of Options

     Each Option shall be clearly identified in the applicable Award Agreement as either an

 - 8 - 

 

     Incentive Stock Option or a Non-Qualified Stock Option. In the absence of such
identification, an Option will be deemed to be a Non-Qualified Stock Option.

(b) Exercise Price

     Each Award Agreement with respect to an Option shall set forth the amount (the “exercise
price”) payable by the holder to the Company upon exercise of the Option. The exercise price per
share shall be determined by the Committee but shall in no event be less than the Fair Market Value
of a share of Company Stock on the date the Option is granted.

(c) Term and Exercise of Options

          (1) The applicable Award Agreement will provide the date or dates on which an Option shall
become exercisable. The Committee shall determine the expiration date of each Option; provided,
however, that no Option shall be exercisable more than ten years after the date of grant. Unless
the applicable Award Agreement provides otherwise, no Option shall be exercisable prior to the
first anniversary of the date of grant.

          (2) An Option may be exercised for all or any portion of the shares as to which it is
exercisable; provided, that no partial exercise of an Option shall be for an aggregate exercise
price of less than $1,000. The partial exercise of an Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof.

          (3) Unless the Committee determines otherwise, an Option shall be exercised by delivering
notice to the Company’s principal office, to the attention of its Secretary (or the Secretary’s
designee), no less than one nor more than ten business days in advance of the effective date of the
proposed exercise. Such notice shall specify the number of shares of Company Stock with respect to
which the Option is being exercised and the effective date of the proposed exercise and shall be
from the Participant or other person then having the right to exercise the Option. Payment for
shares of Company Stock purchased upon the exercise of an Option shall be made on the effective
date of such exercise by one or a combination of the following means: (i) in cash, by certified
check, bank cashier’s check or wire transfer; (ii) subject to the approval of the Committee, in
shares of Company Stock owned by the Participant for at least six months prior to the date of
exercise and valued at their Fair Market Value on the effective date of such exercise; or (iii) by
means of a broker assisted cashless exercise procedure complying with applicable law, and (iv) by
such other provision as the Committee may from time to time authorize. Any payment in shares of
Company Stock shall be effected by the delivery of such shares to the Secretary (or the Secretary’s
designee) of the Company, duly endorsed in blank or accompanied by stock powers duly executed in
blank, together with any other documents and evidences as the Secretary (or the Secretary’s
designee) of the Company shall require.

          (4) Certificates for shares of Company Stock purchased upon the exercise of an Option shall be
issued in the name of the Participant or other person entitled to receive such shares, and
delivered to the Participant or such other person as soon as practicable following the effective
date on which the Option is exercised.

     (d) Limitations on Incentive Stock Options

 - 9 - 

 

          (1) Incentive Stock Options may be granted only to employees of the Company or any “subsidiary
corporation” thereof (within the meaning of Section 424(f) of the Code and the applicable
regulations thereunder).

          (2) To the extent that the aggregate Fair Market Value of shares of Company Stock with respect
to which Incentive Stock Options are exercisable for the first time by a Participant during any
calendar year under the Plan and any other stock option plan of the Company (or any “subsidiary
corporation” of the Company within the meaning of Section 424 of the Code) shall exceed $100,000,
or such higher value as may be permitted under Section 422 of the Code, such Options shall be
treated as Non-Qualified Stock Options. Such Fair Market Value shall be determined as of the date
on which each such Incentive Stock Option is granted.

          (3) No Incentive Stock Option may be granted to an individual if, at the time of the proposed
grant, such individual owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (or any “subsidiary corporation” of the Company within the
meaning of Section 424 of the Code), unless (i) the exercise price of such Incentive Stock Option
is at least 110% of the Fair Market Value of a share of Company Stock at the time such Incentive
Stock Option is granted and (ii) such Incentive Stock Option is not exercisable after the
expiration of five years from the date such Incentive Stock Option is granted.

(e) Effect of Termination of Employment

          (1) Unless the applicable Award Agreement provides or the Committee shall determine otherwise,
in the event that the employment of a Participant with the Company shall terminate for any reason
other than Cause, Disability or death : (i) Options granted to such Participant, to the extent that
they were exercisable at the time of such termination, shall remain exercisable until the date that
is three months after such termination, on which date they shall expire; and (ii) Options granted
to such Participant, to the extent that they were not exercisable at the time of such termination,
shall expire at the close of business on the date of such termination. The three-month period
described in this Section 7(e)(1) shall be extended to one year in the event of the Participant’s
death during such three-month period. Notwithstanding the foregoing, no Option shall be
exercisable after the expiration of its term.

          (2) Unless the applicable Award Agreement provides or the Committee shall determine otherwise,
in the event that the employment of a Participant with the Company shall terminate on account of
the Disability or death of the Participant: (i) Options granted to such Participant, to the extent
that they were exercisable at the time of such termination, shall remain exercisable until the
first anniversary of such termination, on which date they shall expire; and (ii) Options granted to
such Participant, to the extent that they were not exercisable at the time of such termination,
shall expire at the close of business on the date of such termination. Notwithstanding the
foregoing, no Option shall be exercisable after the expiration of its term.

          (3) In the event of the termination of a Participant’s employment for Cause, all outstanding
Options granted to such Participant shall expire at the commencement of business on the date of
such termination.

 - 10 - 

 

     (f) Acceleration of Exercise Date Upon Change in Control

     Unless the Award Agreement provides or the Committee determines otherwise, upon the occurrence
of a Change in Control, each Option granted under the Plan and outstanding at such time shall
become fully and immediately exercisable and shall remain exercisable until its expiration,
termination or cancellation pursuant to the terms of the Plan. In addition, upon the occurrence of
a Change in Control, the Committee may in its discretion, cancel any outstanding Options and pay to
the holders thereof, in cash or stock, or any combination thereof, the value of such Options based
upon the price per share of Company Stock to be received by other shareholders of the Company in
the Change in Control less the exercise price of each Option.

