Document:

EX-10.2

 

Exhibit 10.2

Mr. Michael A. Cutler

Vice President and Chief Financial Officer

Warwick Valley Telephone Company

47 Main Street

Warwick, NY 10990

               Re: Retention Agreement

Dear Mike:

As you know, Warwick Valley Telephone Company (“WVT” or the “Company”) has announced that it has
decided to explore all strategic alternatives available to it and that it has engaged Stifel,
Nicolaus (“SN”) to help it in doing so.

1. Basis of Letter

This Letter Agreement (the “Agreement”) reflects our mutual understanding concerning the
continuation of your employment with the Company (“Company Employment”) and shall be effective as
of the date it has been signed by you and the Company. It is based also in part on several other
mutual understandings, namely:

	 	a.	 	The Company’s exploration of its strategic alternatives may not result in the
taking of any action whatsoever by the Company, with the consequence that no particular
event can necessarily serve as the natural termination of this Letter Agreement; and
	 
	 	b.	 	It is in the best interests of all parties that the Company continue during this
exploration and through any transaction that may arise out of it to have the uninterrupted
services of a chief financial officer experienced in both the preparation of financial
statements and in the analysis and establishment of internal control over financial
reporting.

2. Salary and Benefits

From the effective date hereof (as defined in paragraph 1 hereof) through the earliest to occur of
(A) the date on which your Company Employment is terminated for Cause (as defined below in
paragraph 4), and (B) the date you voluntarily terminate your Company Employment, (C) you are
terminated without cause or resign for good reason, you will continue to receive (i) salary
payments at no less than your current annual base salary rate of $158,000 per year (less applicable
withholdings and deductions subject to increases per the normal performance review process), paid
in accordance with the Company’s payroll practices in the ordinary course, (ii) bonuses payable at
the discretion of the Company; and (iii) the level and type of benefits you are currently entitled
to receive, and subject to the terms of the applicable plans and any changes thereto.

 

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3. Retention Award

(a) Subject to paragraph 3(b) below, upon the occurrence of the Retention Award Date (as defined
below) you or your beneficiaries or guardian in the event of death or debilitating disability,
shall be entitled to receive an additional lump sum cash payment of $200,000 (the “Retention
Award”), to be paid at any closing whose occurrence constitutes a Retention Award Date, or if no
such closing occurs, no later that five business days after the Retention Award Date. The
Retention Award Date shall be the earliest date on which any one of the following occurs: (i) The
closing of a sale or merger of the Company; (ii) the closing of any acquisition effected by the
Company on the basis of SN’s engagement; (iii) the closing of a sale of the Company’s entire
interest in Orange County – Poughkeepsie LP, but only if no further sale or merger of the Company
or sale of a substantial portion of its assets is contemplated; (iv) written notification by the
Company or SN that SN’s engagement is terminated; (v) termination of your Company Employment by the
Company without Cause (as Cause is defined below in paragraph 4); (vi) termination of your Company
Employment as a result of your death or disability (as such term is defined in the Company’s
long-term disability policy applicable to you); (vii) your resignation from your Company Employment
for Good Reason (as defined below in paragraph 4); and (viii) the 18-month anniversary of the
effectiveness of this Agreement.

(b) Your entitlement to receive the Retention Award is subject to your diligently carrying out your
duties as Chief Financial Officer in connection with (i) preparing the annual and quarterly
financial statements and other financial and business disclosure required in the Company’s periodic
and current reports, including, without limitation, the analysis and development of the Company’s
internal control over financial reporting; (ii) assisting the Company in developing effective
accounting and management information systems; and (iii) developing and providing the information
that exists and is required or advisable for the effective evaluation of the Company’s strategic
alternatives.

