EXHIBIT 10.5


                              EMPLOYMENT AGREEMENT


                  THIS AGREEMENT, dated as of November 20, 2001, is between
RENT-WAY, INC., a Pennsylvania corporation with its executive offices at One
RentWay Place, Erie, Pennsylvania, 16505 (the "Corporation"), and William E.
Morgenstern, an individual residing at 4011 Westbury Ridge Drive, Erie,
Pennsylvania 16506 (the "Executive").

                                    RECITALS:

                  WHEREAS, the Executive is currently employed by the
Corporation pursuant to an employment agreement dated October 1, 1998;

                  WHEREAS, the Corporation wishes to acknowledge the Executive's
extraordinary efforts on behalf of the Corporation since first disclosure of the
Corporation's accounting improprieties in October 2000, to extend the
Executive's term of employment and in connection therewith provide the Executive
with certain benefits and protections;

                  NOW, THEREFORE, in consideration of the promises and of the
covenants contained in this Agreement, the Corporation and the Executive agree
as follows:

1. Definitions.  The following definitions apply for purposes of this Agreement:

   (a)   "Board of  Directors"  or "Board"  means the Board of  Directors of the
         Corporation.

   (b)   "Cause"  means a  finding  by the  Board of  Directors  that any of the
         following conditions exist:

        (i)       The Executive's willful failure to perform his material duties
                  under this Agreement (other than as a result of his
                  Disability) if such failure is not substantially cured within
                  15 days after written notice of such failure is provided to
                  the Executive.

        (ii)      The Executive's willful breach of his fiduciary duty or duty
                  of loyalty to the Corporation which is injurious to the
                  financial condition or the business reputation of the
                  Corporation.

        (iii)     The Executive's conviction for a felony offense under the laws
                  of the United States or any state thereof.

        (iv)      Willful breach by the Executive of any restrictive covenant
                  contained in Sections 12 and 13 of this Agreement.

                  For purposes of this definition, no act or failure to act will
                  be deemed "willful" unless effected by the Executive not in
                  good faith and without a reasonable belief that his action or
                  failure to act was in or not opposed to the Corporation's best
                  interests.

   (c)   "Change in Control"  means and shall be deemed to have occurred  if:(i)
         any  "person" as such term is used in  Sections  13(d) and 14(d) of the
         Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
         than the Corporation, any trustee or other fiduciary holding securities
         under any  employee  benefit  plan of the  Corporation,  or any  entity
         owned,  directly or indirectly,  by the shareholders of the Corporation
         in substantially  the same proportions as their ownership of the voting
         securities of the  Corporation),  is or becomes the "beneficial  owner"
         (as defined in Rule 13d-3 under the Exchange Act, or any successor rule
         or  regulation  thereto as in effect  from time to time),  directly  or
         indirectly,  of  securities  representing  25% or more of the  combined
         voting power of the  Corporation's  then outstanding  securities;  (ii)
         during any period of two  consecutive  years (not  including any period
         prior to the date of this Agreement),  individuals who at the beginning
         of such period constitute the Board of Directors,  and any new director
         (other than a director  designated  by a person who has entered into an
         agreement  with the  Corporation  to effect a transaction  described in
         clause (i),  (iii),  or (iv) of this  paragraph)  whose election by the
         Board of Directors  or  nomination  for  election by the  Corporation's
         shareholders  was  approved  by a vote of at  least  two-thirds  of the
         directors  then  still in  office  who  either  were  directors  at the
         beginning of the two-year  period or whose  election or nomination  for
         election was previously approved, cease for any reason to constitute at
         least a majority  of the Board of  Directors;  (iii) the  Corporation's
         shareholders  approve a merger or consolidation of the Corporation with
         any other corporation,  other than a merger or consolidation that would
         result  in  the  voting  securities  of  the  Corporation   outstanding
         immediately prior thereto  continuing to represent (either by remaining
         outstanding  or by  being  converted  into  voting  securities  of  the
         surviving  entity) more than 50% of the combined voting power of voting
         securities of the  Corporation  or such  surviving  entity  outstanding
         immediately after such merger or consolidation; provided, however, that
         a merger or consolidation  effected to implement a recapitalization  of
         the  Corporation  (or similar  transaction) in which no person acquires
         more than 25% of the combined  voting power of the  Corporation's  then
         outstanding  securities  shall not  constitute a Change in Control;  or
         (iv)  the  Corporation's   shareholders  approve  a  plan  of  complete
         liquidation  of  the  Corporation  or an  agreement  for  the  sale  or
         disposition  by the  Corporation  of all  or  substantially  all of the
         Corporation's  assets.  If any of the events  enumerated  in clause (i)
         through  (iv)  occur,  the  Corporation's   Board  of  Directors  shall
         determine  in good  faith the  effective  date of the Change in Control
         resulting therefrom for purposes of this Agreement.

   (d)   "Code" means the Internal Revenue Code of 1986, as amended.

   (e)   "Corporation" means Rent-Way, Inc.

   (f)   "Disability"  means a  disability  that has  existed  for a period of 6
         consecutive  months and because of which the Executive is physically or
         mentally  unable to  substantially  perform his regular duties as Chief
         Executive Officer of the Corporation.