     (g) Except as otherwise provided in an applicable Award Agreement, during the lifetime of a
Participant each Option granted to a Participant shall be exercisable only by the Participant and
no Option shall be assignable or transferable otherwise than by Will or by the laws of descent and
distribution. The Committee may in its sole discretion on a case by case basis, in any applicable
agreement evidencing an Option (other than, to the extent inconsistent with the requirements of
Section 422 of the Code applicable to Incentive Stock Options), permit a Participant to transfer
all or some of the Options to (i) the Participant’s Immediate Family Members, or (ii) a trust or
trusts or other entity for the exclusive benefit of such Immediate Family Members. Following any
such transfer, any transferred Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to the transfer. “Immediate Family Members” shall
mean a Participant’s spouse, siblings, child(ren) and grandchild(ren). Notwithstanding the
foregoing, Incentive Awards may be transferred to a Participant’s former spouse pursuant to a
property settlement made part of an agreement or court order incident to the divorce.

8 SARS

     (a) Exercise Price

     The exercise price per share of a SAR shall be determined by the Committee at the time of
grant, but shall in no event be less than the Fair Market Value of a share of Company Stock on the
date of grant.

     (b) Benefit Upon Exercise

     The exercise of SARs with respect to any number of shares of Company Stock shall entitle the
Participant to receive unrestricted, fully transferable shares of Company Stock, payable within 21/2
months of the date on which the SARs are exercised, equal in value to the number of SARs exercised
multiplied by (i) the Fair Market Value of a share of Company Stock on the exercise date over (ii)
the exercise price of the SAR. Fractional share amounts shall be settled in cash.

     (c) Term and Exercise of SARs

          (1) The applicable Award Agreement will provide the dates or dates on which a SAR shall become
exercisable. The Committee shall determine the expiration date of each SAR; provided, however,
that no SAR shall be exercisable more than ten years after the date of

 - 11 - 

 

grant. Unless the
applicable Award Agreement provides otherwise, no SAR shall be exercisable prior to the first
anniversary of the date of grant.

          (2) A SAR may be exercised for all or any portion of the shares as to which it is exercisable;
provided, that no partial exercise of a SAR shall be for an aggregate exercise price of less than
$1,000. The partial exercise of a SAR shall not cause the expiration, termination or cancellation
of the remaining portion thereof.

          (3) Unless the Committee determines otherwise, a SAR shall be exercised by delivering notice
to the Company’s principal office, to the attention of its Secretary (or the Secretary’s designee),
no less than one nor more than ten business days in advance of the effective date of the proposed
exercise. Such notice shall specify the number of shares of Company Stock with respect to which
the SAR is being exercised, and the effective date of the
proposed exercise, and shall be from the Participant or other person (if any) having the right
to exercise the SAR.

     (d) Effect of Termination of Employment

     The provisions set forth in Section 7(e) with respect to the exercise of Options following
termination of employment shall apply to such exercise of SARs.

     (e) Acceleration of Exercise Date Upon Change in Control

     Unless the Award Agreement provides or the Committee determines otherwise, upon the occurrence
of a Change in Control, any SAR granted under the Plan and outstanding at such time shall become
fully and immediately exercisable and shall remain exercisable until its expiration, termination or
cancellation pursuant to the terms of the Plan. In addition, upon the occurrence of a Change in
Control, the Committee may in its discretion, cancel any outstanding SARs and pay to the holders
thereof, in stock, the value of such SARs based upon the price per share of Company Stock to be
received by other shareholders of the Company in the Change in Control less the exercise price of
each SAR.

9 RESTRICTED STOCK

     (a) Issue Date and Vesting Date

     At the time of the grant of shares of Restricted Stock, the Committee shall establish an Issue
Date or Issue Dates and a Vesting Date or Vesting Dates with respect to such shares. The Committee
may divide such shares into classes and assign a different Issue Date and/or Vesting Date for each
class. If the grantee is employed by the Company on an Issue Date (which may be the date of
grant), the specified number of shares of Restricted Stock shall be issued in accordance with the
provisions of Section 9(e). Provided that all conditions to the vesting of shares of Restricted
Stock imposed pursuant to Section 9(b) are satisfied, and except as provided in Section 9(g), upon
the occurrence of the Vesting Date with respect to shares of Restricted Stock, such shares shall
vest and the restrictions of Section 9(c) shall cease to apply to such share.

- 12 -

 

     (b) Conditions to Vesting

     At the time of the grant of shares of Restricted Stock, the Committee may impose such
restrictions or conditions to the vesting of such shares as it, in its absolute discretion, deems
appropriate. By way of example and not by way of limitation, the Committee may require, as a
condition to the vesting of any class or classes of shares of Restricted Stock, that the
Participant or the Company achieves such performance goals as the Committee may specify under
Section 12.

     (c) Restrictions on Transfer Prior to Vesting

     Prior to the vesting of a share of Restricted Stock, no transfer of a Participant’s rights
with respect to such shares, whether voluntary or involuntary, by operation of law or otherwise,
shall be permitted. Immediately upon any attempt to transfer such rights, such shares, and all of
the rights related thereto, shall be forfeited by the Participant.

     (d) Dividends on Restricted Stock

     The Committee in its discretion may require that any dividends paid on shares of Restricted
Stock shall be held in escrow until all restrictions on such shares have lapsed.

     (e) Issuance of Certificates

          (1) Reasonably promptly after the Issue Date with respect to shares of Restricted Stock, the
Company shall cause to be issued a stock certificate, registered in the name of the Participant to
whom such shares were granted, evidencing such shares; provided, that the Company shall not cause
such a stock certificate to be issued unless it has received a stock power duly endorsed in blank
with respect to such shares. Each such stock certificate shall bear any such legend as the Company
may determine.