4. Definition for Purposes of this Agreement

(a) “Cause” is defined as your engaging in conduct that (i) is in competition with the Company
during Company Employment, (ii) violates a material provision of Company code of ethics, (iii)
breaches any material provision of this Agreement, (iv) through your negligence results, without
that being the intention or desire of the Company, in the loss of any required or material Company
licenses or regulatory approvals, (v) constitutes a crime or violation of any applicable law or
regulation, or (vi) constitutes gross negligence and results in material injury to the Company,
monetary or otherwise.

(b) “Good Reason” is defined as the occurrence of any of the following: (i) reduction of your base
salary; (ii) a material breach by Company of any term or provision of this Agreement; or (iii) )
relocation of your workplace to a location more than 30 miles from your current work location.

 

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(c) If the existence of Cause or Good Reason is based on a claim of a material breach of this
Agreement and such breach is curable, the relevant party shall have thirty (30) days to cure such
event after receipt of written notice specifying such breach in specific detail.

5. No Entitlement to Additional or Further Payments

(a) The Retention Award shall not be treated as compensation for purposes of calculating the
benefits, if any, to which you may be entitled to receive pursuant to any compensatory plan,
program or arrangement of the Company.

(b) If your Company Employment is terminated for Cause (as defined above in paragraph 4) or if you
terminate your Company Employment for any reason, then notwithstanding anything herein to the
contrary, the Company shall have no further obligations to make any payments or provide any
benefits under this Agreement other than to pay to you your base salary and other accumulated
benefits (such as unused vacation, personal days, etc.) through the date of such termination of
employment, unless the Retention Award Date has already occurred or your termination of your
Company Employment constitutes the Retention Award Date, in which case you shall also be entitled
to receive the Retention Award.

6. Restrictive Covenants

For the period commencing on the date your Company Employment terminates for any reason and ending
on the date 12 months thereafter, you will not, directly or indirectly, for yourself or on behalf
of a third party, hire, solicit, recruit, employ, retain, engage or co-invest with (i) person who
is an employee or Director of the Company on the date this Agreement has been signed by both
parties, or (ii) any individual who was an employee of the Company during the 12 months preceding
the date this Agreement has been signed by both parties. Nothing in this paragraph 6(a) shall
limit your ability to hire, solicit, recruit, employ, engage or co-invest with any former employee
of the Company who has been involuntarily terminated by the Company. Notwithstanding the above if
the Retention Award is granted solely as a result of the expiration of the Term, the Company will
waive the restrictive covenants in this paragraph 2(a).

7. Remedies: Severability: Arbitration

(a) You and the Company acknowledge and agree that given your role and the opportunities you have
enjoyed with the Company, the covenants contained in paragraph 6 above are reasonable, constitute
an important part of the consideration provided under this Agreement and will not unnecessarily or
unreasonably restrict your professional opportunities. You and the Company also acknowledge and
agree that for the purpose of any injunction, restraining order or other equitable relief that you
or the Company may seek, it is deemed that the Company and you would suffer significant and
irreparable harm if you or the Company breached or threatened to breach any of such covenants.

(b) The invalidity or unenforceability of any provision of this Agreement shall have no effect
upon, and shall not impair, the validity or enforceability of any other provision of this
Agreement.

 

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(c) In the event of any dispute with respect to any provision of this Agreement, including without
limitation that any of the covenants contained in paragraph 6 above is claimed to be invalid or
unenforceable for any reason, or if you breach or threaten to breach any covenant contained in
paragraph 6 above, you and the Company agree to first attempt to resolve the dispute through
mediation using the services of JAMS, the Resolution Experts, in New York City If such mediation
fails to resolve the dispute , the dispute shall be settled by arbitration in New York City
administered by the American Arbitration Association under its National Rules for the Resolution of
Employment Disputes and judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.. Notwithstanding the provisions for arbitration in this
paragraph, you acknowledge and agree that for any breach or threatened breach of any covenant
contained in paragraph 6 above, the Company may apply for an injunction, restraining order, or
other equitable relief that may be granted, without the necessity of posting a bond, restraining
you from committing or continuing to commit such breach until such time as the matter is resolved
by a final award in arbitration. You acknowledge and agree that proof shall not be required that
monetary damages for such breach would be difficult to calculate or that a remedy at law or in
arbitration would be inadequate.