   (g)   "Good Reason" means:

         (i)  The Executive's  reasonable  belief that there has been a material
              diminution in the  Executive's  responsibilities,  duties,  title,
              reporting   responsibilities  within  the  business  organization,
              status,  role or authority  which is not  restored  within 15 days
              after  written  notice  of  such  diminution  is  provided  to the
              Corporation.

         (ii) Removal  of  the  Executive  from,  or  failure  to  re-elect  the
              Executive  to,  the  position  of  Chairman  of the Board or Chief
              Executive Officer of the Corporation.

        (iii) A  determination  by the Executive  using his reasonable  judgment
              that the services  required to be performed by the Executive would
              necessitate  the  Executive  moving his  residence  from the Erie,
              Pennsylvania area.

         (iv) A breach by the  Corporation  of any of the material terms of this
              Agreement if such breach is not substantially cured within 15 days
              after   written   notice  of  such   breach  is  provided  to  the
              Corporation.

   (h)   "Termination  In Connection  With A Change In Control" means any of the
         following events  occurring  within twenty four (24) months  following,
         or, directly or indirectly, in connection with, or in anticipation of a
         Change in Control:

         (1) a termination of Executive's employment by the Corporation for any
             reason other than Cause;

         (2) a termination of Executive's employment by the Executive for
             Good Reason;

         (3) a termination of Executive's employment by Executive because any
             successor to the Corporation's operations or assets (whether
             acquired by merger, sale, consolidation or otherwise)
             ("Successor") fails to:

             (i) appoint the Executive to a position with the Successor having
                 the same responsibilities, duties, title, reporting
                 responsibilities within the business organization, status, role
                 and authority the Executive now holds with the Corporation,

            (ii) acknowledge and assume, in writing, this Agreement at the time
                 of the Change in Control, or

           (iii) acknowledge and assume, in writing, any indemnification
                 agreement with the Executive or by law provisions regarding
                 indemnification which are in effect at the time of the Change
                 in Control.

2. Employment; Duties. Subject to the terms and conditions set forth in this
Agreement, the Corporation hereby agrees to employ the Executive, and the
Executive hereby accepts employment as Chairman of the Board and Chief Executive
Officer of the Corporation, in full charge of the operation of its business and
affairs, subject to the provisions of the by-laws of the Corporation in respect
of the duties and responsibilities assigned from time to time by the Board of
Directors to the Chairman of the Board and Chief Executive Officer, and subject
also at all times to the control of the Board of Directors. The Executive will
perform those duties and discharge those responsibilities as are commensurate
with his position, and as the Board of Directors may from time to time
reasonably direct that are commensurate with his position. The Executive agrees
to perform his duties and discharge his responsibilities in a faithful manner
and to the best of his ability and to use all reasonable efforts to promote the
interests of the Corporation. The Executive may not accept other gainful
employment except with the prior consent of the Board of Directors of the
Corporation. To the extent the Executive performs services for any affiliate or
subsidiary of the Corporation, the Executive shall be entitled to compensation
for such services in amounts approved by the Board of Directors. With the prior
consent of the Board of Directors of the Corporation, the Executive may become a
director, trustee or other fiduciary of other corporations, trusts or entities.
The Executive may be involved in charitable, civic and religious organizations
so long as they do not materially interfere with the performance of the
Executive's duties hereunder. The Executive shall be entitled to make and manage
personal investments, provided such investments and any activities undertaken in
connection therewith do not violate any restrictive covenants in Sections 12 or
13 of this Agreement.

3.Compensation.

   (a)   Base Salary.  During the term of the Executive's  employment under this
         Agreement,  the  Executive  will  receive a base salary of Five Hundred
         Thousand  Dollars  ($500,000) per year,  payable in accordance with the
         Corporation's  normal payroll practices.  On an annual basis, the Board
         of  Directors  will,  in good  faith,  review  the base  salary  of the
         Executive  to  consider  appropriate   increases  (but  not  decreases)
         therein.  If the  Executive  dies  during the period of his  employment
         under this Agreement, employment for any part of the month of his death
         will be considered employment for the entire month.

   (b)   Annual  Cash  Bonuses.  During the term of the  Executive's  employment
         under this  Agreement,  the  Executive  will be  entitled to receive an
         annual  cash  bonus  calculated   pursuant  to  performance   standards
         developed by the Corporation's  compensation  committee in consultation
         with the Executive,  as such standards are in effect from time to time.
         The target  amount of the bonus shall be 100% of the  Executive's  base
         salary as of the end of the fiscal period of the  Corporation for which
         the bonus is calculated. The Board of Directors of the Corporation,  in
         its discretion, may award bonuses to the Executive in addition to those
         provided for above, as it may from time to time determine.

   (c)   Special Bonus.  Upon execution of this Agreement,  the Corporation will
         pay the Executive a special one-time cash bonus of Seven
         Hundred Fifty Thousand Dollars ($750,000).

   (d)   Stock Options.  Upon execution of this Agreement,  the Corporation will
         award the Executive a grant of 250,000 options to acquire shares of the
         Corporation's  common stock under the Corporation's  stock option plans
         at an exercise  price equal to the closing  price of the  Corporation's
         common stock as reported by the New York Stock  Exchange on the date of
         grant.  The  agreement  evidencing  these  options will provide for the
         vesting of the options as follows:  83,333  options on the date of this
         Agreement;  83,333  options on  October  1, 2002 and 83.334  options on
         October 1, 2003.