          Such legend shall not be removed until such shares vest pursuant to the terms hereof.

          (2) Each certificate issued pursuant to this Section 9(e), together with the stock powers
relating to the shares of Restricted Stock evidenced by such certificate, shall be held by the
Company in such manner as the Company may determine unless the Committee determines otherwise.

     (f) Consequences of Vesting

     Upon the vesting of a share of Restricted Stock pursuant to the terms of the Plan and the
applicable Award Agreement, the restrictions of Section 9(c) shall cease to apply to such share.
Reasonably promptly after a share of Restricted Stock vests, the Company shall cause to be
delivered to the Participant to whom such shares were granted, a certificate evidencing such
shares, free of the legend set forth in Section 9(e). Notwithstanding the foregoing, such shares
still may be subject to restrictions on transfer as a result of applicable securities laws or
pursuant to Section 15.

- 13 -

 

     (g) Effect of Termination of Employment

          (1) Unless the applicable Award Agreement or the Committee determines otherwise, in the event
of the termination of a Participant’s service to the Company for any reason other than Cause, all
shares of Restricted Stock granted to such Participant that have not vested as of the date of such
termination shall immediately be forfeited and returned to the Company. The Company also shall
have the right to require the return of all dividends paid on such shares, whether by termination
of any escrow arrangement under which such dividends are held or otherwise.

          (2) In the event of the termination of a Participant’s employment for Cause, all shares of
Restricted Stock granted to such Participant that have not vested prior to the date of such
termination shall immediately be forfeited and returned to the Company, together with any dividends
credited on such shares by termination of any escrow arrangement under which such dividends are
held or otherwise.

     (h) Effect of Change in Control

     Unless the Award Agreement provides or the Committee determines otherwise, upon the occurrence
of a Change in Control, all outstanding shares of Restricted Stock which have not previously vested
shall immediately vest. In addition, upon the occurrence of a Change in Control, the Committee may
in its discretion cancel any outstanding shares of Restricted Stock and pay to the holders thereof,
in cash or stock, or any combination thereof, the value of such shares of Restricted Stock based
upon the price per share of Company Stock to be received by other shareholders of the Company in
the Change in Control.

10 RESTRICTED STOCK UNITS

     (a) Vesting Date

     At the time of the grant of Restricted Stock Units, the Committee shall establish a Vesting
Date or Vesting Dates with respect to such shares. The Committee may divide such shares into
classes and assign a different Vesting Date for each class. Provided that all conditions to the
vesting of a Restricted Stock Unit imposed pursuant to Section 10(c) are satisfied, and except as
provided in Section 10(d), upon the occurrence of the Vesting Date with respect to a Restricted
Stock Unit, such Restricted Stock Unit shall vest and shares of Stock will be delivered pursuant to
Section 10(c).

     (b) Dividend Equivalents

     Any Participant selected by the Committee may be granted Dividend Equivalents based on the
dividends declared on the shares of Company Stock that are subject to any award of Restricted Stock
Units, to be credited as of dividend payment dates, during the period between the date the award is
granted and the date the award is exercised, vests or expires, as determined by the Committee.
Such Dividend Equivalents shall be converted to cash or additional Restricted Stock Units by such
formula and at such time and subject to such limitations as may be determined by the Committee.

- 14 -

 

     (c) Benefit Upon Vesting

     Upon the vesting of a Restricted Stock Unit, the Participant shall be entitled to receive one
unrestricted, fully transferable share of Stock for each Restricted Stock Unit scheduled to be paid
out on such date and not previously forfeited, or, in the sole discretion of the Committee, an
amount, payable within 2 1/2 months of the date on which such Restricted Stock Units vests, equal to
the Fair Market Value of a share of Company Stock on the date on which such Restricted Stock Unit
vests. Notwithstanding the foregoing, shares of Company Stock issued may be subject to
restrictions on transfer as a result of applicable securities laws or pursuant to Section 15.

     (d) Conditions to Vesting

     At the time of the grant of Restricted Stock Units, the Committee may impose such restrictions
or conditions to the vesting of such Restricted Stock Units as it, in its absolute discretion,
deems appropriate. By way of example and not by way of limitation, the Committee may require, as a
condition to the vesting of any class or classes of Restricted Stock Units, that the Participant or
the Company achieves such performance goals as the Committee may specify under Section 12.

     (e) Effect of Termination of Employment

          (1) Unless the applicable Award Agreement or the Committee determines otherwise, Restricted
Stock Units that have not vested, together with any dividends credited on such Restricted Stock
Units, shall be forfeited upon the Participant’s termination of employment for any reason other
than Cause.

          (2) In the event of the termination of a Participant’s employment for Cause, all Restricted
Stock Units granted to such Participant that have not vested as of the date of such termination
shall immediately be forfeited, together with any dividends credited on such shares.

     (f) Effect of Change in Control

     Unless the Award Agreement provides or the Committee determines otherwise, upon the occurrence
of a Change in Control all outstanding Restricted Stock Units which have not theretofore vested
shall immediately vest. In addition, upon the occurrence of a Change in Control, the Committee may
in its discretion, cancel any outstanding Restricted Stock Units and pay to the holders thereof, in
cash or stock, or any combination thereof, the value of such Restricted Stock Units based upon the
price per share of Company Stock to be received by other shareholders of the Company in the Change
in Control.

11 STOCK BONUSES

     In the event that the Committee grants a Stock Bonus, a certificate for the shares of Company
Stock comprising such Stock Bonus shall be issued in the name of the Participant to whom such grant
was made and delivered to such Participant as soon as practicable after the date on which such
Stock Bonus is payable.

- 15 -

 

12 PERFORMANCE-BASED AWARDS

     (a) Purpose.