8. Cooperation

You agree that, at all times during and following your Company Employment, you will assist and
cooperate with the Company (or its designee) by providing truthful and accurate information
concerning any past, present or future legal matters that relate to or arise out of your Company
Employment including, but not limited to, the defense or prosecution of any claim that may be made
against or by the Company, any of its affiliates or any of their current or former employees. or in
connection with any ongoing or future investigation or dispute or claim of any kind involving the
Company or any of its affiliates or any of their current or former employees, including any formal
or informal proceeding before the SEC or any competent court (including responding to any formal or
informal requests for documents or testimony) to the extent such claims, investigations or
proceedings arise out of or are in connection with your Company Employment or termination of your
Company Employment. Company’s request for your “reasonable cooperation” shall take into
consideration your personal and business commitments and the amount of notice provided to you by
the Company. You further agree to execute and deliver any documents that may be reasonably
necessary for, and customarily associated with, carrying out the provisions of this paragraph 8.
The Company shall reimburse you for any necessary and reasonable fees and expenses incurred by you
in connection with your cooperation hereunder (including travel and accommodations); it being
understood that the Company shall not reimburse you for any expenses relating to separate counsel
unless it reasonably determines that separate representation is necessary.

9. Attorneys’ Fees and Expenses

The Company has agreed to pay your legal fees of up to $4,000 in connection with the review and
negotiation of this Agreement.

 

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10. Non-disparagement

You and the Company (for purposes hereof, the Company shall mean only the executive officers and
directors thereof and not any other employees) agrees not to make any public statements that
disparage the other party or, in the case of the Company, its respective Affiliates, employees,
officers, directors, products or services. Notwithstanding the foregoing, statements made in the
course of sworn testimony in administrative, judicial or arbitral proceedings (including, without
limitation, depositions in connection with such proceedings) shall not be subject to this paragraph
10.

11. 409A Compliance

Company represents and warrants that this Agreement and all payments and benefits associated with
it are intended to comply with Section 409A of the Internal Revenue Code. Notwithstanding the
above, in the event of a determination that any payment or benefit associated with this Agreement
is not compliant with the provisions of Section 409A of the Internal Revenue Code, the Company
agrees that it will modify this Agreement to make it compliant with Section 409A and that it will
make a good faith effort to maintain the value of the payments and benefits under this Agreement.

12. Indemnification

To the extent the Company contractually indemnifies other officers or directors with respect to
litigation relating to their service with or on behalf of the Company, the Company shall provide
equivalent indemnification to you.

13. Governing Law

This Agreement shall be governed by the local law of the State of New York as to all matters,
including without limitation validity, construction, effect, performance and remedies, except to
the extent that such laws are preempted by federal law.

14. Ability to Understand Agreement

You acknowledge that: (a) you have read and understand each of the provisions of this Agreement;
(b) you have been advised to consult with an attorney prior to executing this Agreement: and(c) you
are entering into this Agreement of your own free will.

15. Notices 

All notices, requests and other communications under this Agreement will be in writing (including
facsimile or similar writing) to the applicable address (or to such other address as to which
notice is given in accordance with this paragraph 14).

 

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If to you:

Michael Cutler

P.O. Box 492

Warwick, NY 10990

And a copy to:

Wendi S. Lazar, Esq.

Outten & Golden, LLP

3 Park Avenue

New York New York 10016

If to the Company:

Herbert Gareiss, Jr

President & CEO

Warwick Valley Telephone Company

47 Main Street

Warwick, NY 10990

Facsimile: 845-986-6699

Each such notice, request or other communication will be effective only when received by the
receiving party.