   (e)   Withholding.  The  Corporation  will deduct or withhold from all salary
         and bonus  payments,  and from all other payments made to the Executive
         pursuant  to this  Agreement,  all  amounts  that may be required to be
         deducted or withheld under any applicable Social Security contribution,
         income tax  withholding  or other similar law now in effect or that may
         become effective during the term of this Agreement.

4.Other Benefits And Terms.  During the term of the Executive's employment under
this Agreement, the Executive will be entitled to the following other benefits
and terms:

   (a)   The  Executive  will be entitled to  participate  in the  Corporation's
         health and medical  benefit  plans,  any  pension,  profit  sharing and
         retirement  plans, and any insurance  policies or programs from time to
         time generally offered to all or substantially  all executive  officers
         who are employed by the Corporation. These plans, policies and programs
         are subject to change at the sole discretion of the Corporation.

   (b)   The Executive will be entitled to any other fringe benefit from time to
         time generally  offered to all or substantially  all senior  executives
         employed by the Corporation.

(c) The Corporation will pay on behalf of or reimburse the Executive for
personal legal and financial advice an amount not to exceed $10,000 in any
fiscal year.

(d) The Corporation will pay on behalf of or reimburse the Executive for the
premiums on that certain policy of life insurance (Policy No. 2509258) through
First Colony Life Insurance Company insuring the Executive's life in the amount
of $7 million in an amount not to exceed $5,000 in any fiscal year.

5.Vacations.  The Executive will be entitled to four (4) weeks of paid vacation
each calendar year. Unused vacation in any year may not be carried over to
subsequent years.

6. Reimbursement For Expenses. The Corporation will reimburse the Executive for
expenses which the Executive may from time to time reasonably incur on behalf of
the Corporation in the performance of his responsibilities and duties including,
but not limited to, membership dues in trade and business organizations and
attendance at trade and business conferences.

7. Period Of Employment. Subject to the provisions of this Section, the period
of employment of the Executive under this Agreement will be deemed to begin on
October 1, 2001 and continue until October 1, 2006 (the "Initial Term"). Upon
the expiration of the Initial Term, the period of employment will be
automatically extended for additional one year periods thereafter, unless either
party provides 120 days prior written notice to the other that it does not wish
to extend the Executive's employment beyond its then present term.

                  Notwithstanding the foregoing:

   (a)   The Executive's employment will automatically  terminate upon the death
         or Disability of the Executive. The foregoing is subject to the duty of
         the Corporation to provide reasonable accommodation under the Americans
         with Disabilities Act.

   (b)   The  Corporation  may, at its sole option,  terminate  the  Executive's
         employment at any time and for any reason by delivering  written notice
         to the Executive.

   (c)   The  Executive,  at his sole option,  may terminate his  employment for
         Good Reason by providing  written notice to the Corporation at least 30
         days  prior to the  effective  date of the  termination  of  employment
         specified in the notice.

   (d)   The Executive,  at his sole option, may terminate his employment absent
         Good Reason by providing  written notice to the Corporation at least 90
         days  prior to the  effective  date of the  termination  of  employment
         specified in the notice.

Any notice of termination of employment given by a party must specify the
particular termination provision of this Agreement relied upon by the party and
must set forth in reasonable detail the facts and circumstances that provide a
basis for the termination.

8.Benefits Upon Termination. The Corporation will provide the following benefits
upon the termination of the Executive's employment with the Corporation.

   (a)   Upon  Termination  By The  Corporation  Other  Than For Cause Or By The
         Executive  With Good Reason.  Upon the  Executive's  termination of his
         employment  for Good  Reason or the  Corporation's  termination  of the
         Executive's  employment  for other than  Cause,  the  Corporation  will
         provide the following:

        (i)       Salary And Fringe Benefits. The Executive will receive his
                  salary and Fringe Benefits through the effective date of
                  termination of employment. The Executive will also receive (i)
                  his annual base salary, (ii) his full fringe benefits,
                  including medical and health insurance ("Fringe Benefits"), in
                  effect on the date of notice of termination for a period of 24
                  months beginning with the month next following the month
                  during which his employment terminates or the balance of the
                  Initial Term, whichever is the longer period. If the Executive
                  dies during this period, dependent health or medical Fringe
                  Benefits will be provided for the balance of the period.

        (ii)      Bonus. The Executive will receive a bonus payment equal to the
                  sum of  (A) 200% of his base salary in effect in the year of
                  the termination of his employment or an amount equal to 10% of
                  his base salary in effect in the year of termination
                  multiplied by each full month remaining in the Initial Term,
                  whichever is the greater amount, plus (B) an amount determined
                  by multiplying 100% of his base salary by a fraction the
                  numerator of which is the number of full and partial
                  calendar months in the calendar year that precede the date of
                  the termination of his employment and the denominator of which
                  is 12, plus (c) an amount equal to the unpaid portion of any
                  bonus earned for any fiscal year prior to the year in which
                  his employment terminates.