     The purpose of this Section 12 is to provide the Committee the ability to qualify Incentive
Awards, other than Options and SARs, that are granted pursuant to Sections 9 and 10 as Qualified
Performance-Based Compensation. If the Committee, in its discretion, decides to grant a
Performance-Based Award to a Covered Employee, the provisions of this Section 12 shall control over
any contrary provision contained in Sections 9 and 10; provided, however, that the Committee may in
its discretion grant Incentive Awards to Covered Employees and to other Participants that are based
on Performance Criteria or Performance Goals but that do not satisfy the requirements of this
Section 12.

     (b) Applicability.

     This Section 12 shall apply only to those Covered Employees selected by the Committee to
receive Performance-Based Awards. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive an Incentive Award
for the period. Moreover, designation of a Covered Employee as a Participant for a particular
Performance Period shall not require designation of such Covered Employee as a Participant in any
subsequent Performance Period and designation of one Covered Employee as
a Participant shall not require designation of any other Covered Employees as a Participant in
such period or in any other period.

     (c) Procedures with Respect to Performance-Based Awards.

     To the extent necessary to comply with the Qualified Performance-Based Compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Incentive Award granted under
Sections 9 and 10 which may be granted to one or more Covered Employees, no later than ninety (90)
days following the commencement of any fiscal year in question or any other designated fiscal
period or period of service (or such other time as may be required or permitted by Section 162(m)
of the Code), the Committee shall, in writing, (a) designate one or more Covered Employees, (b)
select the Performance Criteria applicable to the Performance Period, (c) establish the Performance
Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period,
and (d) specify the relationship between Performance Criteria and the Performance Goals and the
amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance
Period. Following the completion of each Performance Period, the Committee shall certify in
writing whether the applicable Performance Goals have been achieved for such Performance Period.
In determining the amount earned by a Covered Employee, the Committee shall have the right to
reduce or eliminate (but not to increase) the amount payable at a given level of performance to
take into account additional factors that the Committee may deem relevant to the assessment of
individual or corporate performance for the Performance Period.

     (d) Payment of Performance-Based Awards.

     Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by
the Company or a Subsidiary on the day a Performance-Based Award for such

- 16 -

 

Performance Period is
paid to the Participant. Furthermore, a Participant shall be eligible to receive payment pursuant
to a Performance-Based Award for a Performance Period only if, and to the extent, the Performance
Goals for such period are achieved.

     (e) Additional Limitations.

     Notwithstanding any other provision of the Plan, any Incentive Award which is granted to a
Covered Employee and is intended to constitute Qualified Performance-Based Compensation shall be
subject to any additional limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as qualified performance-based compensation as described in Section
162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform
to such requirements.

13 RIGHTS AS A STOCKHOLDER

     No person shall have any rights as a stockholder with respect to any shares of Company Stock
covered by or relating to any Incentive Award until the date of issuance of a stock certificate
with respect to such shares.

     Except as otherwise expressly provided in Section 3(d), no adjustment to any Incentive Award
shall be made for dividends or other rights for which the record date occurs prior to the
date such stock certificate is issued.

14 DEFERRAL OF AWARDS

     The Committee may permit or require the deferral of payment or settlement of any Restricted
Stock Unit or Stock Bonus subject to such rules and procedures as it may establish. Payment or
settlement of Options or SARs may not be deferred unless such deferral would not cause the
provisions of Section 409A of the Code to be violated.

15 RESTRICTION ON TRANSFER OF SHARES

     The Committee may impose, either in the Award Agreement or at the time shares of Company Stock
are issued in settlement of an Incentive Award, restrictions on the ability of the Participant to
sell or transfer such shares of Company Stock.

16 NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD

     Nothing contained in the Plan or any Award Agreement shall confer upon any Participant any
right with respect to the continuation of employment by the Company or interfere in any way with
the right of the Company, subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or decrease the compensation of
the Participant.

     No person shall have any claim or right to receive an Incentive Award hereunder. The
Committee’s granting of an Incentive Award to a Participant at any time shall neither require the
Committee to grant any other Incentive Award to such Participant or other person at any time nor

- 17 -

 

preclude the Committee from making subsequent grants to such Participant or any other person.

17 SECURITIES MATTERS

     (a) The Company shall be under no obligation to effect the registration pursuant to the
Securities Act of 1933 of any interests in the Plan or any shares of Company Stock to be issued
hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to
the contrary, the Company shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to the Plan unless and until the Company
is advised by its counsel that the issuance and delivery of such certificates is in compliance with
all applicable laws, regulations of governmental authority and the requirements of the New York
Stock Exchange or any other securities exchange or automated quotation system on which shares of
Company Stock are listed. Certificates evidencing shares of Company Stock issued pursuant to the
terms hereof, may bear such legends, as the Committee or the Company, in its sole discretion, deems
necessary or desirable to insure compliance with applicable securities laws.

     (b) The transfer of any shares of Company Stock hereunder shall be effective only at such time
as counsel to the Company shall have determined that the issuance and delivery of such shares is in
compliance with all applicable laws, regulations of governmental authority and the requirements of
the New York Stock Exchange or any other securities exchange or automated quotation system on which
shares of Company Stock are listed. The Committee may, in its sole discretion, defer the
effectiveness of any transfer of shares of Company stock
hereunder in order to allow the issuance of such shares to be made pursuant to registration or
an exemption from registration or other methods for compliance available under federal or state
securities laws. The Company shall inform the Participant in writing of the Committee’s decision
to defer the effectiveness of a transfer. During the period of such a deferral in connection with
the exercise of an Option, the Participant may, by written notice, withdraw such exercise and
obtain the refund of any amount paid with respect thereto.