16. Entire Agreement

This Agreement sets forth the entire agreement and understanding relating to your Company
Employment and supersedes all prior discussions, negotiations, agreements, memoranda, charts, and
communications concerning your employment and the termination thereof, other than prior or
contemporaneous, as applicable, confidentiality, trade secret, non-competition, non- solicitation
or arbitration agreement. You hereby acknowledge and agree that you are subject to certain
obligations as set forth in the WVT Code of Ethics.

17. Counterparts

This Agreement may be executed by the parties in any number of counterparts, and all such
counterparts taken together shall be deemed to constitute one and the same document.

 

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18. Headings

The section headings continued in this Agreement are for convenience of reference only and shall
not define, interpret or limit this Agreement.

19. At -Will Employment

You acknowledge and agree that your Company Employment is at will and, subject to the terms of this
Agreement, either you or the Company can terminate your employment at any time for any reason or
for no reason at all not otherwise prohibited by law.

20. Outplacement Services

If it has been established that a Retention Award Date has occurred and your Company Employment is
terminated on or after that date either by you or by the Company, the Company shall pay up to
twenty-thousand ($20,000) dollars for outplacement services from an outplacement or executive
search firm of your choice that specializes in placing senior executives and/or CFO’s.

21. Binding Effect; Amendment

This Agreement shall be binding upon and inure to the benefit of the parties and their respective
successors, heirs, executors and administrators. Neither party may assign its rights or delegate
its obligations hereunder. This Agreement may be amended only by a writing signed by both parties
hereto. The provisions of paragraphs 5, 6, 7, 8, 10 and 11 hereof shall survive any termination of
this Agreement and the payment of any Retention Award and of any amounts payable under paragraph
20.

	 	 	 	 	 	 	 	 	 
	 

	 	WARWICK VALLEY TELEPHONE COMPANY	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date: 5/11/06

	 	By
	 	/s/Herbert Gareiss, Jr.	 	 	 	 
	 

	 	 	 	 

	 	 	 	 
	 

	 	 	 	Herbert Gareiss, Jr., President & CEO	 	 	 	 

I HAVE READ THIS AGREEMENT AND UNDERSTAND ALL OF ITS TERMS. I SIGN AND ENTER THIS AGREEMENT
KNOWINGLY AND VOLUNTARILY WITH FULL KNOWLEDGE OF WHAT IT MEANS.

	 	 	 	 	 
	 	 	 
	Date:  5/11/06 	/s/Michael A. Cutler
 	 
	 	 	 
	 	Michael A. CutlerEX-10.28

 

EXHIBIT 10.28

EMPLOYMENT AGREEMENT

     THIS AGREEMENT is made as of the 1st day of April, 2006, by and between RENT-WAY, INC., a
Pennsylvania corporation, with offices at One RentWay Place, Erie, Pennsylvania 16505 (the
“Company”) and John A. Lombardi, an individual residing at 5094 North Jarrod Court, Erie,
Pennsylvania 16506 (the “Employee”).

     WHEREAS, the Employee is currently serving as Vice President and interim Chief Financial
Officer of the Company under an employment agreement dated October 1, 2005;

     WHEREAS, the Company desires to promote the Employee to the position of Senior Vice President
and Chief Financial Officer and the Employee desires to accept employment in such new position upon
the terms and conditions contained in this Agreement; and

     WHEREAS, the Company and the Employee desire to rescind all prior agreements regarding
employment between them and make this Agreement the sole contract governing the Company’s
employment of the Employee.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein the
Company and the Employee agree as follows:

     1. Term. Subject to the terms and conditions set forth in this Agreement, the Company
hereby agrees to employ the Employee, and the Employee hereby accepts such employment, for the
period beginning on the date of this Agreement and continuing until March 31, 2008 (the “Initial
Term”), or until earlier terminated as provided herein. Thereafter, this Agreement shall continue
until (i) either party gives at least 120 days’ prior written notice to the other of the
termination of this Agreement or (ii) until this Agreement is otherwise terminated as provided
herein (the Initial Term and any continuing term of this Agreement being referred to as the
“Term”).