        (iii)     Accrued Vacation. The Executive will receive payment for
                  accrued but unused vacation, which payment will be equitably
                  prorated based on the period of active employment for that
                  portion of the calendar year in which the Executive's
                  termination of employment becomes effective.

        (iv)      Stock Options.  Notwithstanding any contrary provisions
                  contained in any stock option agreement evidencing stock
                  options granted to the Executive, as of the effective date of
                  the Executive's termination of employment, (x) the Corporation
                  will vest the Executive in any outstanding unvested stock
                  options of the Corporation granted the Executive prior to his
                  termination of employment, and (y) the period during which the
                  Executive shall have the right to exercise such vested options
                  will be extended by the Corporation to the later of the
                  expiration of the term of the options assuming no termination
                  of employment or the one year anniversary of the effective
                  date of the Executive's termination of employment.

The cash payments provided for in this subsection (a) will made in one lump sum
within ten business days following the effective date of the Executive's
termination of employment.

   (b)   Upon  Termination  By  The  Executive  Absent  Good  Reason  Or By  The
         Corporation For Cause.  Upon the Executive's  termination of employment
         absent Good Reason or by the  Corporation  for Cause,  the  Corporation
         will provide the following:

        (i)       Salary, Bonus And Fringe Benefits.  The Executive will receive
                  his salary and Fringe Benefits through the effective date of
                  termination of employment and the unpaid portion of any bonus
                  earned for a prior year.

        (ii)      Accrued Vacation. The Executive will receive payment for
                  accrued but unused vacation, which payment will be equitably
                  prorated based on the period of active employment for that
                  portion of the calendar year in which the Executive's
                  termination of employment becomes effective. Payment for
                  accrued but unused vacation will be payable in one lump sum on
                  the effective date of termination of employment.

   (c)   Upon  Termination For Disability.  Upon  termination of the Executive's
         employment because of Disability, the Corporation will provide the
         following:

        (i)      Salary And Fringe Benefits. The Executive will receive his
                 salary and Fringe Benefits through the effective date of
                 termination of employment.  The Executive will also receive his
                 annual base salary and Fringe Benefits, as in effect on the
                 date immediately before the Disability, for a period of 18
                 months commencing with the month following the month during
                 which his employment terminates.  If the Executive dies during
                 the 18-month period, his salary payments  under this subsection
                 will continue be paid to his estate for the balance of the
                 18-month period and any dependent health or medical Fringe
                 Benefits will be provided in each case for the balance of the
                 18-month period.

        (ii)      Bonus. The Executive will receive a bonus payment equal to an
                  amount determined by multiplying 100% of his base salary by a
                  fraction the numerator of which is the number of full and
                  partial calendar months in the calendar year that precede the
                  date of the termination of his employment and the denominator
                  of which is 12, plus an amount equal to the unpaid portion of
                  any bonus earned for any fiscal year prior to the year in
                  which his employment terminates.

        (iii)     Accrued Vacation. The Executive will receive payment for
                  accrued but unused vacation, which payment will be equitably
                  prorated based on the period of active employment for that
                  portion of the calendar year in which the Executive's
                  termination becomes effective.

        (iv)      Stock Options.  Notwithstanding any contrary provisions
                  contained in any stock option agreement evidencing stock
                  options granted to the Executive, as of the effective date of
                  the Executive's termination of employment because of
                  Disability the Corporation will cause the Executive to become
                  vested in (only to the extent he is not already vested in)
                  that number of the options granted in Section 3(d) hereof as
                  are equal to 250,000 multiplied by a percentage determined by
                  dividing the number of days from the date of this Agreement to
                  the date of termination of employment because of Disability
                  divided by the number of days from the date of this Agreement
                  to October 1, 2003.

The bonus and vacation payments provided for in this subsection (c) will be made
in one lump sum within ten business days following the effective date of the
Executive's termination of employment because of Disability.

   (d)   Upon  Termination  For  Death.  Upon  termination  of  the  Executive's
         employment  because of his death,  the  Corporation  will  provide  the
         following:

         (i)      Salary And Fringe Benefits. The Executive's salary and Fringe
                  Benefits through the effective date of termination of
                  employment. The Executive's estate will also receive his
                  annual base salary as an effect on the date immediately prior
                  to his date of death, for a period of 18 months. Any dependent
                  health or medical Fringe Benefits will be provided for the
                  18-month period following the month in which the Executive
                  dies.

        (ii)      Bonus. The Executive's successor as provided in Section 14
                  will receive a bonus payment equal to an amount determined by
                  multiplying 100% of his base salary by a fraction the
                  numerator of which is the number of full and partial calendar
                  months in the calendar year that precede the date of the
                  termination of his employment and the denominator of which is
                  12, plus an amount equal to the unpaid portion of any bonus
                  earned for any fiscal year prior to the year in which his
                  employment terminates.

        (iii)     Accrued Vacation. The Executive's successor as provided in
                  Section 14 will receive payment for accrued but unused
                  vacation, which payment will be equitably prorated based on
                  the period of active employment for that portion of the
                  calendar year in which the Executive died.