     (c) It is intended that the Plan be applied and administered in compliance with Rule 16b-3.
If any provision of the Plan would be in violation of Rule 16b-3 if applied as written, such
provision shall not have effect as written and shall be given effect so as to comply with Rule
16b-3, as determined by the Committee. The Committee is authorized to amend the Plan and to make
any such modifications to Award Agreements to comply with Rule 16b-3, as it may be amended from
time to time, and to make any other such amendments or modifications deemed necessary or
appropriate to better accomplish the purposes of the Plan in light of any amendments made to Rule
16b-3.

18 WITHHOLDING TAXES

     Whenever cash is to be paid pursuant to an Incentive Award, the Company shall have the right
to deduct therefrom an amount sufficient to satisfy any federal, state and local withholding tax
requirements related thereto.

     Whenever shares of Company Stock are to be delivered pursuant to an Incentive Award, the
Company shall have the right to require the Participant to remit to the Company in cash an

- 18 -

 

amount
sufficient to satisfy any federal, state and local withholding tax requirements related thereto.
With the approval of the Committee, which it shall have sole discretion to grant and which approval
may be evidenced by the presence in the Award Agreement of an appropriate reference to such right,
a Participant may satisfy the foregoing requirement by electing to have the Company withhold from
delivery shares of Company Stock having a value equal to the minimum amount of tax required to be
withheld. Such shares shall be valued at their Fair Market Value on the date as of which the
amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash.
Such a withholding election may be made with respect to all or any portion of the shares to be
delivered pursuant to an Incentive Award. Any tax withholding above the minimum amount of tax
required to be withheld must be deducted from other amounts payable to the Participant or must be
paid in cash by the Participant.

19 NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE

     If any Participant shall, in connection with the acquisition of shares of Company Stock under
the Plan, make the election permitted under Section 83(b) of the Code (i.e., an election to include
in gross income in the year of transfer the amounts specified in Section 83(b)) and permitted under
the terms of the Award Agreement, such Participant shall notify the Company of such election within
ten days of filing notice of the election with the Internal Revenue Service, in addition to any
filing and notification required pursuant to regulations issued under the authority of Code Section
83(b).

20 NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION 421(b) OF THE CODE

     Each Award Agreement with respect to an Incentive Stock Option shall require the Participant
to notify the Company of any disposition of shares of Company Stock issued pursuant to the exercise
of such Option under the circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions) within ten days of such disposition.

21 AMENDMENT OR TERMINATION OF THE PLAN

     The Board of Directors may, at any time, suspend or terminate the Plan or revise or amend it
in any respect whatsoever; provided, however, that stockholder approval shall be required if and to
the extent required by Rule 16b-3 or by any comparable or successor exemption under which the Board
of Directors believes it is appropriate for the Plan to qualify, or if and to the extent the Board
of Directors determines that such approval is appropriate for purposes of satisfying Section
162(m), Section 422 or Section 409A of the Code or any applicable rule or listing standard of any
stock exchange, automated quotation system or similar organization. Nothing herein shall restrict
the Committee’s ability to exercise its discretionary authority pursuant to Section 4, which
discretion may be exercised without amendment to the Plan. No action hereunder may, without the
consent of a Participant, reduce the Participant’s rights under any outstanding Incentive Award.

22 NO OBLIGATION TO EXERCISE

     The grant to a Participant of an Option or SAR shall impose no obligation upon such
Participant to exercise such Option or SAR.

- 19 -

 

23 TRANSFERS UPON DEATH; NONASSIGNABILITY

     Upon the death of a Participant outstanding Incentive Awards granted to such Participant may
be exercised only by the executor or administrator of the Participant’s estate or by a person who
shall have acquired the right to such exercise by Will or by the laws of descent and distribution.
No transfer of an Incentive Award by Will or the laws of descent and distribution shall be
effective to bind the Company unless the Company shall have been furnished with (a) written notice
thereof and with a copy of the Will and/or such evidence as the Committee may deem necessary to
establish the validity of the transfer and (b) an agreement by the transferee to comply with all
the terms and conditions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in connection with the
grant of the Incentive Award.

     Except as otherwise provided, no Incentive Award or interest in it may be transferred,
assigned, pledged or hypothecated by the Participant, whether by operation of law or otherwise, or
be made subject to execution, attachment or similar process.

24 EXPENSES AND RECEIPTS

     The expenses of the Plan shall be paid by the Company. Any proceeds received by the Company
in connection with any Incentive Award will be used for general corporate purposes.

25 FAILURE TO COMPLY

     In addition to the remedies of the Company elsewhere provided for herein, failure by a
Participant (or beneficiary) to comply with any of the terms and conditions of the Plan or the
applicable Award Agreement, unless such failure is remedied by such Participant (or beneficiary)
within ten days after notice of such failure by the Committee, shall be grounds for the
cancellation and forfeiture of such Incentive Award, in whole or in part, as the Committee, in its
sole discretion, may determine.

26 EFFECTIVE DATE AND TERM OF PLAN

     The Plan shall be effective as of the Effective Date. Unless earlier terminated by the Board
of Directors, the right to grant Incentive Awards under the Plan will terminate on the tenth
anniversary of the Effective Date. Incentive Awards outstanding at Plan termination will remain in
effect according to their terms and the provisions of the Plan.

27 APPLICABLE LAW

     Except to the extent preempted by any applicable federal law, the Plan will be construed and
administered in accordance with the laws of the Commonwealth of Pennsylvania, without reference to
the principles of conflicts of laws thereunder.

- 20 -

 

AMENDMENT I

OF THE

RENT-WAY, INC.

2006 EQUITY INCENTIVE PLAN

RECITALS:

     WHEREAS, the Rent-Way, Inc. 2006 Equity Incentive Plan (the “Plan”) was adopted by the board
of directors of Rent-Way, Inc. on January 13, 2006, and approved by the shareholders of Rent-Way,
Inc. on March 8, 2006; and

     WHEREAS, in connection with the acquisition of Rent-Way, Inc. by an indirect wholly owned
subsidiary of Rent-A-Center, Inc. (the “Company”) on November 15, 2006, the Company has acquired
sponsorship of the Plan; and

     WHEREAS, subject to and in accordance with the provisions of applicable law and the rules of
the Nasdaq Stock Market, the Company desires to amend the Plan in order to substitute the shares of
the Company’s common stock for the shares of Rent-Way, Inc. common stock reserved for issuance
under the Plan and to facilitate the ability of the Company to use the Plan as a vehicle for making
future equity compensation awards to eligible personnel.