     If during the Initial Term, the Company terminates this Agreement for any reason other than
the Employee’s death pursuant to Section 5, the Employee’s disability pursuant to Section 6, or for
cause pursuant to Section 9, the Employee shall have the right to receive continuing payments of
bi-weekly base salary (at the rate in effect at the time notice of termination is given) through
the end of the Initial Term and for a 12-month period following the end of the Initial Term;
provided, however, that in no event will the continuing payments of base salary be made for a
period in excess of 24 months. In the event that such termination by the Company occurs after the
Initial Term, the Employee shall have the right to receive such continuing payments for the
12-month period following the effective date of termination. Such continuing payments of base
salary shall be severance pay and shall not constitute a continuation of the Employee’s employment
for any reason.

 

 

     2. Office; Duties. During the Term, the Employee shall serve as Senior Vice President
and Chief Financial and Accounting Officer. The President or his designee may at any time change
the title of the Employee.

     Employee shall perform such duties and discharge such responsibilities as the President or his
designee shall from time to time reasonably direct. The Employee agrees to perform such duties and
discharge such responsibilities in a faithful manner and to the best of his ability. The Employee
agrees to devote his full business time and attention to the business and affairs of the Company
and to use his best efforts to promote the interests of the Company. The Employee further agrees
that he will engage in no outside business concerns or activities that conflict with his duties to
the Company, or are directly or indirectly competitive with the Company, without the Company’s
prior written consent.

     The President or his designee may from time to time assign to the Employee additional duties
and responsibilities and delegate to other employees of the Company duties and responsibilities
normally discharged by the Employee. All such assignments and delegations of duties and
responsibilities shall be made by the President or his designee and may include a reduction of the
Employee’s duties and responsibilities or a reduction in the Employee’s position as reasonably
determined by the President or his designee.

     3. Compensation. During the Term, the Company agrees that:

          3.1 The Employee shall receive an annual base salary of $230,000, payable in installments in
accordance with the regular payroll practices of the Company. The Company shall deduct or withhold
from payments of base salary, and from all other payments made to the Employee pursuant to this
Agreement, all amounts which may be required to be deducted or withheld under any applicable law
now in effect or which may become effective during the term of this Agreement (including but not
limited to Social Security contributions and income tax withholdings). The Employee’s base salary
shall be reviewed annually by the President or his designee and may be reasonably adjusted on the
basis of individual and corporate performance in accordance with criteria and standards established
by the President or his designee.

          3.2 Incentive Compensation; Bonuses. In addition to base salary, the Employee shall
be entitled to (i) participate in such incentive plans (including the right to defer income and
bonuses) made available by the Company to its executives and key employees and (ii) receive such
additional bonus or discretionary compensation payments as the President or his designee may
determine from time to time. The Employee’s eligibility for incentive plan participation and
additional bonus or discretionary compensation payments shall be reviewed annually by the President
or his designee and shall be awarded on the basis of corporate performance and in accordance with
criteria and standards established in the sole discretion of the President or his designee.

          3.3 Expenses. During the Term, the Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred in connection with the performance of his duties
in accordance with the policies and procedures of the Company as may be in effect from time to
time.

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          3.4 Benefits. During the Term, the Employee shall be entitled to receive a package of
benefits that includes all of the programs, plans and perquisites currently provided by the Company
to its employees, for so long as such programs, plans and perquisites are continued by the Company
and are available to employees of the Company.

     4. Restricted Stock Units. The Employee shall be granted 15,000 restricted stock
units under the Company’s 2006 Equity Incentive Plan. Such units will vest equally over a period
of three years subject to satisfaction of certain requirements, and will have such other terms and
conditions not inconsistent with the Plan, as may be set forth in the restricted stock units
agreement or award letter evidencing such units.

     5. Termination of Employment by Reason of Death. If the Employee dies during the
Term, this Agreement shall terminate automatically as of the date of his death and the Company
shall pay to the Employee’s legal representatives such benefits determined in accordance with any
then existing Company-sponsored plans or programs providing benefits at death.