        (iv)      Stock Options.  Notwithstanding any contrary provisions
                  contained in any stock option agreement evidencing stock
                  options granted to the Executive, as of the effective date of
                  the Executive's termination of employment because of Death the
                  Corporation will cause the Executive to become vested in (only
                  to the extent he is not already vested in) that number of the
                  options granted in Section 3(d) hereof as are equal to 250,000
                  multiplied by a percentage determined by dividing the number
                  of days from the date of this Agreement to the date of
                  termination of employment because of Death divided by the
                  number of days from the date of this Agreement to October 1,
                  2003.

The bonus and vacation payments provided for in this subsection (d) will be made
in one lump sum within ten business days following the effective date of the
Executive's termination of employment because of death.

   (e)   Upon  Termination  In  Connection  With A Change In  Control.  Upon the
         Executive's  Termination  in Connection  With A Change In Control,  the
         Executive will be entitled to the following:

        (i)      Salary And Fringe Benefits:  The Executive's salary and Fringe
                 Benefits through the effective date of termination of
                 employment.  The Executive will also receive an amount equal to
                 two times the sum of the Executive's annual base salary or an
                 amount equal to the sum of the remaining payments of base
                 salary for the balance of the Initial Term in each case at the
                 rate in effect on the date of such termination, whichever is
                 greater.  The Executive and his dependents will also receive
                 Fringe Benefits as in effect on the date of such termination
                 for a continuing period of twenty-four (24) months following
                 the date of such termination or for the remaining balance of
                 the Initial Term, whichever shall be the longer period.

        (ii)     Bonus.  The Executive will receive a bonus payment equal to the
                 sum of  (A) 200% of his base salary in effect in the year of
                 the Termination in Connection With a Change in Control or an
                 amount equal to 10% of his base salary in effect in the year of
                 the Termination in Connection with a Change in Control
                 multiplied by each full month remaining in the Initial Term,
                 whichever is the greater amount, plus (B) an amount determined
                 by multiplying 100% of his base salary by a fraction the
                 numerator of which is the number of full and partial calendar
                 months in the calendar year that precede the date of such
                 termination and the denominator of which is 12, plus  (C) an
                 amount equal to the unpaid portion of any bonus earned for any
                 fiscal year prior to the year in which his employment
                 terminates.

        (iii)     Accrued Vacation. The Executive will receive payment for
                  accrued but unused vacation, which payment will be equitably
                  prorated based on the period of active employment for that
                  portion of the calendar year in which the Termination in
                  Connection With a Change in Control occurs.

        (iv)      Expenses. For a twenty-four (24) month period following the
                  effective date of the Termination in Connection With A Change
                  in Control, the Corporation will promptly pay or reimburse the
                  Executive for expenses, in an aggregate amount not to exceed
                  5% of the Executive's annual base salary, at the rate in
                  effect on the date of such termination, incurred by the
                  Executive for outplacement services, which may include
                  consultants, reasonable travel, rental of an office off the
                  Corporation's premises, secretarial support, and photocopying,
                  telephone, and other miscellaneous office expenses.

        (v)       Plan Benefits. The Executive will be fully vested in his
                  accrued benefit under any qualified or non-qualified pension
                  or profit sharing plan maintained by the Corporation,
                  provided, however, if the terms of such plan do not permit
                  acceleration of full vesting, the Executive will receive a
                  cash payment in an amount equal to the value of the accrued
                  benefit which was not so vested.

        (vi)      Stock Options.  Notwithstanding any contrary provisions
                  contained in any stock option agreement evidencing stock
                  options granted to the Executive, as of the effective date of
                  the Executive's termination of employment, (x) the Corporation
                  will vest the Executive in any outstanding unvested stock
                  options of the Corporation granted the Executive prior to such
                  termination, and (y) the period during which the Executive
                  shall have the right to exercise such vested options will be
                  extended by the Corporation to the later of the expiration of
                  the term of the options assuming no termination of employment
                  or the one year anniversary of the effective date of such
                  termination.

The cash payments provided for in this subsection (e) (other than the payments
and reimbursements provided for in clause (iv) thereof) will be made in one lump
sum within ten business days following the effective date of the Executive's
Termination in Connection With a Change in Control.

   (f)   Reduction In Fringe Benefits.  Medical and health Fringe Benefits under
         this  Section  will be reduced to the extent of any  medical and health
         fringe  benefits  provided by and available to the  Executive  from any
         subsequent employer.  (g) Determination of Disability.  Any question as
         to the  existence  of a physical or mental  condition  which would give
         rise to the  Disability of the  Executive  upon which the Executive and
         the  Corporation  cannot  agree  will  be  determined  by  a  qualified
         independent   physician   selected  by  the  Executive  and  reasonably
         acceptable to the Corporation (or, if the Executive is unable to make a
         selection,  the  selection of the  physician  will be made by any adult
         member of his immediate family). The physician's written  determination
         to the  Corporation  and to the Executive  will be final and conclusive
         for all purposes of this Agreement.

   (h)   Continuation of Healthcare Coverage. For purposes of COBRA continuation
         healthcare  coverage,  the  "qualifying  event"  will be deemed to have
         occurred  at the end of the period  during  which  health  and  medical
         benefits are provided under this Section 8.