     NOW, THEREFORE, the Plan is amended in the following respects. Unless otherwise specified, the
amendments are effective as of December 29, 2006.

     1. The name of the Plan is changed to “The Rent-A-Center, Inc. 2006 Equity Incentive Plan.”

     2. Paragraph 1 of the Plan (Preamble) is amended in its entirety to read as follows:

“The purpose of the Plan is to foster the ability of Rent-A-Center, Inc. (the
“Company”) and its subsidiaries to attract, motivate and retain key personnel and
enhance stockholder value through the use of certain equity incentive compensation
opportunities. The Plan, which was formerly known as the Rent-Way, Inc. 2006 Equity
Incentive Plan, was acquired by the Company in connection with its acquisition of
Rent-Way, Inc. on November 15, 2006.”.

     3. Wherever used in the Plan, the terms “Rent-Way, Inc.” and “Rent-Way” will be deemed to be
“Rent-A-Center, Inc.” and the term “Company” will be deemed to mean “Rent-A-Center, Inc.”.

     4. The definition of “Common Stock” in paragraph 2(h) of the Plan is amended to mean “the
common stock, $.01 par value, of the Company.”.

     5. The definition of “Fair Market Value” in paragraph 2(m) of the Plan is amended in its entirety to read as follows:

	“Fair Market Value” means, on any particular day, if the Company Stock is listed on an established
stock exchange or traded on the Nasdaq Global Select Market or the Nasdaq SmallCap Market, the closing sales price (or the
closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Company Stock) on the last market trading day prior to the date of determination, as reported
in The Wall Street Journal or such other source as the Committee deems reliable.”

     6. Paragraph 5 of the Plan (Eligibility) is amended in its entirety to read as follows:

“The persons who shall be eligible to receive Incentive Awards pursuant to the
Plan shall be such employees of the Company or a Subsidiary (including prospective
employees conditioned upon their becoming employees), non-employee consultants or
other service providers to the Company or a Subsidiary, and non-employee directors
of the Company or a Subsidiary; provided, however,

- 1 -

 

that no Incentive Award may be
granted under the Plan to any individual who,
immediately prior to the Company’s acquisition of Rent-Way, Inc., was employed by
the Company or any entity that was a subsidiary of the Company.”.

     
7. Paragraph 27 (Applicable Law) is amended by deleting the words “Commonwealth of
Pennsylvania” and inserting in lieu thereof the words “State of Texas”.

     
8. The following new Paragraph 28 is added at the end of the Plan:

     
“28 COMPLIANCE WITH NASDAQ RULES

     The assumption of the Plan by the Company is intended to comply with the
‘mergers and acquisitions’ exemption from the shareholder approval requirements
contained in Rule 4350(i)(1)(A)(iii) and IM-4350-5 of the Nasdaq Marketplace Rules,
and the Plan, as amended, will be construed and interpreted accordingly. Toward that
end, if any provision in or omission from the Plan would cause the Plan to fail to
satisfy the conditions of such exemption, the Plan will be deemed to have been
further amended accordingly in order to satisfy such conditions.”.

- 2 -exv10w16

 

EXHIBIT
10.16

CHANGE OF CONTROL AGREEMENT

     This Change of Control Agreement (the “Agreement”) is made and entered into as of
                    ,
200    , by and between Aradigm Corporation (the “Company”), and                                          (the “Executive”).

     Whereas, the Company’s Board of Directors (the “Board”) has determined that it would
be in the best interests of the Company and its stockholders to provide for certain severance
benefits in the event the Executive’s employment is terminated in connection with a Change of
Control (as defined below) in order to align further the interests of the Executive with those of
the stockholders of the Company;

     Now, Therefore, in consideration of the Executive’s continued employment with the
Company, the Company and the Executive hereby agree as follows:

1. Definitions. The following terms in this Agreement shall have the meanings set forth
below:

     1.1 “Change of Control” shall mean any one or more of the following events:

          (a) The consummation of a merger, consolidation or similar transaction involving (directly or
indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the shareholders of the Company immediately prior thereto do not own, directly
or indirectly, either (i) outstanding voting securities representing more than sixty percent (60%)
of the combined outstanding voting power of the surviving entity in such merger, consolidation or
similar transaction or (ii) more than sixty percent (60%) of the combined outstanding voting power
of the parent of the surviving entity in such merger, consolidation or similar transaction, in each
case in substantially the same proportions as their ownership of the outstanding voting securities
of the Company immediately prior to such transaction.

          (b) The consummation of a sale, lease, exclusive license or other disposition of 90% or more
of the consolidated assets of the Company and its subsidiaries within a single 12 month period,
other than a sale, lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its subsidiaries to an entity, more than sixty percent (60%)
of the combined voting power of the voting securities of which are owned by the shareholders of the
Company in substantially the same proportions as their ownership of the outstanding voting
securities of the Company prior to such sale, lease, license or other disposition. The Board shall
have the sole discretion to determine whether the event described in this Section 1.1(b) has
occurred.

          (c) Individuals who, on the date this Agreement is approved by the Board, are members of the
Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members
of the Board; provided, however, that if the appointment or election (or nomination for election)
of any new Board member was approved or recommended by a majority vote of the members of the
Incumbent Board then still in office, such new member shall, for purposes of this Agreement, be
considered a member of the Incumbent Board.

1

 

The term Change of Control shall not include a sale of assets, merger or other transaction effected
exclusively for the purpose of changing the domicile of the Company.