     6. Termination of Employment by Reason of Disability. In the event that the Employee
shall sustain a disability which in the opinion of medical authority satisfactory to the Company
would substantially prevent him from rendering the services required under this Agreement for a
total of 180 days during any 360-day period, the Company shall have the right to terminate this
Agreement upon thirty (30) days’ prior written notice to the Employee.

     7. Termination After a Change in Control of the Company.

          (a) If within ninety (90) days following the occurrence of a Change of Control of the Company
(as defined in Appendix A) the Employee elects to voluntarily terminate his employment with the
Company, the Employee shall be entitled to receive continuing payments of bi-weekly base salary (at
the rate in effect at the time notice of termination is given) for 12 months following the date on
which termination is effective.

          (b) Except as stated in (a) above, a Change of Control of the Company shall not affect the
terms of this Agreement.

     8. Termination of Employment at Employee’s Election. If the Employee elects to
terminate this Agreement and the Employee gives two (2) weeks prior written notice of such
termination, the Employee shall be entitled to receive his salary then in effect for the two (2)
weeks notice period regardless of whether the Company desires the Employee to continue his
employment during that period.

     9. Termination of Employment for Cause. The Company shall have the right to terminate
the Employee’s employment immediately in the event the Employee shall do or cause to be done any
act that constitutes “cause” (as hereinafter defined) for termination. For purposes of this
Agreement, “cause” shall be deemed to mean (i) a material breach of his obligations under this
Agreement (any breach of Section 10, 11 or 12 hereof being an example of such a breach), (ii) gross
negligence or willful misconduct in the performance of his duties to the Company, (iii) dishonesty
to the Corporation, (iv) conviction of any crime that could have the

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effect of causing the termination or suspension of any license or permit which the Company
holds, (v) conviction of any felony, (vi) conviction of a misdemeanor which substantially impairs
the Employee’s ability to perform his duties to the Corporation, or (vii) excessive absenteeism not
related to disability. The Employee will not be deemed to have been terminated for “cause” as
defined under subsection (i) or (ii) of the immediately preceding sentence unless and until he is
provided written notice of the alleged grounds for such termination and such grounds are not
substantially cured within 15 days following the Employee’s receipt of such notice. Should the
Employee’s employment be terminated by the Company for cause, the Company’s only obligation shall
be to pay the Employee his base salary through the date of termination. Nothing contained in this
Section 8 shall in any way waive, restrict or prejudice the Company’s rights and remedies in equity
and at law against the Employee with respect to the matter for which the Employee’s employment
under this Agreement is terminated for cause.

     10. Confidentiality.

          10.1 During the course of his employment with the Company, the Employee has had and will have
access to and will gain knowledge with respect to all aspects of the business of the Company,
including financial information; business and marketing practices and procedures; information
concerning employees, customers, suppliers; and other valuable and proprietary information relating
to the business of Company (“Confidential Information”). The parties agree that certain covenants
by the Employee are essential to the growth and stability of the business of the Company. Among
these covenants are the Employee’s promises not to make unauthorized disclosures of the
Confidential Information nor to use the Confidential Information regardless of whether the
Employee’s employment with the Company has terminated. Accordingly, Employee agrees that, except
as required by his duties under this Agreement, he shall not use nor disclose to anyone at anytime
during or after the Term any Confidential Information obtained by him in the course of his
employment with the Company. The Employee agrees to enter into any further agreement regarding
confidentiality that the Company may request. The Employee shall use his best efforts to prevent
the removal of any Confidential Information from the premises of the Company, except as required in
his normal course of employment by the Company. The Employee shall use his best efforts to cause
all persons or entities to whom any Confidential Information shall be disclosed by him hereunder to
observe the terms and conditions set forth herein as though each such person or entity was bound
hereby.