   (i)   Indemnity.  For a 60 month period following the date of the Executive's
         termination of employment  regardless of reason,  the Corporation  will
         continue  any  indemnification  agreement  with the  Executive  and any
         directors' and officers'  liability insurance insuring the Executive at
         the  date  of  such  termination.   At  the  Executive's  request,  the
         Corporation   will  cause  a  certificate  of  insurance,   in  a  form
         satisfactory  to the Executive,  verifying this coverage to be provided
         to the Executive on an annual basis.

9. Additional Payments. Notwithstanding anything in this Agreement or any other
agreement to the contrary, in the event it is determined that any payments or
distributions (including, without limitation, the vesting of an option or other
non-cash benefit or property or the forgiveness of any indebtedness) by the
Corporation or any affiliate (as defined under the Securities Act of 1933, as
amended, and the regulations thereunder) thereof or any other person to or for
the benefit of the Executive, whether paid or payable pursuant to the terms of
this Agreement, or pursuant to any other agreement or arrangement with the
Corporation or any such affiliate ("Payments"), would be subject to the excise
tax imposed by Section 4999 of the Code, or any successor provision, or any
interest or penalties with respect to the excise tax (the excise tax, together
with any interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive will be entitled to receive an additional
payment from the Corporation (a "Gross-Up Payment") in an amount that after
payment by the Executive of all taxes (including, without limitation, any
interest or penalties imposed with respect to such taxes and any Excise Tax)
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The amount
of the Gross-Up Payment will be calculated by the Corporation's independent
accounting firm, engaged immediately prior to the event that triggered the
payment, in consultation with the Corporation's outside legal counsel. For
purposes of making the calculations required by this Section, the accounting
firm may make reasonable assumptions and approximations concerning applicable
taxes and may rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code, provided that the accounting
firm's determinations must be made with substantial authority (within the
meaning of Section 6662 of the Code). The Gross-Up Payment will be paid on the
Executive's last day of employment or on the occurrence of the event that
results in the imposition of the Excise Tax, if later. If the precise amount of
the Gross-Up Payment cannot be determined on the date it is to be paid, an
amount equal to the best estimate of the Gross-Up Payment will be made on that
date and, within 10 days after the precise calculation is obtained, either the
Corporation will pay any additional amount to the Executive or the Executive
will pay any excess amount to the Corporation, as the case may be. If
subsequently the Internal Revenue Service (the "IRS") claims that any additional
Excise Tax is owing, an additional Gross-Up Payment will be paid to the
Executive within 30 days of the Executive providing substantiation of the claim
made by the IRS. After payment to the Executive of the Gross-Up Payment, the
Executive will provide to the Corporation any information reasonably requested
by the Corporation relating to the Excise Tax, the Executive will take those
actions as the Corporation reasonable requests to contest the Excise Tax,
cooperate in good faith with the Corporation to effectively contest the Excise
Tax and permit the Corporation to participate in any proceedings contesting the
Excise Tax. The Corporation will bear and pay directly all costs and expenses
(including any interest or penalties on the Excise Tax), and indemnify and hold
the Executive harmless, on an after-tax basis, from all such costs and expenses
related to such contest. Should it ultimately be determined that any amount of
an Excise Tax is not properly owed, the Executive will refund to the Corporation
the related amount of the Gross-Up Payment.

10. Non-exclusivity of Rights. Except as otherwise specifically provided,
nothing in this Agreement will prevent or limit the Executive's continued or
future participation in any benefit, incentive, or other plan, practice, or
program provided by the Corporation and for which the Executive may qualify. Any
amount of vested benefit or any amount to which the Executive is otherwise
entitled under any plan, practice, or program of the Corporation will be payable
in accordance with the plan, practice, or program, except as specifically
modified by this Agreement.

11. No Obligation To Seek Other Employment. The Executive will not be obligated
to seek other employment or to take other action to mitigate any amount payable
to him under this Agreement and, except as provided in Section 8(f), amounts
owed to him hereunder shall not be reduced by amounts he may receive from
another employer.

12. Confidentiality. During the course of his employment, the Executive will
have access to confidential information relating to the lines of business of the
Corporation, its trade secrets, marketing techniques, technical and cost data,
information concerning customers and suppliers, information relating to product
lines, and other valuable and confidential information relating to the business
operations of the Corporation not generally available to the public (the
"Confidential Information"). The parties hereby acknowledge that any
unauthorized disclosure or misuse of the Confidential Information could cause
irreparable damage to the Corporation. The parties also agree that covenants by
the Executive not to make unauthorized use or disclosures of the Confidential
Information are essential to the growth and stability of the business of the
Corporation. Accordingly, the Executive agrees to the confidentiality covenants
set forth in this Section.

                  The Executive agrees that, except as required by his duties
with the Corporation as he reasonably determines or as authorized by the
Corporation in writing, he will not use or disclose to anyone at any time,
regardless of whether before or after the Executive ceases to be employed by the
Corporation, any of the Confidential Information obtained by him in the course
of his employment with the Corporation. The Executive shall not be deemed to
have violated this Section 12 by disclosure of Confidential Information that at
the time of disclosure (a) is publicly available or becomes publicly available
through no act or omission of the Executive, or (b) is disclosed as required by
court order or as otherwise required by law, on the condition that notice of the
requirement for such disclosure is given to the Corporation prior to make any
disclosure.