     1.2 “Cause” shall mean any one or more of the following: (i) the Executive’s commission of
any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United
States or any state thereof; (ii) the Executive’s attempted commission of, or participation in, a
fraud or act of dishonesty against the Company; (iii) the Executive’s intentional, material
violation of any material contract or agreement between the Executive and the Company or any
statutory duty owed to the Company; (iv) the Executive’s unauthorized use or disclosure of the
Company’s confidential information or trade secrets; or (v) the Executive’s gross misconduct. The
determination that a termination is for Cause shall be made by the Company in its sole discretion.

     1.3 “Constructive Termination” shall mean the resignation of the Executive due to the
occurrence of any of the following without the Executive’s consent:

          (a) a material reduction in the Executive’s duties, title, reporting relationships, or
responsibilities relative to the Executive’s duties, title, reporting relationships, or
responsibilities in effect immediately prior to the effective date of the Change of Control;
provided, however, that a change in the Executive’s title or reporting relationships shall not in
and of themselves (or collectively) constitute a Constructive Termination;

          (b) a material reduction by the Company in the Executive’s annual base salary or benefits as
in effect on the effective date of the Change of Control or as increased thereafter; provided,
however, that Constructive Termination shall not be deemed to have occurred in the event of a
reduction in the Executive’s annual base salary or benefits,
including severance benefits under the Executive Officer Severance
Benefit Plan, that is pursuant to a salary reduction
program or change in Company benefit programs that affects substantially all of the executive
officers or employees of the Company and that does not adversely affect the Executive to a greater
extent than other similarly situated employees; or

          (c) a relocation of the Executive’s primary business office to a location more than fifty (50)
miles from the location at which the Executive performed the Executive’s duties as of the effective
date of the Change of Control, except for required travel by the Executive with respect to the
Company’s business to an extent substantially consistent with the Executive’s business travel
obligations prior to the effective date of the Change of Control.

2. Change of Control Severance Benefits.

     2.1 Severance Benefits. If within eighteen (18) months after the effective date of a Change
of Control, the Executive: (a) is either terminated by the Company without Cause or suffers a
Constructive Termination; and (b) provides the Company with a signed general release of all claims
in a form acceptable to the Company and allows this release to become effective, then the Executive
shall be eligible for the following severance benefits:

          (a) Severance Payment. The Executive shall receive a single lump sum payment equal to [24
(for CEO); 18 (for CFO, CMO and CSO); 12 (for SVP positions; VP
Clinical and Regulatory Affairs; and VP
Corporate Planning and Program Management)] months of the base salary he received as of the date of
the Change of Control, or the termination of his employment (whichever is greater). This Severance
Payment shall be subject to required

2

 

deductions and tax withholdings and shall be paid within ten
(10) business days of the effective date of the release required by this Section 2.1.

          (b) Bonus Payment. The Executive shall receive a single lump sum payment equal to [two times
(for CEO); 1.5 times (for CFO, CMO and CSO); or 1 times (for SVP Operations; VP Clinical and Regulatory
Affairs; and VP Corporate Planning and Program Management)] the following sum: The Executive’s target
bonus for the year in which the termination occurs multiplied by the average annual percentage
achievement of corporate goals over each fiscal year for the three complete fiscal years preceding
the termination date. This Bonus Payment shall be subject to required deductions and tax
withholdings and shall be paid within ten (10) business days of the effective date of the release
required by this Section 2.1.

          (c) Health Insurance Payments. If, following the termination of Executive’s employment, the
Executive timely elects continued group health insurance coverage under the federal COBRA law or
similar state laws, if applicable, the Company will pay the Executive’s COBRA premium costs to
continue such coverage at the level in effect as of the Executive’s termination date for a period
of [24 (for CEO); 18 (for CFO, CMO and CSO); or 12 (for SVP
Operations; VP Clinical and Regulatory
Affairs; and VP Corporate Planning and Program Management)] months after the Executive’s termination
date or until the Executive becomes eligible for group health insurance coverage through a new
employer (whichever comes first). The Executive must promptly notify the Company in writing if the
Executive becomes eligible for group health insurance coverage through a new employer during the
Severance Period.

          (d) Career Transition Assistance (Outplacement Services). The Company will reimburse the
Executive up to [$20,000 (for CEO) or $10,000 (for all others)] for expenses actually incurred by
the Executive within six (6) months of his termination date for reasonable and customary
outplacement services for career transition assistance expenses.

          (e) Accelerated Vesting. The Company will accelerate the vesting of any stock options or
restricted stock awards that remain unvested as of the date of the termination of the Executive’s
employment such that all such unvested options or awards shall be deemed vested as of the date of
such termination. Except as modified herein, all such options and awards shall continue to be
governed by the applicable agreements and stock option plans.

     2.2 Ineligibility For Severance Benefits. The Executive will not be eligible for any benefits
under this Agreement if the Company (or its successor) terminates the Executive’s employment for
Cause or if the Executive resigns for any reason other than a Constructive Termination. Further,
the Executive will not be eligible for severance benefits under this Agreement in the event that
the Executive’s employment ends for any reason more than eighteen (18) months after the effective
date of a Change of Control.