          10.2 Employee agrees to hold as the Company’s property all memoranda, books, papers, letters,
customer lists, processes, computer software, records, financial information, policy and procedure
manuals, training and recruiting procedures and other data, and all copies thereof and therefrom in
any way relating to the Company’s business and affairs, whether made by him or otherwise coming
into his possession, and on termination of his employment, or on demand of the Company at any time,
to deliver the same to the Company.

     11. Non-Competition; Non-Solicitation.

          11.1 During the Term of this Agreement and for a period continuing for one (1) year
thereafter, the Employee agrees that he shall not directly or indirectly, for his own account or as
agent, employee, officer, director, trustee, consultant or shareholder of any corporation or other
entity (except for a two percent (2%) interest or less in any publicly traded

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corporation or other entity) engage or attempt to engage anywhere in North America in any
business activity which is the same as, substantially similar to or directly competitive with the
business of the Company, or any subsidiary of the Company, as now or in the future conducted by the
Company.

          11.2 During the Term of this Agreement and for a period continuing for one (1) year
thereafter, the Employee agrees that he shall not, directly or indirectly, for his own account or
as agent, employee, officer, director, trustee, consultant or shareholder of any corporation or
other entity (except for a two percent (2%) interest or less in any publicly traded corporation or
other entity) (i) employ or solicit the employment of any employee of the Company, any employee of
a subsidiary of the Company, or any former employee of the Company whose employment with the
Company terminated within the preceding six (6) months or (ii) induce or attempt to induce any
employee of the Company, or any employee of a subsidiary of the Company, to terminate his or her
employment with the Company or any subsidiary of the Company.

          11.3 The Employee acknowledges and agrees that the foregoing territorial and time limitations
and restrictive covenants are reasonable and properly required for the adequate protection of the
business and affairs of the Company. In the event any such territorial or time limitation is found
to be unreasonable by a court of competent jurisdiction, the Employee agrees and submits to the
reduction of either said territorial or time limitation (or both) to such an area or period as the
court may determine to be reasonable.

     12. Rights to Discoveries. The Employee agrees that all ideas, inventions, trademarks
and other techniques, procedures, developments or improvements conceived, developed or acquired by
the Employee, whether or not during working hours, at the premises of the Company or elsewhere,
alone or with others, that are within the scope of the Company’s business operations or that relate
to any work or projects of the Company shall be the sole and exclusive property of the Company.
The Employee agrees to disclose promptly and fully to the Company all such ideas, inventions,
trademarks or other techniques, procedures, developments or improvements and, at the request of the
Company, the Employee shall submit to the Company a full written report thereof regardless of
whether the request for a written report is made after the termination of this Agreement. The
Employee agrees that during the Term and thereafter, upon the request of the Company and at its
expense, he shall execute and deliver any and all applications, assignments and other instruments
which the Company shall deem necessary or advisable to transfer to and vest in the Company the
Employee’s entire right, title and interest in and to all such ideas, inventions, trademarks or
other techniques, procedures, developments or improvements and shall assist the Company in applying
for and obtaining patent, trademark or copyright protection for any such protectible ideas,
inventions, trademarks and other techniques, procedures, developments and improvements.

     13. Notices. All notices and other communications given pursuant to this Agreement
shall be deemed to have been properly given or delivered if mailed, by certified mail, postage
prepaid, addressed to the appropriate party, at the address for such party set forth at the
beginning of this Agreement. Any party may from time to time designate by written notice

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given pursuant to this Section 13 any other address or party to which any such notice or
communication or copies thereof shall be sent.