                  The Executive agrees that since irreparable damage could
result from his breach of the covenants in this Section, in addition to any and
all other remedies available to the Corporation, the Corporation will have the
remedies of a restraining order, injunction or other equitable relief to enforce
the provisions thereof. The Executive consents to jurisdiction in Erie County,
Pennsylvania on the date of the commencement of any action for purposes of any
claims under this Section. In addition, the Executive agrees that the issues in
any action brought under this Section will be limited to claims under this
Section, and all other claims or counterclaims under other provisions of this
Agreement will be excluded.

13. Non-competition. In consideration of the compensation and other benefits to
be paid to the Executive under and in connection with this Agreement, the
Executive agrees that, beginning on the date of this Agreement and continuing
until the Covenant Expiration Date (as defined in subsection (b) below), he will
not, directly or indirectly, for his own account or as agent, employee, officer,
director, trustee, consultant, partner, stockholder or equity owner of any
corporation or any other entity (except that he may passively own securities
constituting less than 1% of any class of securities of a public company), or
member of any firm or otherwise, (i) engage or attempt to engage, in the
Restricted Territory (as defined in subsection (d) below), in any business
activity which is directly or indirectly competitive with the business conducted
by the Corporation or any Affiliate at the Reference Date (as defined in
subsection (c) below), (ii) employ or solicit the employment of any person who
is employed by the Corporation or any Affiliate at the Reference Date or at any
time during the six-month period preceding the Reference Date, except that the
Executive will be free to employ or solicit the employment of any such person
whose employment with the Corporation or any Affiliate has terminated for any
reason (without any interference from the Executive) and who has not been
employed by the Corporation or any Affiliate for at least six months, (iii)
canvass or solicit business in competition with any business conducted by the
Corporation or any Affiliate at the Reference Date from any person or entity who
during the six-month period preceding the Reference Date was a customer of the
Corporation or any Affiliate or from any person or entity which the Executive
has reason to believe might in the future become a customer of the Corporation
or any Affiliate as a result of marketing efforts, contacts or other facts and
circumstances of which the Executive is aware, (iv) willfully dissuade or
discourage any person or entity from using, employing or conducting business
with the Corporation or any Affiliate or (v) intentionally disrupt or interfere
with, or seek to disrupt or interfere with, the business or contractual
relationship between the Corporation or any Affiliate and any supplier who
during the six-month period preceding the Reference Date shall have supplied
components, materials or services to the Corporation or any Affiliate.

                  Notwithstanding the foregoing, the restrictions imposed by
this Section: (i) shall not in any manner be construed to prohibit, directly or
indirectly, the Executive from serving as an employee or consultant of the
Corporation or any Affiliate, and (ii) shall not apply if the termination of the
Executive's employment was a Termination in Connection With A Change In Control
or occurs by reason of expiration of the term of this Agreement (which term
includes any extension period pursuant to the operation of Section 7 hereof) or
occurs after the expiration of the term of this Agreement (which term includes
any extension period pursuant to the operation of Section 7 hereof).

                  For purposes of this Agreement, the following terms have the
meanings given to them below:

   (a)   "Affiliate"  means any joint venture,  partnership or subsidiary now or
         hereafter   directly  or   indirectly   owned  or   controlled  by  the
         Corporation.  For  purposes of  clarification,  an entity  shall not be
         deemed  to be  indirectly  or  directly  owned  or  controlled  by  the
         Corporation solely by reason of the ownership or control of such entity
         by shareholders of the Corporation.

   (b)   "Covenant  Expiration  Date" means the date which is 365 days after the
         Termination Date.

   (c)   "Reference  Date" means (A) for purposes of applying the  covenants set
         forth in this Section at any time prior to the  Termination  Date,  the
         then current  date,  or (B) for purposes of applying the  covenants set
         forth in this Section at any time on or after the Termination Date, the
         Termination Date.

   (d)   "Restricted  Territory"  means the 50 states  of the  United  States of
         America.

   (e)   "Termination  Date" means the date of  termination  of the  Executive's
         employment with the Corporation;  provided however that the Executive's
         employment  will  not be  deemed  to  have  terminated  so  long as the
         Executive  continues  to be  employed  or  engaged  as an  employee  or
         consultant of the Corporation or any Affiliate, even if such employment
         or  engagement  continues  after  the  expiration  of the  term of this
         Agreement.

14. Successors. This Agreement is personal to the Executive and may not be
assigned by the Executive other than by will or the laws of descent and
distribution. This Agreement will inure to the benefit of and be enforceable by
the Executive's legal representatives or successors in interest. Notwithstanding
any other provision of this Agreement, the Executive may designate a successor
or successors in interest to receive any amounts due under this Agreement after
the Executive's death. If he has not designated a successor in interest, payment
of benefits under this Agreement will be made to his wife, if surviving, and if
not surviving, to his estate. A designation of a successor in interest must be
made in writing, signed by the Executive, and delivered to the Employer pursuant
to Section 18. Except as otherwise provided in this Agreement, if the Executive
has not designated a successor in interest, payment of benefits under this
Agreement will be made to the Executive's estate. This Section will not
supersede any designation of beneficiary or successor in interest made by the
Executive or provided for under any other plan, practice, or program of the
Employer.

                  This Agreement will inure to the benefit of and be binding
upon the Corporation and its successors and assigns.