     2.3 Other Severance Benefits. Nothing in this Agreement shall affect the right of the
Executive to receive any severance benefits pursuant to any other Company severance plan including,
without limitation, the Aradigm Corporation Executive Officer Severance Benefit Plan; provided,
however, that if the Executive actually receives benefits under this Agreement, he shall not be
entitled to receive any other severance benefits of any kind (except for the accelerated vesting
set forth in Section 2.1(e) above) pursuant to any other severance benefit plan

3

 

of the Company
(including, without limitation, the Aradigm Corporation Executive Officer Severance Benefit Plan).
The Executive acknowledges and agrees that any prior agreement between the Executive and the
Company providing for or relating to severance benefits in connection with a Change of Control (as
defined herein or therein), except for those contained in the Executive’s stock option agreements
with the Company, are
hereby expressly superseded and replaced in their entirety by this Agreement and shall have no
further force or effect

     2.4 Deferred Compensation. In the event that the Company determines that any cash severance
payment benefit provided under Sections 2.1(a) and 2.1(b), or continued group health insurance
coverage benefit provided under Section 2.1(c) fails to satisfy the distribution requirement of
Section 409A(a)(2)(A) of the Code as a result of Section 409A(a)(2)(B)(i) of the Code, the payment
of such benefits shall be accelerated to the minimum extent necessary so that the benefit is not
subject to the provisions of Section 409A(a)(1) of the Code. (The payment schedule as revised
after the application of the preceding sentence shall be referred to as the “Revised Payment
Schedule.”) However, in the event the payment of benefits pursuant to the Revised Payment Schedule
would be subject to Section 409A(a)(1) of the Code, the payment of such benefits shall not be paid
pursuant to the original payment schedule or the Revised Payment Schedule and instead the payment
of such benefits shall be delayed to the minimum extent necessary so that such benefits are not
subject to the provisions of Section 409A(a)(1) of the Code. The Board may attach conditions to or
adjust the amounts paid pursuant to this Section 2.3 to preserve, as closely as possible, the
economic consequences that would have applied in the absence of this Section 2.3; provided,
however, that no such condition or adjustment shall result in the payments being subject to Section
409A(a)(1) of the Code.

3. Parachute Payments.

     3.1 Reduction of Severance Benefits. Notwithstanding the above, if any payment or benefit
that the Executive would receive under this Plan, when combined with any other payment or benefit
he receives that is contingent upon a Change in Control (“Payment”) would (i) constitute a
“parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence,
be subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”), then such Payment
shall be either (x) the full amount of such Payment or (y) such lesser amount (with Payments being
reduced in the order and priority established by the Board) as would result in no portion of the
Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account
the applicable federal, state and local employment taxes, income taxes and the Excise Tax, results
in the Executive’s receipt, on an after-tax basis, of the greater amount notwithstanding that all
or some portion of the Payment may be subject to the Excise Tax. The Executive shall be solely
responsible for the payment of all personal tax liability that is incurred as a result of the
payments and benefits received under this Plan, and the Executive will not be reimbursed by the
Company for any such payments.

     3.2 Determination of Excise Tax Liability. The Company shall attempt to cause its accountants
to make all of the determinations required to be made under Section 3.1, or, in the event the
Company’s accountants will not perform such service, the Company may select another professional
services firm to perform the calculations. The Company shall request that the accountants or firm
provide detailed supporting calculations both to the Company and the Executive prior to the Change
in Control if administratively feasible or subsequent to the Change in Control if events occur that
result in parachute payments to the Executive at that time. For

4

 

purposes of making the
calculations required by Section 3.1, the accountants or firm may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good faith determinations
concerning the application of the Code. The Company and the Executive shall furnish to the
accountants or firm such information and documents as the accountants or firm may reasonably
request in order to make a determination under this Section 3.1. The Company shall bear all costs
the accountants or firm may reasonably incur in connection with any calculations contemplated by
Section 3.1. Any such determination by the
Company’s accountants or other firm shall be binding upon the Company and the Executive, and
the Company shall have no liability to the Executive for the determinations of its accountants or
other firm.

4. General Provisions.

     4.1 At Will Employment. Nothing in this Agreement alters the Executive’s at-will employment
status. Either the Executive or the Company may terminate the Executive’s employment relationship
at any time, with or without cause or advance notice. In particular, nothing expressed or implied
in this Agreement will create any right or duty on the part of the Company or the Executive to have
the Executive remain in the employment of the Company or any subsidiary prior to or following any
Change of Control.

     4.2 Successors and Binding Agreement. This Agreement will be binding upon and inure to the
benefit of the Company and any successor to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of the business or assets of the Company
whether or not through a Change of Control (and such successor shall thereafter be deemed the
“Company” for the purposes of this Agreement). This Agreement will inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.

     4.3 Amendments. No provision of the Agreement may be amended, modified or waived unless such
amendment, modification or waiver shall be agreed to in writing and signed by the Executive and a
duly authorized officer of the Company.

     4.4 Severability. If any provision of the Agreement shall be determined to be invalid or
unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement shall
be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by
law.

     4.5 Notices. Any notice or other communication required or permitted under the Agreement
shall be in writing and shall be deemed to have been duly given when delivered by hand, electronic
transmission (with a copy following by hand or by overnight courier), by registered or certified
mail, postage prepaid, return receipt requested or by overnight courier addressed to the other
party. All notices shall be addressed as follows, or to such other address or addresses as may be
substituted by notice in writing:

	 	 	 	 	 	 	 
	 

	 	To the Company:
	 	To the Executive:
	 	 
	 

	 	Aradigm Corporation	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	3929 Point Eden Way	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

5

 

	 	 	 	 	 	 	 
	 

	 	Hayward, CA 94545	 	 	 	 

     4.6 Governing Law. The Agreement shall be construed, interpreted and governed in accordance
with the laws of the State of California, without reference to rules relating to conflicts of law.

     4.7 Independent Counsel. The Executive acknowledges that this Agreement has been prepared on
behalf of the Company by counsel to the Company and that this counsel does not represent,
and is not acting on behalf of, the Executive. The Executive has been provided with an
opportunity to consult with the Executive’s own counsel with respect to this Agreement.

     4.8 Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute one and the same
agreement.

     In Witness Whereof, the parties have executed this Change of Control Agreement as of
the date first written above.

	 	 	 	 	 	 	 	 	 
	Aradigm Corporation	 	 	 	Executive
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	Signature:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Print Name:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 

6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]