     14. Equitable Relief The Employee acknowledges that the Company will suffer damages
incapable of ascertainment in the event that any of the provisions of Section 10, 11 or 12 hereof
are breached and that the Company will be irreparably damaged in the event that the provisions of
Section 10, 11 or 12 are not enforced. Therefore, should any dispute arise with respect to the
breach or threatened breach of any such Sections, the Employee agrees and consents that in addition
to any and all other remedies available to the Company an injunction or restraining order or other
equitable relief may be issued or ordered by a court of competent jurisdiction restraining any
breach or threatened breach of such Sections. The Employee agrees not to urge in any such action
that an adequate remedy exists at law. All expenses, including, without limitation, attorney’s
fees and expenses incurred in connection with any legal proceeding arising as a result of a breach
or threatened breach of Section 10, 11 or 12 of this Agreement shall be borne by the losing party
to the fullest extent permitted by law and the losing party hereby agrees to indemnify and hold the
other party harmless from and against all such expenses.

     15. Arbitration of Disputes. Except for an alleged violation of Section 10, 11 or 12
of this Agreement, the Employee and the Company waive any right to a court (including jury)
proceeding and instead agree to submit any dispute over the Employee’s employment with the Company
or the application, interpretation, validity or any other aspect of this Agreement to final and
binding arbitration consistent with the Company’s alternative dispute resolution program or, if
none, then consistent with the application of the Federal Arbitration Act and the rules for
arbitration of employment disputes of the American Arbitration Association (“AAA”) before a single
arbitrator. Only true neutrals will be eligible for consideration as arbitrators and under no
circumstances will AAA furnish the names of individuals who represent employees, unions or
companies.

     16. Successors. The Company will require any successor to all or substantially all of
the business and/or assets of the Company (whether direct or indirect by purchase, merger,
consolidation or otherwise) to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if no such succession
had taken place. As used in this Agreement, the “Company” shall mean both Rent-Way, Inc. and any
successor to its business and/or assets (by merger, purchase or otherwise).

     17. Miscellaneous. This Agreement shall be governed by the internal domestic laws of
the Commonwealth of Pennsylvania without reference to conflict of laws principles. The Employee
consents to jurisdiction in Pennsylvania and venue in Erie County for purposes of all claims
arising under this Agreement. All headings and subheadings are for convenience only and are not of
substantive effect. This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements, negotiations,
understandings and writings (or any part thereof) whether oral or written between the parties
hereto relating to the subject matter hereof, including that certain employment agreement between
the parties dated October 1, 2005, all of which are hereby terminated and canceled. There are no
oral agreements in connection with this Agreement.

6

 

Neither this Agreement nor any provision of this Agreement may be waived, modified or amended
orally or by any course of conduct but only by an agreement in writing duly executed by both of the
parties hereto. If any section, portion, subsection or subportion of this Agreement shall be
determined to be unenforceable or invalid, then such section, portion, subsection or subportion
shall be modified in the letter and spirit of this Agreement to the extent permitted by applicable
law so as to be rendered valid and any such determination shall not affect the remainder of this
Agreement, which shall be and remain binding and effective as against the parties hereto.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be effective as of
the date first above written.

	 	 	 	 	 	 	 
	 	 	 	 	COMPANY:
	 
	 	 	 	 	 	 
	EMPLOYEE:	 	 	 	RENT-WAY, INC.
	 
	 	 	 	 	 	 
	/s/ John A. Lombardi

	 	 	 	By:
	 	/s/ William S. Short
	 	 	 	 	 	 	 
	John A. Lombardi

	 	 	 	 	 	William S. Short, President

7

 

APPENDIX A

     A “Change in Control of the Company” shall be deemed to have occurred if, as the result
of a single transaction or a series of transactions, the event set forth in either of the following
paragraphs shall have occurred:

     (1) there is consummated a merger or consolidation of the Company with any other corporation
or entity, other than a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting securities of the surviving
entity or any parent thereof) at least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding immediately after such merger or
consolidation as appropriate; or

     (2) the stockholders of the Company approve a plan of liquidation or dissolution of the
Company or an agreement for the sale or disposition by the Company of all or substantially all of
the Company’s assets, other than a sale or disposition by the Company of all or substantially all
of the Company’s assets to an entity, at least 60% of the combined voting power of the voting
securities of which are owned by stockholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.

8

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