                  The Corporation will require any successor (whether direct or
indirect, by acquisition of assets, merger, consolidation or otherwise) to all
or substantially all of the operations or assets of the Corporation or any
successor and without regard to the form of transaction used to acquire the
operations or assets of the Corporation, to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no succession had taken place. As used in this
Agreement, "Corporation" means the Corporation and any successor to its
operations or assets as set forth in this Section that is required by this
clause to assume and agree to perform this Agreement or that otherwise assumes
and agrees to perform this Agreement.

15. Benefit Claims. In the event the Executive or his legal representatives or
beneficiaries, as the case may be, and the Corporation disagree as to their
respective rights and obligations under this Agreement, and the Executive or his
legal representatives or beneficiaries are successful in establishing, privately
or otherwise, that his or their position is substantially correct, or that the
Corporation's position is substantially wrong or unreasonable, or in the event
that the disagreement is resolved by settlement, the Corporation will pay all
costs and expenses, including counsel fees, which the Executive or his legal
representatives or beneficiaries may incur in connection therewith directly to
the provider of the services or as may otherwise be directed by the Executive or
his legal representatives or beneficiaries. The Corporation will not delay or
reduce the amount of any payment provided for hereunder or setoff or
counterclaim against any such amount for any reason whatsoever; it is the
intention of the Corporation and the Executive that the amounts payable to the
Executive or his legal representatives or beneficiaries hereunder will continue
to be paid in all events in the manner and at the times herein provided. All
payments made by the Corporation hereunder will be final and the Corporation
will not seek to recover all or any part of any portion of any payments
hereunder for any reason.

16. Failure, Delay or Waiver. No course of action or failure to act by the
Corporation or the Executive will constitute a waiver by the party of any right
or remedy under this Agreement, and no waiver by either party of any right or
remedy under this Agreement will be effective unless made in writing.

17. Severability. Whenever possible, each provision of this Agreement will be
interpreted in such a manner as to be enforceable under applicable law. However,
if any provision of this Agreement is deemed unenforceable under applicable law
by a court having jurisdiction, the provision will be unenforceable only to the
extent necessary to make it enforceable without invalidating the remainder
thereof or any of the remaining provisions of this Agreement.

18. Notice. All written communications to parties required hereunder must be in
writing and (a) delivered in person, (b) mailed by registered or certified mail,
return receipt requested, (such mailed notice to be effective 4 days after the
date it is mailed) or (c) sent by facsimile transmission, with confirmation sent
by way of one of the above methods, to the party at the address given below for
the party (or to any other address as the party designates in a writing
complying with this Section, delivered to the other party):




                  If to the Corporation:

                           Rent-Way, Inc.
                           One RentWay Place
                           Erie, Pennsylvania 16505
                           Attention:   Chairman, Compensation Committee
                           Telephone: (814)  455-5378
                           Telecopier: (814)  455-5379

                  with a copy to:

                           Hodgson  Russ, LLP
                           One M&T Plaza, Suite 2000
                           Buffalo, New York 14203
                           Attention:       John J. Zak, Esq.
                           Telephone:       716-856-4000
                           Telecopier:      716-849-0349

                  If to the Executive:

                           William E. Morgenstern
                           4011 Westbury Ridge Drive
                           Erie, Pennsylvania 16506
                           Telephone:       814-836-0333

                  with a copy to:

                           Kronish Lieb Weiner & Hellman, LLP
                           1114 Avenue of the Americas
                           New York, New York 10036-7798
                           Attention:       Paul M. Ritter, Esq.
                           Telephone:       (212) 479-6000
                           Telecopier:      (212) 479-6275

19. Miscellaneous. This Agreement (a) may not be amended, modified or terminated
orally or by any course of conduct pursued by the Corporation or the Executive,
but may be amended, modified or terminated only by a written agreement duly
executed by the Corporation and the Executive, (b) is binding upon and inures to
the benefit of the Corporation and the Executive and each of their respective
heirs, representatives, successors and assignees, except that the Executive may
not assign any of his rights or obligations pursuant to this Agreement, (c)
except as provided in Sections 4 and 10 of this Agreement, constitutes the
entire agreement between the Corporation and the Executive with respect to the
subject matter of this Agreement, and supersedes all oral and written proposals,
representations, understandings and agreements previously made or existing with
respect to such subject matter, including, but not limited to, the prior
employment agreement between the parties dated October 1, 1998, and (d) will be
governed by, and interpreted and construed in accordance with, the laws of the
Commonwealth of Pennsylvania, without regard to principles of conflicts of law.

20. Multiple Counterparts. This Agreement may be executed in one or more counter
parts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. Any party may execute this
Agreement by facsimile signature and the other party shall be entitled to rely
on such facsimile signature as evidence that this Agreement has been duly
executed by such party. Any party executing this Agreement by facsimile
signature shall immediately forward to the other party an original page by
overnight mail.



<PAGE>


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

                  RENT-WAY, INC.:


                  By /s/Robert Fagenson
                     -------------------
                        Robert Fagenson
                        Chairman, Compensation Committee of the
                        Board of Directors


                  EXECUTIVE:


                  By /s/William E. Morgenstern
                     -------------------------
                        William E. Morgenstern